Toaz - Info Multiple Choice Questions

MULTIPLE CHOICE QUESTIONS a. user-specific.
43. Managerial accounting applies to each of the b. general-purpose.

following types of businesses except c. special-purpose.
a. service firms. d. managerial reports.
b. merchandising firms. 54. Managerial accounting reports can be described as
c. manufacturing firms. a. general-purpose.
d. Managerial accounting applies to all types of b. macro-reports.
firms. c. special-purpose.
44. Managerial accounting information is generally d. classified financial statements.
prepared for 55. The reporting standard for external financial reports
a. stockholders. is
b. creditors. a. industry-specific.
c. managers. b. company-specific.
d. regulatory agencies. c. generally accepted accounting principles.
45. Managerial accounting information d. department-specific.
a. pertains to the entity as a whole and is highly 56. Which of the following statements about internal
aggregated. reports is not true?
b. pertains to subunits of the entity and may be a. The content of internal reports may extend
very detailed. beyond the double-entry accounting system.
c. is prepared only once a year. b. Internal reports may show all amounts at
d. is constrained by the requirements of generally market values.
accepted accounting principles. c. Internal reports may discuss prospective
46. The major reporting standard for presenting events.
managerial accounting information is d. Most internal reports are summarized rather
a. relevance. than detailed.
b. generally accepted accounting principles. 57. In an analogous sense, external user is to internal
c. the cost principle. user as generally accepted accounting principles
d. the current tax law. are to
47. Managerial accounting is also called a. timely.
a. management accounting. b. special-purpose.
b. controlling. c. relevance to decision.
c. analytical accounting. d. SEC.
d. inside reporting. 58. Internal reports are generally
48. Which of the following is not an internal user? a. aggregated.
a. Creditor b. detailed.
b. Department manager c. regulated.
c. Controller d. unreliable.
d. Treasurer 59. A distinguishing feature of managerial accounting is
49. Managerial accounting does not encompass a. external users.
a. calculating product cost. b. general-purpose reports.
b. calculating earnings per share. c. very detailed reports.
c. determining cost behavior. d. quarterly and annual reports.
d. profit planning. 60. What activities and responsibilities are not
50. Managerial accounting is applicable to associated with management's functions?
a. service entities. a. Planning
b. manufacturing entities. b. Accountability
c. not-for-profit entities. c. Controlling
d. all of these. d. Directing
51. Management accountants would not 61. Planning is a function that involves
a. assist in budget planning. a. hiring the right people for a particular job.
b. prepare reports primarily for external users. b. coordinating the accounting information
c. determine cost behavior. system.
d. be concerned with the impact of cost and c. setting goals and objectives for an entity.
volume on profits. d. analyzing financial statements.
52. Internal reports must be communicated 62. The managerial function of controlling
a. daily. a. is performed only by the controller of a
b. monthly. company.
c. annually. b. is only applicable when the company sustains a
d. as needed. loss.
53. Financial statements for external users can be c. is concerned mainly with operating a
described as manufacturing segment.
d. includes performance evaluation by d. Indirect materials
management. 72. Manufacturing costs include
63. Which of the following is not a management a. direct materials and direct labor only.
function? b. direct materials and manufacturing overhead
a. Constraining only.
b. Planning c. direct labor and manufacturing overhead only.
c. Controlling d. direct materials, direct labor, and manufacturing
d. Directing overhead.
64.A manager that is establishing objectives is performing 73. Which one of the following is not a direct material?
which management function? a. A tire used for a lawn mower
a. Controlling b. Plastic used in the covered case for a home PC
b. Directing c. Steel used in the manufacturing of steel-radial
c. Planning tires
d. Constraining d. Lubricant for a ball-bearing joint for a large
65. The management function that requires managers crane
to look ahead and establish objectives is 74. Which one of the following is not a cost element in
a. controlling. manufacturing a product?
b. directing. a. Manufacturing overhead
c. planning. b. Direct materials
d. constraining. c. Office salaries
66. In determining whether planned goals are being d. Direct labor
met, a manager is performing the function of 75. A manufacturing process requires small amounts of
a. planning. glue. The glue used in the production process is
b. follow-up. classified as a(n)
c. directing. a. period cost.
d. controlling. b. indirect material.
67. Which of the following is not a separate c. direct material.
management function? d. miscellaneous expense.
a. Planning 76. The wages of a timekeeper in the factory would be
b. Directing classified as
c. Decision-making a. a period cost.
d. Controlling b. direct labor.
68. Directing includes c. indirect labor.
a. providing a framework for management to have d. compliance costs.
criteria to terminate employees when needed. 77. Which one of the following is not considered as
b. running a department under quality control material costs?
standards universally accepted. a. Partially completed motor engines for a
c. coordinating a company's diverse activities and motorcycle plant
human resources to produce a smooth-running b. Bolts used in manufacturing the compressor of
operation. an engine
d. developing a complex performance ranking c. Rivets for the wings of a new commercial jet
system to give certain high performers good aircraft
raises. d. Lumber used to build tables
69. Both direct materials and indirect materials are 78. Which of the following is not a manufacturing cost
a. raw materials. category?
b. manufacturing overhead. a. Cost of goods sold
c. merchandise inventory. b. Direct materials
d. sold directly to customers by a manufacturing c. Direct labor
company. d. Manufacturing overhead
70. The work of factory employees that can be 79. As current technology changes manufacturing
physically and directly associated with converting processes, it is likely that direct
raw materials into finished goods is a. labor will increase.
a. manufacturing overhead. b. labor will decrease.
b. indirect materials. c. materials will increase.
c. indirect labor. d. materials will decrease.
d. direct labor. 80. For the work of factory employees to be considered
71. Which one of the following would not be classified as direct labor, the work must be conveniently and
as manufacturing overhead? a. materially associated with raw materials
a. Indirect labor conversion.
b. Direct materials b. periodically associated with raw materials
c. Insurance on factory building conversion.
c. physically associated with raw materials c. $0
conversion. d. Cannot be determined from the information
d. promptly associated with raw materials provided
conversion. 90. Which of the following are period costs?
81. Which of the following is not classified as direct a. Raw materials
labor? b. Direct materials and direct labor
a. Bottlers of beer in a brewery c. Direct labor and manufacturing overhead
b. Copy machine operators at a copy shop d. Selling expenses
c. Wages of supervisors 91. Sales commissions are classified as
d. Bakers in a bakery a. overhead costs
82. Cotter pins and lubricants used irregularly in a b. period costs.
production process are classified as c. product costs.
a. miscellaneous expense. d. indirect labor.
b. direct materials. 92. Product costs consist of
c. indirect materials. a. direct materials and direct labor only.
d. nonmaterial materials. b. direct materials, direct labor, and manufacturing
83. Which of the following is not another name for the overhead.
term manufacturing overhead? c. selling and administrative expenses.
a. Factory overhead d. period costs.
b. Pervasive costs 93. Which one of the following represents a period
c. Burden cost?
d. Indirect manufacturing costs a. The VP of Sales' salary and benefits
84. Because of automation, which component of b. Overhead allocated to the manufacturing
product cost is declining? operations
a. Direct labor c. Labor costs associated with quality control
b. Direct materials d. Fringe benefits associated with factory workers
c. Manufacturing overhead 94. Product costs are also called
d. Advertising a. direct costs.
85. The product cost that is most difficult to associate b. overhead costs.
with a product is c. inventoriable costs.
a. direct materials. d. capitalizable costs.
b. direct labor. 95. For inventoriable costs to become expenses under
c. manufacturing overhead. the matching principle,
d. advertising. a. the product must be finished and in stock.
86. Manufacturing costs that cannot be classified as b. the product must be expensed based on its
either direct materials or direct labor are known as percentage-of-completion.
a. period costs. c. the product to which they attach must be sold.
b. nonmanufacturing costs. d. all accounts payable must be settled.
c. selling and administrative expenses. 96. As inventoriable costs expire, they become
d. manufacturing overhead. a. selling expenses.
87. Which one of the following is an example of a b. gross profit.
period cost? c. cost of goods sold.
a. A change in benefits for the union workers who d. sales revenue.
work in the New York plant of a Fortune 1000 97. A manufacturing company calculates cost of goods
manufacturer sold as follows:
b. Workers' compensation insurance on factory a. Beginning FG inventory + cost of goods
workers' wages allocated to the factory purchased – ending FG inventory.
c. A box cost associated with computers b. Ending FG inventory – cost of goods
d. A manager's salary for work that is done in the manufactured + beginning FG inventory.
corporate head office c. Beginning FG inventory – cost of goods
88.Which one of the following costs would not be manufactured – ending FG inventory.
inventoriable? d. Beginning FG inventory + cost of goods
a. Period costs manufactured – ending FG inventory.
b. Factory insurance costs 98. A manufacturing company reports cost of goods
c. Indirect materials manufactured as a(n)
d. Indirect labor costs a. current asset on the balance sheet.
89. Direct materials and direct labor of a company total b. administrative expense on the income
$6,000,000. If manufacturing overhead is statement.
$3,000,000, what is direct labor cost? c. component in the calculation of cost of goods
a. $3,000,000 sold on the income statement.
b. $6,000,000
d. component of the raw materials inventory on a. Beginning WIP + direct materials used + direct
the balance sheet. labor + manufacturing overhead + ending WIP.
99. The subtotal, "Cost of goods manufactured" b. Direct materials used + direct labor +
appears on manufacturing overhead – beginning WIP +
a. a merchandising company's income statement. ending WIP.
b. a manufacturing company's income statement. c. Beginning WIP + direct materials used + direct
c. both a manufacturing and a merchandising labor + manufacturing overhead – ending WIP.
company's income statement. d. Direct materials used + direct labor +
d. neither a merchandising nor a manufacturing manufacturing overhead – ending WIP –
company's income statement. beginning WIP.
100. Cost of goods manufactured in a manufacturing 104. If the amount of "Cost of goods manufactured"
company is analogous to during a period exceeds the amount of "Total
a. Ending inventory in a merchandising company. manufacturing costs" for the period, then
b. Beginning inventory in a merchandising a. ending work in process inventory is greater
company. than or equal to the amount of the beginning
c. Cost of goods available for sale in a work in process inventory.
merchandising company. b. ending work in process is greater than the
d. Cost of goods purchased in a merchandising amount of the beginning work in process
company. inventory.
101. Cost of goods sold c. ending work in process is equal to the cost of
a. only appears on merchandising companies' goods manufactured.
income statements. d. ending work in process is less than the amount
b. only appears on manufacturing companies' of the beginning work in process inventory.
income statements. 105. On the costs of goods manufactured schedule,
c. appears on both manufacturing and depreciation on factory equipment
merchandising companies' income statements. a. is not listed because it is included with
d. is calculated exactly the same for Depreciation Expense on the income
merchandising and manufacturing companies. statement.
102. Hollern Combines, Inc. has $10,000 of ending b. appears in the manufacturing overhead section.
finished goods inventory as of December 31, 2008. c. is not listed because it is not a product cost.
If beginning finished goods inventory was $5,000 d. is not an inventoriable cost.
and cost of goods sold was $20,000, how much 106. On the costs of goods manufactured schedule, the
would Hollern report for cost of goods item raw materials inventory (ending) appears as
manufactured? a(n)
a. $22,500 a. addition to raw materials purchases.
b. $5,000 b. addition to raw materials available for use.
c. $25,000 c. subtraction from raw materials available for
d. $15,000 use.
103. Cost of goods manufactured is calculated as d. subtraction from raw materials purchases.
follows:
Use the following information for questions 107–109.

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. 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.
108. Carly Manufacturing Company's total manufacturing costs incurred in 2008 amounted to
a. $1,530,000.
b. $1,490,000.
c. $1,390,000.
d. $1,580,000.
109. 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.
110. 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
111. 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.
112. 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
Raw materials inventory $ 80,000 $ 64,000
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?
a. $992,000
b. $1,004,000
c. $988,000
d. $1,000,000
115. Assume Hopkins Manufacturing’s 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
116. McNally Manufacturing Company reported the following year-end information:
Beginning work in process inventory $ 46,000
How much is McNally Manufacturing’s 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
Raw materials inventory $120,000 $ 96,000
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:
How much is Sauder Manufacturing’s 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
Hardigan’s 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
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 125–128:
Raw materials inventory, January 1 $ 30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
Raw materials purchases 1,500,000
Factory utilities 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 $180,000 Beginning work in process $30,000
Direct labor 75,000 Ending work in process 15,000
Manufacturing overhead 225,000 Beginning finished goods 38,000
Operating expenses 263,000 Ending finished goods 23,000
(A) (B)
a. $465,000 $495,000
b. $480,000 $465,000
c. $480,000 $495,000
d. $495,000 $510,000
131. 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
132. Given the following data for Glennon Company, compute (A) total manufacturing costs and (B) costs of
goods manufactured:
Direct materials used $240,000 Beginning work in process $40,000
Direct labor 100,000 Ending work in process 20,000
Manufacturing overhead 300,000 Beginning finished goods 50,000
Operating expenses 350,000 Ending finished goods 30,000
(A) (B)
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 d. The number of defects found on each
the balance sheet of a manufacturing product
company? 140. For what purpose is the theory of constraints
a. Finished goods inventory used?
b. Work in process inventory a. To reduce product defects
c. Cost of goods manufactured b. To balance performance measurement
d. Raw materials inventory c. To identify and manage constraints that
134. The equivalent of finished goods inventory for bottle-neck operations
a merchandising firm is referred to as d. To reduce inventory levels
a. purchases. 141. Which one of the following characteristics
b. cost of goods purchased. would likely be associated with a just-in-time
c. merchandise inventory. inventory method?
d. raw materials inventory. a. Ending inventory of work in process that
135. What term describes all activities associated would allow several production runs
with providing a product or service? b. A backlog of inventory orders not yet
a. The manufacturing chain shipped
b. The product chain c. Minimal finished goods inventory on hand
c. The supply chain d. An understanding with customers that they
d. The value chain may come to the showroom and select
136. How have many companies significantly from inventory on hand
lowered inventory levels and costs? 142. Which one of the following is a cost that would
a. They use activity-based costing. not likely be associated with computer-
b. They utilize an enterprise resource integrated manufacturing?
planning system. a. Manufacturing overhead associated with
c. They have a just-in-time method. allocation of equipment depreciation
d. They focus on a total quality management b. Direct labor costs of a welder on the
system. production floor
137. Which one of the following managerial c. Manufacturing overhead associated with
accounting approaches attempts to allocate allocation of the plant lease to the latest
manu-facturing overhead in a more meaningful production run
fashion? d. Direct materials cost with several fuse
a. Theory of constraints plates for a new automobile
b. Just-in-time inventory 143. Which one of the following is an activity not
c. Activity-based costing associated with TQM?
d. Total-quality management a. Tightening the bolts on a chassis so that
138. What is one primary benefit of an enterprise the frame will not drop out
resource planning (ERP) system? b. Redesigning the gas tank after fuel
a. It reduces inventory levels. efficiency standards are not being met
b. It permits companies to be more c. Verifying the 10 check points associated
streamlined in production. with producing the highest quality loaf of
c. It replaces research and development in a bread
company. d. Ensuring that the mattress just
d. It requires an increased emphasis on manufactured meets the standard of
product quality. comfort of a random factory line worker
139. What is “balanced” in the balanced scorecard 144. What is ERP’s primary benefit?
approach? a. It can eliminate stand alone systems that
a. The number of products produced do not share information easily for
b. The emphasis on financial and non- manage-ment’s use.
financial performance measurements b. It allows management to rely on the
c. The amount of costs allocated to products simplest way to utilize information systems
in a manufacturing environment.
c. It permits line workers to perform a. have the same primary users.
accounting and marketing tasks. b. produce general-purpose reports.
d. It calculates year end bonuses to a c. have reports that are prepared quarterly
precision not available in traditional and annually.
information systems management. d. deal with the economic events of an
145. Some companies implement systems to enterprise.
reduce defects in finished products with the 152. The function that pertains to keeping the
goal of achieving zero defects. What are these activities of the enterprise on track is
systems called? a. planning.
a. Activity-based costing systems b. directing.
b. Enterprise resource planning systems c. controlling.
c. Value chain systems d. accounting.
d. Total quality management systems 153. Property taxes on a manufacturing plant are an
146. Many companies now manufacture products element of a
that are untouched by human hands. What do
Product Cost Period Cost
they use to achieve this?
a. Yes No
a. Activity-based costing
b. Yes Yes
b. Computer-integrated manufacturing
c. No Yes
c. Enterprise resource planning systems
d. No No
d. Total quality management systems
a 154. For a manufacturing company, which of the
147. When a company prepares a worksheet for a
following is an example of a period cost rather
manufacturing company, to which column is
than a product cost?
the Indirect Labor account extended?
a. Depreciation on factory equipment
a. To the adjustment columns
b. Wages of salespersons
b. To the income statement columns
c. Wages of machine operators
c. To the cost of goods manufactured
d. Insurance on factory equipment
columns
155. For a manufacturing firm, cost of goods
d. To the balance sheet columns
a available for sale is computed by adding the
148. When a worksheet is prepared for a
beginning finished goods inventory to
manufacturing company, an offsetting entry
a. cost of goods purchased.
must be made to balance the cost of goods
b. cost of goods manufactured.
manufactured columns. Where does the
c. net purchases.
offsetting entry appear?
d. total manufacturing costs.
a. In the balance sheet debit column
156. If the cost of goods manufactured is less than
b. In the income statement debit column
the cost of goods sold, which of the following is
c. In the balance sheet credit column
correct?
d. In the income statement credit column
a a. Finished Goods Inventory has increased.
149. Which one of the following accounts would not
b. Work in Process Inventory has increased.
appear in the cost of goods manufactured
c. Finished Goods Inventory has decreased.
columns of a worksheet?
d. Work in Process Inventory has decreased.
a. Ending Work in Process Inventory
157. The principal difference between a
b. Ending Finished Goods Inventory
merchandising and a manufacturing income
c. Raw Materials Inventory
statement is the
d. Direct Labor
a a. cost of goods sold section.
150. When making closing entries for a
b. extraordinary item section.
manufacturing company, to which account do
c. operating expense section.
all accounts that appear on the cost of goods
d. revenue section.
manufactured schedule get closed?
158. If the total manufacturing costs are greater
a. Income Summary
than the cost of goods manufactured, which of
b. Materials, Labor, and Overhead
the following is correct?
c. Manufacturing Summary
a. Work in Process Inventory has increased.
d. Finished Goods Inventor
b. Finished Goods Inventory has increased.
Additional Multiple Choice Questions
c. Work in Process Inventory has decreased.
151. Financial and managerial accounting are
d. Finished Goods Inventory has decreased.
similar in that both
159. The sum of the direct materials costs, direct applicable to production that is only partially
labor costs, and manufacturing overhead completed are, respectively
incurred is the a. Work in Process Inventory and Raw
a. cost of goods manufactured. Materials Inventory.
b. total manufacturing overhead. b. Finished Goods Inventory and Raw
c. total manufacturing costs. Materials Inventory.
d. total cost of work in process. c. Finished Goods Inventory and Work in
Process Inventory.
160. The inventory accounts that show the cost of d. Raw Materials Inventory and Work in
completed goods on hand and the costs Process Inventory.
Answers to
Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Multiple
43. d 60. b 77. a 94. c 111. a 128. d 145. d Choice
44. c 61. c 78. a 95. c 112. b 129. d 146. b Questions
45. b 62. d 79. b 96. c 113. b 130. c 147. c
46. a 63. a 80. c 97. d 114. b 131. d 148. b
47. a 64. c 81. c 98. c 115. a 132. c 149. b
48. a 65. c 82. c 99. b 116. c 133. c 150. c
49. b 66. d 83. b 100. d 117. b 134. c 151. d
50. d 67. c 84. a 101. c 118. d 135. d 152. c
51. b 68. c 85. c 102. c 119. d 136. c 153. a
52. d 69. a 86. d 103. c 120. b 137. c 154. b
53. b 70. d 87. d 104. d 121. d 138. b 155. b
54. c 71. b 88. a 105. b 122. a 139. b 156. c
55. c 72. d 89. d 106. c 123. c 140. c 157. a
56. d 73. d 90. d 107. d 124. d 141. c 158. a
57. c 74. c 91. b 108. a 125. d 142. b 159. c
58. b 75. b 92. b 109. c 126. a 143. a 160. c
59. c 76. c 93. a 110. a 127. c 144. a
MULTIPLE CHOICE QUESTIONS a. job order and job accumulation systems.

b. job order and process cost systems.
36. Which of the following is one of the c. process cost and batch systems.
components of cost accounting? d. job order and batch systems.
a. It involves measuring product costs.
b. It involves the determination of company 39. A process cost system would most likely be
profits. used by a company that makes
c. It requires GAAP to be applied. a. motion pictures.
d. It requires cost minimizing principles. b. repairs to automobiles.
c. breakfast cereal.
37. A major purpose of cost accounting is to d. college graduation announcements.
a. classify all costs as operating or
nonoperating. 40. Which of the following would be accounted for
b. measure, record, and report period costs. using a job order cost system?
c. provide information to stockholders for a. The production of personal computers
investment decisions. b. The production of automobiles
d. measure, record, and report product costs. c. The refining of petroleum
d. The construction of a new campus building
38. The two basic types of cost accounting
systems are
41. Process costing is used when a. Finished Goods Inventory
a. the production process is continuous.
Direct Materials
b. production is aimed at filling a specific
Direct Labor
customer order.
Manufacturing Overhead
c. dissimilar products are involved.
d. costs are to be assigned to specific jobs. b. Work In Process Inventory
42. Process costing is not used when Direct Materials
a. similar goods are being produced. Direct Labor
b. large volumes are produced. Manufacturing Overhead
c. jobs have distinguishing characteristics.
d. a series of connected manufacturing c. Raw Materials Inventory
processes is necessary. Work In Process Inventory
d. Finished Goods Inventory
43. An important feature of a job order cost system
is that each job Work In Process Inventory
a. must be similar to previous jobs completed. 48. The two major steps in the flow of costs are
b. has its own distinguishing characteristics. a. allocating and assigning.
c. must be completed before a new job is b. acquiring and accumulating.
accepted. c. accumulating and assigning.
d. consists of one unit of output. d. accumulating and amortizing.
44. As of December 31, 2008, Stand Still 49. The Raw Materials Inventory account is
Industries had $1,500 of raw materials a. a subsidiary account.
inventory. At the beginning of 2008, there was b. debited for invoice costs and freight costs
$1,200 of materials on hand. During the year, chargeable to the purchaser.
the company purchased $183,000 of materials; c. debited for purchase discounts taken.
however, it paid for only $175,500. How much d. debited for purchase returns and
inventory was requisitioned for use on jobs allowances.
during 2008?
a. $175,200 50. Records of individual items of raw materials
b. $182,700 would not be maintained
c. $183,300 a. electronically.
d. $175,800 b. manually.
c. on store ledger cards.
45. The flow of costs in a job order cost system d. in the Raw Materials Inventory account.
a. involves accumulating manufacturing costs
incurred and assigning the accumulated 51. Cost of raw materials is debited to Raw
costs to work done. Materials Inventory when the
b. cannot be measured until all jobs are a. materials are ordered.
complete. b. materials are received.
c. measures product costs for a set time c. materials are put into production.
period. d. bill for the materials is paid.
d. generally follows a LIFO cost flow
assumption. 52. Raw Materials Inventory records are also
referred to as
46. In a job order cost accounting system, the Raw a. the Raw Materials control account.
Materials Inventory account is b. the store ledger cards.
a. an expense. c. the purchases journal.
b. a control account. d. periodic inventory records.
c. not used.
d. a period cost. 53. After all postings have been completed, the
sum of the balances in the raw materials
47. When a job is completed and all costs have subsidiary ledger should equal the
been accumulated on a job cost sheet, the a. balance in the Raw Materials Inventory
journal entry that should be made is control account.
b. cost of materials charged to Work in c. Accounts Receivable
Process Inventory. d. Raw Materials Inventory
c. cost of materials purchased.
d. cost of materials placed into production. 59. Manufacturing Overhead would not have a
subsidiary account for
54. Factory labor costs a. utilities.
a. are accumulated in a control account. b. property taxes.
b. do not include pension costs. c. insurance.
c. include vacation pay. d. raw materials inventory.
d. are based on workers’ net pay.
60. The entry to record the acquisition of raw
55. Factory Labor is a(n) materials on account is
a. expense account. a. Work in Process Inventory
b. control account. Accounts Payable
c. subsidiary account. b. Manufacturing Overhead
d. manufacturing cost clearing account. Raw Materials Inventory
Accounts Payable
56. Kline Manufacturing has the following labor c. Accounts Payable
costs: Raw Materials Inventory
Factory—Gross wages d. Raw Materials Inventory
Factory—Net wages Accounts Payable
Employer Payroll Taxes Payable
61. Which one of the following best describes a job
The entry to record the cost of factory labor cost sheet?
and the associated payroll tax expense will a. It is a form used to record the costs
include a debit to Factory Labor for chargeable to a specific job and to
a. $220,000. determine the total and unit costs of the
b. $195,000. completed job.
c. $185,000. b. It is used to track manufacturing overhead
d. $170,000. costs to specific jobs.
c. It is used by management to understand
57. Factory labor costs how direct costs affect profitability.
a. accumulate in advance of utilization. d. It is a daily form that management uses for
b. accumulate in a control account. tracking worker productivity on which
c. include sick pay earned by factory workers. employee raises are based.
d. accumulate in the Factory Labor Expense
account. 62. Job cost sheets constitute the subsidiary
ledger for the
58. Which of the following is not a control account? a. Finished Goods Inventory account.
a. Manufacturing Overhead b. Cost of Goods Sold account.
b. Factory Labor c. Work In Process Inventory account.
d. Cost of Goods Manufactured account.
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
d. Work In Process Inventory................................................... 53,000
Manufacturing Overhead..................................................... 9,000
64.The job cost sheet does not show 70. Which of the following shows entries only to
a. costs chargeable to a specific job. control accounts?
b. the total costs of a completed job. a. Factory Labor
c. the unit cost of a completed job. Wages Payable
d. the cost of goods sold.
b. Work in Process
Factory Labor
65. Under an effective system of internal control,
Raw Materials Inventory
the authorization for issuing materials is made
Wages Payable
a. orally.
b. on a prenumbered materials requisition c. Work in Process
slip. Manufacturing Overhead
c. by the accounting department. Raw Materials Inventory
d. by anyone on the production line. d. Factory Labor
Raw Materials Inventory
66. A copy of the materials requisition slip Accounts Payable
a. is routed to the treasurer's office for Wages Payable
payment.
b. becomes the subsidiary ledger for the 71. A time ticket does not indicate the
Work in Process Inventory. a. employee's name.
c. can be used as a subsidiary ledger for Raw b. account to be charged.
Materials Inventory. c. number of personal exemptions claimed by
d. is retained by the storeroom, and the the employee.
original is sent to accounting. d. job number.
67. Materials requisition slips are costed 72. Which one of the following is a source
a. by production supervisors. document that impacts the job cost sheet?
b. by factory personnel who work on the a. Raw materials receiving slips
production line. b. Materials purchase orders
c. after the goods have been sold. c. Labor time tickets
d. using any of the inventory costing d. Finished goods shipping documents
methods.
73. Time tickets should be approved by
68. Posting to control accounts in a costing system a. the audit committee.
are made b. co-workers.
a. monthly. c. the employee's supervisor.
b. daily. d. the payroll department.
c. annually.
d. semi-annually. 74. If the entry to assign factory labor showed only
a debit to Work In Process Inventory, then all
69. Which one of the following should be equal to labor costs were
the balance of the work in process inventory a. direct labor.
account at the end of the period? b. indirect labor.
a. The total of the amounts transferred from c. overtime related.
raw materials for the current period d. regular hours.
b. The sum of the costs shown on the job 75. The principal accounting record used in
cost sheets of unfinished jobs assigning costs to jobs is
c. The total of manufacturing overhead a. a job cost sheet.
applied to work in process for the period b. the cost of goods manufactured schedule.
d. The total manufacturing costs for the c. the Manufacturing Overhead control
period account.
d. the store ledger cards.
76. The following information is available for a. $30,000.
completed Job No. 402: Direct materials, b. $195,000.
$60,000; direct labor, $90,000; manufacturing c. $39,000.
overhead applied, $45,000; units produced, d. $156,000.
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 $33,000
Direct labor $18,000
Manufacturing overhead applied $12,000
Units produced 3,000 units
Units sold 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 process for 2008 are $4,000 and $5,000,
new line of sewing machines. The cost respectively. How much is cost of goods sold
incurred for production during 2008 totaled for the year?
$12,000 of materials, $6,000 of direct labor a. $46,500
costs, and $4,000 of manufacturing overhead b. $42,000
applied. The company ships all goods as soon c. $40,500
as they are completed which results in no d. $47,500
finished goods inventory on hand at the end of
any year. Beginning work in process totaled 81. A company expected its annual overhead
$10,000, and the ending balance is $6,000. costs to be $600,000 and direct labor costs to
During the year, the company completed 40 be $1,000,000. Actual overhead was
machines. How much is the cost per machine? $580,000, and actual labor costs totaled
a. $450 $1,100,000. How much is the company’s
b. $650 predetermined overhead rate to the nearest
c. $550 cent?
d. $800 a. $0.58
b. $0.53
79. As of December 31, 2008, Nilsen Industries c. $0.60
had $2,000 of raw materials inventory. At the d. $0.55
beginning of 2008, there was $1,600 of
materials on hand. During the year, the 82. Vektek, Inc. thinks machine hours is the best
company purchased $244,000 of materials; activity base for its manufacturing overhead.
however it paid for only $234,000. How much The estimate of annual overhead costs for its
inventory was requisitioned for use on jobs jobs was $615,000. The company used 1,000
during 2008? hours of processing on Job No. B12 during the
a. $244,400 period and incurred overhead costs totaling
b. $234,400 $630,000. The budgeted machine hours for the
c. $233,600 year totaled 20,000. How much overhead
d. $243,600 should be applied to Job No. B12?
a. $630
80. Cost of goods manufactured equals $44,000 b. $30,750
for 2008. Finished goods inventory is $2,000 at c. $31,500
the beginning of the year and $5,500 at the d. $615
end of the year. Beginning and ending work in
83. Hill Mfg. provided the following information from its accounting records for 2008:
Expected production 30,000 labor hours
Actual production 28,000 labor hours
Budgeted overhead $900,000
Actual overhead $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 materials used $6,300
Direct labor hours worked 300
Direct labor rate per hour $12.00
Machine hours used 200
Applied factory overhead rate per machine hour $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 materials used $8,400
Direct labor hours worked 300
Direct labor rate per hour $16.00
Machine hours used 200
Applied factory overhead rate per machine hour $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 60,000 labor hours
Actual production 56,000 labor hours
Budgeted overhead $1,500,000
Actual overhead $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 94. If annual overhead costs are expected to be
indirect labor should be charged to $750,000 and direct labor costs are expected
a. manufacturing overhead. to be $1,000,000, then
b. direct labor. a. $1.33 is the predetermined overhead rate.
c. the individual jobs worked on. b. for every dollar of manufacturing overhead,
d. salary expense. 75 cents of direct labor will be assigned.
c. for every dollar of direct labor, 75 cents of
90. Manufacturing overhead is applied to each job manufacturing overhead will be assigned.
a. at the time when the overhead cost is d. a predetermined overhead rate cannot be
incurred. determined.
b. by means of a predetermined overhead
rate. 95. Overhead application is recorded with a
c. at the end of the year when actual costs a. credit to Work in Process Inventory.
are known. b. credit to Manufacturing Overhead.
d. only if the overhead costs can be directly c. debit to Manufacturing Overhead.
traced to that job. d. credit to job cost sheets.
91. The predetermined overhead rate is based on 96. Manufacturing overhead applied is added to
the relationship between direct labor incurred and to what other item to
a. estimated annual costs and actual activity. equal total manufacturing costs for the period?
b. estimated annual costs and expected a. Goods available for sale
annual activity. b. Raw materials purchased
c. actual monthly costs and actual annual c. Work in process
activity. d. Direct materials used
d. estimated monthly costs and actual
monthly activity. 97. At the beginning of the year, Monroe Company
92. The predetermined overhead rate is estimates annual overhead costs to be
a. determined on a moving average basis $1,500,000 and that 300,000 machine hours
throughout the year. will be operated. Using machine hours as a
b. not calculated until actual overhead costs base, the amount of overhead applied during
are incurred. the year if actual machine hours for the year
c. determined at the beginning of the year. was 315,000 hours is
d. determined at the end of the current year. a. $1,500,000.
b. $1,428,572.
93. In calculating a predetermined overhead rate, c. $1,050,000.
a recent trend in automated manufacturing d. $1,575,000.
operations is to choose an activity base related
to 98. Cost of goods sold is obtained from
a. direct labor hours. a. analysis of all the control accounts in the
b. indirect labor dollars. cost system.
c. machine hours. b. the finished goods inventory records.
d. raw materials dollars. c. the work in process inventory records.
d. the Raw Materials Inventory control
account.
a. Raw Materials Inventory
99. When determining costs of jobs, how does a b. Factory Labor
company account for indirect materials? c. Manufacturing Overhead
a. It is added to work in process as used. d. Cost of Goods Sold
b. It remains part of raw materials inventory.
c. It is transferred out of raw materials into 103. Which of the following is not viewed as part of
manufacturing overhead when used. accumulating manufacturing costs in a job
d. It is transferred out of raw materials into order cost system?
work in process as used. a. Cost of goods sold is recognized
100. In a job order cost system, a credit to b. Raw materials are purchased
Manufacturing Overhead will be accompanied c. Factory labor is incurred
by a debit to d. Manufacturing overhead is incurred
a. Cost of Goods Manufactured.
b. Finished Goods Inventory. 104. Which of the following is not viewed as part of
c. Work in Process Inventory. assigning manufacturing costs in a job order
d. Raw Materials Inventory. cost system?
a. Manufacturing overhead is applied
101. During 2008, Lawson Manufacturing expected b. Raw materials are used
Job No. 26 to cost $600,000 of overhead, c. Manufacturing overhead is incurred
$1,000,000 of materials, and $400,000 in d. Completed goods are recognized
labor. Lawson applied overhead based on
direct labor cost. Actual production required an 105. In determining total manufacturing costs on the
overhead cost of $560,000, $1,100,000 in cost of goods manufactured schedule,
materials used, and $440,000 in labor. All of a. beginning work in process inventory should
the goods were completed. What amount was have a zero balance.
transferred to Finished Goods? b. actual manufacturing overhead costs
a. $2,000,000 appear as a deduction.
b. $2,100,000 c. manufacturing overhead applied is added
c. $2,140,000 to direct materials and direct labor.
d. $2,200,000 d. ending work in process inventory is
deducted from beginning work in process
102. Debits to Work in Process Inventory are inventory.
accompanied by a credit to all but which one of
the following accounts?
Baxter Company developed the following data for the current year:
Beginning work in process inventory $150,000
Direct materials used 90,000
Actual overhead 180,000
Overhead applied 135,000
Cost of goods manufactured 165,000
Total manufacturing costs 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:
Beginning work in process inventory $180,000
Ending work in process 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 $ 50,000
Finished goods inventory, December 31 150,000
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 Company’s 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:
Total manufacturing costs 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:

Ending work in process 15,000
How much are total manufacturing costs for the period?
a. $395,000
b. $315,000
c. $275,000
d. $305,000
116. Barger Company had the following information at December 31:

Finished goods inventory, January 1 $30,000
Finished goods inventory, December 31 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. Chin Company incurred direct materials costs the goods were completed. What amount was
of $300,000 during the year. Manufacturing transferred to Finished Goods?
overhead applied was $280,000 and is applied a. $1,605,000
based on direct labor costs. The b. $1,650,000
predetermined overhead rate is 70%. How c. $1,500,000
much are Chin Company’s total manufacturing d. $1,575,000
costs for the year?
a. $776,000 119. During 2008, Speck Manufacturing expected
b. $700,000 Job No. 59 to cost $450,000 of overhead,
c. $580,000 $750,000 of materials, and $300,000 in labor.
d. $980,000 Speck applied overhead based on direct labor
cost. Actual production required an overhead
118. During 2008, Denson Manufacturing expected cost of $420,000, $825,000 in materials used,
Job No. 51 to cost $450,000 of overhead, and $330,000 in labor. All of the goods were
$750,000 of materials, and $300,000 in labor. completed. How much is the amount of over-
Denson applied overhead based on direct or underapplied overhead?
labor cost. Actual production required an a. $30,000 underapplied
overhead cost of $420,000, $825,000 in b. $30,000 overapplied
materials used, and $330,000 in labor. All of 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 $1,500,000
Actual annual overhead cost $1,430,000
Estimated machine hours 375,000
Actual machine hours 350,000
a. $1,400,000 applied and $30,000 overapplied
b. $1,500,000 applied and $30,000 overapplied
c. $1,400,000 applied and $30,000 underapplied
d. $1,430,000 applied and neither under- nor overapplied
122. A company assigned overhead to work in d. prepaid.

process. At year end, what does the amount of
overapplied overhead mean? 125. At the end of the year, any balance in the
a. The overhead assigned to work in process Manufacturing Overhead account is generally
is greater than the estimated overhead eliminated by adjusting
costs. a. Work In Process Inventory.
b. The overhead assigned to work in process b. Finished Goods Inventory.
is less than the estimated overhead costs. c. Cost of Goods Sold.
c. The overhead assigned to work in process d. Raw Materials Inventory.
is less than the actual overhead.
d. The overhead assigned to work in process 126. If Manufacturing Overhead has a credit
is greater than the overhead incurred. balance at the end of the period, then
a. overhead has been underapplied.
123. If the Manufacturing Overhead account has a b. the overhead assigned to Work in Process
debit balance at the end of a period, it means Inventory is less than the overhead
that incurred.
a. actual overhead costs were less than c. overhead has been overapplied.
overhead costs applied to jobs. d. management must take corrective action.
b. actual overhead costs were greater than 127. The Manufacturing Overhead account shows
overhead costs applied to jobs. debits of $30,000, $24,000, and $28,000 and
c. actual overhead costs were equal to one credit for $86,000. Based on this
overhead costs applied to jobs. information, manufacturing overhead
d. no jobs have been completed. a. has been overapplied.
b. has been underapplied.
124. If the manufacturing overhead costs applied to c. has not been applied.
jobs worked on were greater than the actual d. shows a zero balance.
manufacturing costs incurred during a period,
overhead is said to be 128. When monthly financial statements are
a. underapplied. prepared, a difference between actual
b. overapplied. overhead and overhead applied will appear on
c. in error. a. the balance sheet.
b. the income statement. a. debit to Manufacturing Overhead.
c. the statement of stockholders' equity. b. credit to Finished Goods Inventory
d. none of the financial statements. c. debit to Cost of Goods Sold.
d. credit to Work in Process Inventory.
129. When monthly financial statements are
prepared, overapplied overhead will appear as 133. The existence of under- or overapplied
a. unearned revenue. overhead at the end of the month
b. a current asset. a. is expected to be offset in future months.
c. a loss on the income statement under b. indicates that an error has been made.
"Other Expenses and Losses." c. requires a retroactive adjustment to the
d. miscellaneous expense. cost of all jobs completed.
d. is written off as a bad estimate expense.
130. When monthly financial statements are
prepared, underapplied overhead will appear 134. Conceptually, any under- or overapplied
as overhead at the end of the year should be
a. unearned revenue. allocated among all of the following except
b. a current asset. a. cost of goods sold.
c. "Other Revenues and Gains," on the b. ending work in process inventory.
income statement. c. ending raw materials inventory.
d. a reduction to cost of goods sold. d. ending finished goods inventory.
135. If, at the end of the year, Manufacturing
131. If manufacturing overhead has been Overhead has been overapplied, it means that
underapplied during the year, the adjusting a. actual overhead costs were greater than
entry at the end of the year will show a the overhead assigned to jobs.
a. debit to Manufacturing Overhead. b. actual overhead costs were less than the
b. credit to Cost of Goods Sold. overhead assigned to jobs.
c. debit to Work in Process Inventory. c. overhead has not been applied to jobs still
d. debit to Cost of Goods Sold. in process.
d. cost of goods will have to be increased by
132. If manufacturing overhead has been the amount of the overapplied overhead.
overapplied during the year, the adjusting entry
at the end of the year will show a
Additional Multiple Choice Questions b. fringe benefits incurred by the employer.

c. net earnings of factory workers.
136. A process cost system would be used for all of d. gross earnings of factory workers.
the following except the
a. manufacture of cereal. 139. Which of the following is not a control account?
b. refining of petroleum. a. Raw Materials Inventory
c. printing of wedding invitations. b. Factory Labor
d. production of automobiles. c. Manufacturing Overhead
d. All of these are control accounts.
137. In a job order cost system, it would be correct
in recording the purchase of raw materials to 140. When the company assigns factory labor costs
debit to jobs, the direct labor cost is debited to
a. Work in Process Inventory. a. Direct Labor.
b. Work in Process and Manufacturing b. Factory Labor.
Overhead. c. Manufacturing Overhead.
c. Raw Materials Inventory. d. Work in Process Inventory.
d. Finished Goods Inventory.
141. Jinnah Company applies overhead on the
138. In a manufacturing company, the cost of basis of 200% of direct labor cost. Job No. 501
factory labor consists of all of the following is charged with $60,000 of direct materials
except costs and $80,000 of manufacturing overhead.
a. employer payroll taxes.
The total manufacturing costs for Job No. 501 d. less than overhead incurred and there is a
is credit balance in Manufacturing Overhead
a. $140,000. at the end of a period.
b. $220,000.
c. $180,000. 144. Usually, under- or overapplied overhead is
d. $200,000. considered to be an adjustment to
a. work in process.
142. Companies assign Manufacturing overhead to b. finished goods.
work in process on an estimated basis through c. finished goods and cost of goods sold.
the use of a(n) d. cost of goods sold.
a. actual overhead rate.
b. estimated overhead rate. 145. Which of the following statements about under-
c. assigned overhead rate. or overapplied manufacturing overhead is
d. predetermined overhead rate. correct?
a. After the entry to transfer over- or
143. Overapplied manufacturing overhead exists underapplied overhead to Cost of Goods
when overhead assigned to work in process is Sold is posted, Manufacturing Overhead
a. more than overhead incurred and there is a will have a zero balance.
debit balance in Manufacturing Overhead b. When Manufacturing Overhead has a
at the end of a period. credit balance, overhead is said to be
b. less than overhead incurred and there is a under-applied.
debit balance in Manufacturing Overhead c. At the end of the year, under- or
at the end of a period. overapplied overhead is eliminated by a
c. more than overhead incurred and there is a closing entry.
credit balance in Manufacturing Overhead d. When annual financial statements are
at the end of a period. prepared, overapplied overhead is reported
in current liabilities.
Answers to Multiple Choice Questions
Ite An Ite An Ite An Ite An Ite An Item An Item An

m s. m s. m s. m s. m s. s. s.
36. a 52. B 68. a 84. c 10 c 116 d 132 a
37. d 53. A 69. b 85. b 0.
10 d .
117 d .
133 a
38. b 54. C 70. c 86. d 1.
10 d .118 b .134 c
39. c 55. D 71. c 87. b 2.
10 a .
119 d .
135 b
40. d 56. A 72. c 88. a 3.
10 c .
120 c .136 c
41. a 57. C 73. c 89. a 4.
10 c .
121 c .
137 c
42. c 58. B 74. a 90. b 5.
10 b .
122 d .
138 c
43. b 59. D 75. a 91. b 6.
10 a .123 b .
139 b
44. b 60. D 76. c 92. c 7.
10 b .
124 b .
140 d
45. a 61. A 77. c 93. c 8.
10 a .
125 c .
141 c
46. b 62. C 78. b 94. c 9.
11 c .126 c .
142 d
47. d 63. D 79. d 95. b 0.
11 c .
127 a .
143 c
48. c 64. D 80. c 96. d 1.
11 a .
128 a .
144 d
49. b 65. B 81. c 97. d 2.
11 c .
129 a .
145 a
50. d 66. D 82. b 98. b 3.
11 a .
130 b .
51. b 67. D 83. b 99. c 4.
11 b .131 d
5. .
MULTIPLE CHOICE QUESTIONS 44. Which of the following is a true statement
about process cost systems?
38. A process cost accounting system is most a. In process cost systems, costs are
appropriate when accumulated but not assigned.
a. a variety of different products are b. A process cost system has one work in
produced, each one requiring different process account for each process.
types of materials, labor, and overhead. c. In process cost systems, costs are
b. the focus of attention is on a particular job summarized on job cost sheets.
or order. d. Unit costs are not computed in process
c. similar products are mass-produced. cost systems.
d. individual products are custom made to the
specification of customers. 45. Which of the following is correct regarding cost
systems?
39. A characteristic of products that are mass-
produced in a continuous fashion is that Job Order
a. the products are identical or very similar in Process
nature.
b. they are grouped in batches. a. Work in process account several
c. they are produced at the time an order is one for each process
received. b. Work in process account one
d. their costs are accumulated on job cost one
sheets. c. Work in process account one
one for each process
40. A process cost system would be used for all of d. Work in process account several
the following products except one
a. chemicals.
b. computer chips. 46. In a process cost system, unit costs are
c. motion pictures. determined using a
d. soft drinks. a. numerator of costs of each job.
b. denominator of units produced during the
41. In a process cost system, period.
a. a Work in Process account is maintained c. denominator of units produced for the job.
for each product. d. denominator of units produced for the day.
b. a materials requisition must identify the job
on which the materials will be used. 47. In process cost accounting, manufacturing
c. a Work in Process account is maintained costs are summarized on a
for each process. a. job order cost sheet.
d. one Work in Process account is maintained b. process order cost sheet.
for all the processes, similar to a job order c. production cost report.
cost system. d. manufacturing cost sheet.
42. Differences between a job order cost
system and a process cost system include all of the 48. Which of the following manufacturing cost
following except the elements occurs in a process cost system?
a. documents used to track costs. a. Direct materials
b. point at which costs are totaled. b. Direct labor
c. unit cost computations. c. Manufacturing overhead
d. flow of costs. d. All of these
43. Which of these best reflects a distinguishing 49. In a process cost system, product costs are
factor between a job order cost system and a summarized
process cost system? a. on job cost sheets.
a. The detail at which costs are calculated b. on production cost reports.
b. The time period each covers c. after each unit is produced.
c. The number of work in process accounts d. when the products are sold.
d. The manufacturing cost elements included
50. When manufacturing overhead costs are d. credit to Manufacturing Overhead for
assigned to production in a process cost $16,000.
system, they are debited to
a. the Finished Goods Inventory account. 56. Barnes and Miller Manufacturing is trying to
b. Cost of Goods Sold. determine the equivalent units for conversion
c. a Manufacturing Overhead account. costs with 3,000 units of ending work in
d. the Work in Process account. process at 80% completion and 14,000
physical units. There are no beginning units in
51. A product requires processing in two the department. Conversion costs occur evenly
departments, Department A and then throughout the entire production period. What
Department B, before it is completed. Costs are the equivalent units for conversion costs
transferred out of Department A will be for the current period?
transferred to a. 17,000
a. Finished Goods Inventory. b. 16,800
b. Cost of Goods Sold. c. 2,400
c. Work in Process—Department B. d. 13,400
d. Manufacturing Overhead. 57. 7,000 units in a process that are 70%
complete are referred to as
52. Which of the following would not appear as a a. 7,000 equivalent units of production.
debit in the Work in Process account of a b. 2,100 equivalent units of production.
second department in a two stage production c. 4,900 equivalent units of production.
process? d. 2,100 unequivalent units of production.
a. Materials used
b. Overhead applied 58. A process with no beginning work in process,
c. Labor assigned completed and transferred out 45,000 units
d. Cost of products transferred out during a period and had 30,000 units in the
ending work in process inventory that were
53. Materials requisitions are 30% complete. The equivalent units of
a. not used in process costing. production for the period were
b. generally used more frequently in process a. 45,000 equivalent units.
costing than job order costing. b. 75,000 equivalent units.
c. generally used less frequently in process c. 54,000 equivalent units.
costing than job order costing. d. 22,500 equivalent units.
d. used more frequently by latter stage
production departments. Use the following information for questions 59–60.
54. A primary driver of overhead costs in A department adds raw materials to a process at the
continuous manufacturing operations is beginning of the process and incurs conversion costs
a. direct labor dollars. uniformly throughout the process. For the month of
b. direct labor hours. January, there were no units in the beginning work in
c. machine hours. process inventory; 80,000 units were started into
d. machine maintenance dollars. production in January; and there were 20,000 units
that were 40% complete in the ending work in process
55. Price Manufacturing assigns overhead based inventory at the end of January.
on machine hours. Department A logs 1,200
machine hours and Department B shows 2,000 59. What were the equivalent units of production
machine hours for the period. If the overhead for materials for the month of January?
rate is $5 per machine hour, the entry to assign a. 88,000 equivalent units
overhead will show a b. 72,000 equivalent units
a. debit to Manufacturing Overhead for c. 60,000 equivalent units
$16,000. d. 80,000 equivalent units
b. credit to Work in Process—Department B
for $10,000. 60. What were the equivalent units of production
c. debit to Work in Process for $10,000. for conversion costs for the month of January?
a. 60,000 equivalent units
b. 72,000 equivalent units b. dividing physical units by the percentage of
c. 68,000 equivalent units work done.
d. 80,000 equivalent units c. multiplying the percentage of work done by
the physical units.
61. Equivalent units are calculated by d. dividing equivalent units by the percentage
a. multiplying the percentage of work done by of work done.
the equivalent units of output.
62. 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
63. Corsi Company had the following department data:
Physical Units
Work in process, beginning -0-
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
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
a. 45,000 equivalent units.
b. 50,000 equivalent units.
c. 52,000 equivalent units.
d. 40,000 equivalent units.
68. The equivalent units of production for conversion costs for June were
a. 40,000 equivalent units.
b. 47,000 equivalent units.
c. 45,000 equivalent units.
d. 50,000 equivalent units.
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?
b. 15,000 equivalent units
c. 17,500 equivalent units
d. 7,500 equivalent units
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?
b. 15,000 equivalent units
c. 11,000 equivalent units
d. 14,000 equivalent units
71. Hanker Company had the following department data on physical units:
Work in process, beginning 1,000
Work in process, ending 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
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 $ 80,000
Equivalent units of materials 10,000
Total conversion costs $120,000
Equivalent units of conversion costs 20,000
How much is the total manufacturing cost per unit?
a. $14.00
b. $6.67
c. $6.00
d. $8.00
Use the following information for questions 77–78. 77. What was the total amount of manufacturing
costs assigned to those units that were
Materials costs of $200,000 and conversion costs of completed and transferred out of the process
$214,200 were charged to a processing department in in September?
the month of September. Materials are added at the a. $184,000
beginning of the process, while conversion costs are b. $391,000
incurred uniformly throughout the process. There were c. $414,200
no units in beginning work in process, 100,000 units d. $425,200
were started into production in September, and there 78. What was the total amount of manufacturing
were 8,000 units in ending work in process that were costs assigned to the 8,000 units in the ending
40% complete at the end of September. work in process?
a. $16,000
b. $7,200 ending inventory which are 50% complete as
c. $13,600 to conversion costs. How much are conversion
d. $23,200 costs per unit?
a. $5.00
79. Charley Company’s Assembly Department has b. $4.93
materials cost at $3 per unit and conversion c. $9.88
cost at $6 per unit. There are 9,000 units in d. $4.82
ending work in process, all of which are 70%
complete as to conversion costs. How much 84. Madison Industries has equivalent units of
are total costs to be assigned to inventory? 2,000 for materials and for conversion costs.
a. $37,800 Total manufacturing costs are $200,000. Total
b. $64,800 materials costs are $150,000. How much is the
c. $56,700 conversion cost per unit?
d. $81,000 a. $10.00
b. $25.00
80. Byrd Manufacturing decided to analyze certain c. $100.00
costs for June of the current year. Units started d. $20.00
into production equaled 14,000 and ending
work in process equaled 2,000 units. With no 85. Equivalent units for materials total 15,000.
beginning work in process inventory, how There were 12,000 units completed and
much is the conversion cost per unit if ending transferred out. Equivalent units for conversion
work in process was 25% complete and total costs equals 13,500. How much are the
conversion costs equaled $50,000? physical units for conversion costs if ending
a. $3.13 work in process is 50% complete?
b. $12.50 a. 14,000
c. $4.00 b. 15,000
d. $2.00 c. 4,000
d. 12,000
81. Reed Manufacturing has recently tried to
improve its analysis for its manufacturing 86. If equivalent units are 6,000 for conversion
process. Units started into production equaled costs and units transferred out equals 4,000,
6,000 and ending work in process equaled 400 what stage of completion should the ending
units. Reed had no beginning work in process work in process be for the 8,000 units
inventory. Conversion costs are applied remaining?
equally throughout production, and materials a. 75%
are applied at the beginning of the process. b. 25%
How much is the materials cost per unit if c. 10%
ending work in process was 25% complete and d. 20%
total materials costs equaled $60,000?
a. $10.00 Use the following information for questions 87–88.
b. $10.53
In the month of April, a department had 500 units in
c. $37.50
the beginning work in process inventory that were
d. $9.38
60% complete. These units had $20,000 of materials
costs and $15,000 of conversion costs. Materials are
82. Conversion cost per unit equals $6.00. Total
added at the beginning of the process and conversion
materials costs are $40,000. Equivalent units
costs are added uniformly throughout the process.
are 20,000. How much is the total
During April, 10,000 units were completed and
manufacturing cost per unit?
transferred to the finished goods inventory and there
a. $8.00
were 2,000 units that were 25% complete in the
b. $6.00
ending work in process inventory on April 30. During
c. $10.00
April, manufacturing costs charged to the department
d. $2.00
were: Materials $460,000; Conversion costs
$510,000.
83. Physical units are 40,000. Total conversion
costs are $197,500. There are 1,000 units in
87. The cost assigned to the units transferred to a. Compute the equivalent units of production
finished goods during April was b. Compute the physical unit flow
a. $900,000. c. Prepare the job order cost sheet
b. $905,000. d. Prepare a cost reconciliation schedule
c. $940,000.
d. $895,000. 92. Honrad Company's Assembly Department has
materials cost at $4 per unit and conversion
88. The cost assigned to the units in the ending cost at $8 per unit. There are 9,000 units in
work in process inventory on April 30 was ending work in process, all of which are 70%
a. $180,000. complete as to conversion costs. How much
b. $105,000. are total costs to be assigned to inventory?
c. $80,000. a. $50,400
d. $145,000. b. $86,400
c. $75,600
89. Zibba Company enters materials at the d. $108,000
beginning of the process. In January, there
was no beginning work in process, but there 93. In a process cost system, units to be
were 100 units in the ending work in process accounted for in a department are equal to the
inventory. The number of units completed a. number of units started or transferred into
equals the number of the department.
a. units started. b. number of units transferred out of the
b. units started less 100. department.
c. units started plus 100. c. units in the beginning inventory plus the
d. equivalent units. units started or transferred into the
90. If there are no units in process at the beginning department.
of the period, then d. ending inventory plus the units started or
a. the company must be using a job order transferred into the department.
cost system.
b. only one computation of equivalent units of 94. The total units accounted for equals units in
production will be necessary. a. beginning work in process – units
c. the units started into production will equal transferred out.
the number of units transferred out. b. beginning work in process + ending work in
d. the units to be accounted for will equal the process.
units transferred out and the units in c. ending work in process + units transferred
process at the end of the period. out.
d. ending work in process – units started into
91. Which of the following is not a necessary step production.
in preparing a production cost report?

Department 1 of a two department production process shows:
Units
Beginning Work in Process 10,000
Ending Work in Process 50,000
Total units to be accounted for 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
c. 120,000
d. 110,000
97. The Assembly Department shows the following information:
Units
Units Transferred Out 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
Started into Production 105,000
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.
103. 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%
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
Materials Conversion Costs
a. $2.40 $2.10
b. $2.40 $2.63
c. $3.00 $2.10
d. $3.60 $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:

Total materials costs $120,000
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:
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 $3.00
Total manufacturing cost per unit $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
Use the following information for questions 110–111. d. $6.25

113. Madison Industries has equivalent units of
Materials costs of $400,000 and conversion costs of 4,000 for materials and for conversion costs.
$510,000 were charged to a processing department in Total manufacturing costs are $200,000. Total
the month of September. Materials are added at the materials costs are $150,000. How much is the
beginning of the process, while conversion costs are conversion cost per unit?
incurred uniformly throughout the process. There were a. $37.50
no units in beginning work in process, 20,000 units b. $12.50
were started into production in September, and there c. $50.00
were 5,000 units in ending work in process that were d. $10.00
40% complete at the end of September.
114. In a process cost system, a production cost
110. What was the total amount of manufacturing report is prepared
costs assigned to those units that were a. only for the first processing department.
completed and transferred out of the process b. for all departments in the aggregate.
in September? c. for each processing department.
a. $750,000 d. only for the last processing department.
b. $1,000,000
c. $803,250 115. A production cost report
d. $682,500 a. is prepared for each product.
b. is prepared from a job cost sheet.
111. What was the total amount of manufacturing c. will show quantity and cost data for a
costs assigned to the 5,000 units in the ending production department.
work in process? d. will not identify a specific department if
a. $227,500 more than one department is involved in
b. $250,000 the production process.
c. $160,000
d. $100,000 116. In the production cost report, the total
a. physical units accounted for equals the
112. Snead Manufacturing has recently tried to costs accounted for.
improve its analysis for its manufacturing b. physical units accounted for equals the
process. Units started into production equaled units to be accounted for.
9,000 and ending work in process equaled 600 c. costs charged equals the units to be
units. Snead had no beginning work in process accounted for.
inventory. Conversion costs are applied d. costs accounted for equals the costs of the
equally throughout production, and materials units started into production.
are applied at the beginning of the process.
a
How much is the materials cost per unit if 117. The Cutting Department’s output during the
ending work in process was 25% complete and period consists of 12,000 units completed and
total materials costs equaled $60,000? transferred out, and 3,000 units in ending work
a. $6.67 in process that were 25% complete as to
b. $7.02 materials and conversion costs. Beginning
c. $25.00 inventory was 1,500 units that were 25%
complete as to materials and conversion costs. process that were 75% complete as to
Under the FIFO method, what are the materials and conversion costs. Beginning
equivalent units of production for materials? inventory was 800 units that were 30%
a. 13,725 complete as to materials and conversion costs.
b. 12,375 Under the FIFO method, what are the
c. 14,475 equivalent units of production for materials?
d. 13,500 a. 10,690
b. 11,010
a
118. The Wrapping Department’s output during the c. 10,450
period consists of 10,000 units completed and d. 10,210
transferred out, and 600 units in ending work in
Use the following information to answer questions are 4,200 units in ending work in process
119–120. which are 25% complete as to conversion
costs, and fully complete as to materials cost.
Chicotti Company has 3,000 units in beginning work in
How much is the total cost assignable to the
process, 30% complete as to conversion costs,
ending work in process inventory if the FIFO
25,000 units transferred out to finished goods, and
method is used?
1,000 units in ending work in process 20% complete
a. 36,750
as to conversion costs. The beginning and ending
b. 84,000
inventory is fully complete as to materials costs.
a c. 21,000
119. How much are equivalent units for conversion
d. 15,750
costs if the FIFO method is used?
a. 25,200 a
122. Solis Company uses the FIFO method to
b. 27,300
compute equivalent units. It has 2,000 units in
c. 23,000
beginning work in process, 20% complete as
d. 24,300
to conversion costs and 50% complete as to
a materials costs, 25,000 units started, and
120. How much are equivalent units for materials if
3,000 units in ending work in process, 30%
the FIFO method is used?
complete as to conversion costs, and 80%
a. 25,200
complete as to materials cost. How much are
b. 26,000
the equivalent units for materials under the
c. 23,000
FIFO method?
d. 29,000
a. 25,400
a b. 25,000
121. Schiller Company has unit costs of $5 for
c. 26,400
materials and $15 for conversion costs. There
d. 27,000
a
123. Special Company had the following department information about physical units and percentage of
completion:
Physical Units
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
a
124. Hanker Company had the following department data on physical units:
Work in process, beginning 1,000
Work in process, ending 800
materials if the FIFO method is used?
a. 4,200
b. 3,800
c. 4,800
d. 3,000
Additional Multiple Choice Questions 130. In computing equivalent units, ___________ is

not part of the equivalent units of production
125. A process cost system would be used by all of formula.
the following except a(n) a. units transferred out
a. chemical company. b. beginning work in process
b. advertising company. c. ending work in process
c. oil company. d. None of these is correct.
d. computer chip company. 131. In Saint-Simon, Inc., the Assembly
Department started 12,000 units and completed
126. Which of the following is considered a 14,000 units. If beginning work in process was 6,000
difference between a job order cost and a units, how many units are in ending work in process?
process cost system? a. 0
a. The manufacturing cost elements b. 2,000
b. Documents used to track costs c. 4,000
c. The accumulation of the costs of materials, d. 8,000
labor, and overhead
d. The flow of costs 132. The total units to be accounted for is computed
by adding
127. The basic similarities between job order cost a. beginning units in process to units
and process cost systems include all of the transferred out.
following except the b. ending units in process to units started into
a. manufacturing cost elements. production.
b. flow of costs. c. beginning units in process to units started
c. point at which costs are totaled. into production.
d. accumulation of the costs of materials, d. ending units in process to total units
labor, and overhead. accounted for.
128 Equivalent units of production are a measure 133. In the Camria Company, materials are entered
of at the beginning of the process. If there is no
a. units completed and transferred out. beginning work in process, but there is an
b. units transferred out. ending work in process inventory, the number
c. units in ending work in process. of equivalent units as to materials costs will be
d. the work done in a period expressed in a. the same as the units started.
fully completed units. b. the same as the units completed.
c. less than the units started.
129. Total physical units to be accounted for are d. less than the units completed.
equal to the units
a. started (or transferred) into production. 134. For the Assembly Department, unit materials
b. started (or transferred) into production plus cost is $8 and unit conversion cost is $12. If
the units in beginning work in process. there are 6,000 units in ending work in process
c. started (or transferred) into production less 75% complete as to conversion costs, the
the units in beginning work in process. costs to be assigned to the inventory are
d. completed and transferred out. a. $120,000.
b. $102,000.
c. $90,000.
d. $108,000.
d. cost of beginning work in process plus the
135. The total costs accounted for in a production cost of units completed and transferred
cost report equal the out.
a. cost of units completed and transferred out
only. 136. In a production cost report, which one of the
b. cost of units started into production. following sections is not shown under Costs?
c. cost of units completed and transferred out a. Unit costs
plus the cost of ending work in process. b. Costs to be accounted for
c. Costs during the period
d. Units accounted for

Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
38. c 53. c 68. b 83. a 98. d 113. b 128. d
39. a 54. c 69. a 84. b 99. a 114. c 129. b
40. c 55. d 70. d 85. b 100. c 115. c 130. b
41. c 56. d 71. c 86. b 101. c 116. b 131. c
a
42. d 57. c 72. b 87. a 102. a 117. b 132. c
a
43. c 58. c 73. a 88. b 103. b 118. d 133. a
a
44. b 59. d 74. b 89. b 104. a 119. d 134. b
a
45. c 60. c 75. c 90. d 105. c 120. c 135. c
a
46. b 61. c 76. a 91. c 106. d 121. a 136. d
a
47. c 62. d 77. b 92. b 107. a 122. a
a
48. d 63. c 78. d 93. c 108. a 123. c
a
49. b 64. b 79. b 94. c 109. c 124. b
50. d 65. b 80. c 95. d 110. a 125. b
51. c 66. c 81. a 96. b 111. c 126. b
52. d 67. b 82. a 97. a 112. a 127. c
MULTIPLE CHOICE QUESTIONS b. overhead rate.
31. Which of the following is not typical of c. cost pool.
traditional costing systems? d. product activity.
a. Use of a single predetermined overhead 34. Which best describes the flow of overhead
rate. costs in an activity-based costing system?
b. Use of direct labor hours or direct labor a. Overhead costs  direct labor cost or
cost to assign overhead. hours  products
c. Assumption of correlation between direct b. Overhead costs  products
labor and incurrence of overhead cost. c. Overhead costs  activity cost pools 
d. Use of multiple cost drivers to allocate cost drivers  products
overhead. d. Overhead costs  machine hours 
products
32. In traditional costing systems, overhead is
generally applied based on 35. The costs that are easiest to trace directly to
a. direct labor. products are
b. machine hours. a. direct materials and direct labor.
c. direct material dollars. b. direct labor and overhead.
d. units of production. c. direct materials and overhead.
33. An activity that has a direct cause-effect d. none of the above; all three costs are
relationship with the resources consumed is equally easy to trace to the product.
a(n)
a. cost driver. 36. Often the most difficult part of computing
accurate unit costs is determining the proper
amount of _________ to assign to each a. allocates overhead to multiple activity cost
product, service, or job. pools, and it then assigns the activity cost
a. direct materials pools to products and services by means
b. direct labor of cost drivers.
c. overhead b. accumulates overhead in one cost pool,
d. direct materials and direct labor then assigns the overhead to products and
services by means of a cost driver.
37. Predetermined overhead rates in traditional c. assigns activity cost pools to products and
costing are often based on services, then allocates overhead back to
a. direct labor cost for job order costing and the activity cost pools.
machine hours for process costing. d. allocates overhead directly to products and
b. machine hours for job order costing and services based on activity levels.
direct labor cost for process costing.
c. multiple bases for job order costing and 41. Ordering materials, setting up machines,
direct labor cost for process costing. assembling products, and inspecting products
d. multiple bases for both job order costing are examples of
and process costing. a. cost drivers.
b. overhead cost pools.
38. Direct labor is sometimes the appropriate basis c. direct labor costs.
for assigning overhead cost to products. It is d. nonmanufacturing activities.
appropriate to use direct labor when which of
the following is true? 42. An “Ordering and Receiving Materials” cost
pool would most likely have as a cost driver:
(1) Direct labor constitutes a significant part
a. machine hours.
of total product cost.
b. number of setups.
(2) A high correlation exists between direct
c. number of purchase orders.
labor and changes in the amount of
d. number of inspection tests.
overhead costs.
a. (1) only 43. Globe Company produces two products, A1
b. (2) only and B2. A1 is a high-volume item totaling
c. Either (1) or (2) 20,000 units annually. B2 is a low-volume item
d. Both (1) and (2) totaling only 6,000 units per year. A1 requires
one hour of direct labor for completion, while
39. Advances in computerized systems, each unit of B2 requires 2 hours. Therefore,
technological innovation, global competition, total annual direct labor hours are 32,000
and automation have changed the (20,000 + 12,000). Expected annual
manufacturing environment drastically by manufacturing overhead costs are $640,000.
a. increasing direct labor costs and increasing Globe uses a traditional costing system and
overhead costs. assigns overhead based on direct labor hours.
b. increasing direct labor costs and Each unit of B2 would be assigned overhead
decreasing overhead costs. of
c. decreasing direct labor costs and a. $20.00.
decreasing overhead costs. b. $24.61.
d. decreasing direct labor costs and c. $40.00.
increasing overhead costs. d. need more information to compute.
40. Activity-based-costing
Use the following information to answer questions 44–46.
R-Ball Corporation manufactures deluxe and standard racquetball racquets. R-Ball’s total overhead costs consist of
assembly costs and inspection costs. The following information is available:
Cost Deluxe Standard Total Cost
Assembly 500 mach. hours 500 mach. hours $30,000
Inspections 350 150 $50,000
2,100 labor hours 1,900 labor hours
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.
46. 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.
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 Cost Driver Est. Overhead Cost Driver Activity
Ordering and Receiving Orders $ 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 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 50. The first step in activity-based costing is to
each activity cost pool to products. a. assign manufacturing overhead costs for
b. compute the activity-based overhead rate each activity cost pool to products.
per cost driver. b. compute the activity-based overhead rate
c. identify and classify the major activities per cost driver.
involved in the manufacture of specific c. identify and classify the major activities
products. involved in the manufacture of specific
d. identify the cost driver that has a strong products.
correlation to the activity cost pool.
d. identify the cost driver that has a strong 52. Which of the following is not an example of an
correlation to the activity cost pool. activity cost pool?
a. Setting up machines
51. A well-designed activity-based costing system b. Machining
starts with c. Inspecting
a. identifying the activity-cost pools. d. Machine hours
b. computing the activity-based overhead
rate. 53. An example of an activity cost pool is
c. assigning manufacturing overhead costs a. machine hours.
for each activity cost pool to products. b. setting up machines.
d. analyzing the activities performed to c. number of setups.
manufacture a product. d. number of inspections.
54. Estimated costs for activity cost pools and other item(s) are as follows:
Machining $500,000
Assembling 200,000
Advertising 450,000
Inspecting and testing 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 a. actual overhead divided by actual use of
the purchasing activity cost pool? cost drivers.
a. Machine setups b. estimated overhead divided by actual use
b. Purchase orders of cost drivers.
c. Machine hours c. actual overhead divided by estimated use
d. Inspections of cost drivers.
59. An activity-based overhead rate is computed d. estimated overhead divided by estimated
as follows: use of cost drivers.
60. Use of activity-based costing will result in the a. decrease the cost per unit for low volume
development of products as compared to a traditional
a. one overhead rate based on direct labor overhead allocation.
hours. b. increase the cost per unit for low volume
b. one plant-wide activity-based overhead products as compared to a traditional
rate. overhead allocation.
c. multiple activity-based overhead rates. c. provide less accurate cost per unit for low
d. no overhead rates; overhead rates are not volume products than will traditional
used in activity-based costing. costing.
d. result in the same cost per unit for low
61. To use activity-based costing, it is necessary to volume products as does traditional
know the costing.
a. cost driver for each activity cost pool.
b. expected use of cost drivers per activity. 65. Companies that switch to ABC often find they
c. expected use of cost drivers per product. have
d. all of the above. a. been overpricing some products.
b. possibly losing market share to
62. To assign overhead costs to each product, the competitors.
company c. been sacrificing profitability by underpricing
a. multiplies the activity-based overhead rates some products.
per cost driver by the number of cost d. all of the above.
drivers expected to be used per product.
b. multiplies the overhead rate by the number 66. Comparing the U.S. to Japan,
of direct labor hours used on each product. a. activity-based costing is used less than in
c. assigns the cost of each activity cost pool the U.S.
in total to one product line. b. U.S. companies show a stronger preference
d. multiplies the rate of cost drivers per to volume measures such as direct labor
estimated cost for the cost pool by the hours to assign overhead costs.
estimated cost for each cost pool. c. labor cost reduction is less of a priority in
the U.S.
63. As compared to a low-volume product, a high- d. developing more accurate product costs is
volume product less of a priority in the U.S.
a. usually requires less special handling. 67. For its inspecting cost pool, Hose Company
b. is usually responsible for more overhead expected overhead cost of $200,000 and
costs per unit. 4,000 inspections. The actual overhead cost
c. requires relatively more machine setups. for that cost pool was $240,000 for 5,000
d. requires use of direct labor hours as the inspections. The activity-based overhead rate
primary cost driver to ensure proper used to assign the costs of the inspecting cost
allocation of overhead. pool to products is
a. $40 per inspection.
64. Assigning overhead using ABC will usually b. $48 per inspection.
c. $50 per inspection.
d. $60 per inspection.

Donkey Company manufactures two products, Standard and DeLuxe. Donkey’s 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 74. Gee-Tar Company manufactures two models
requires 600 purchase orders, and C3 requires of its guitar, the Beginner and the Pro. The
1,000 purchase orders. Calvin has identified Beginner model requires 10,000 direct labor
an ordering and receiving activity cost pool hours and the Pro requires 30,000 direct labor
with allocated overhead of $120,000 for which hours. The company produces 3,400 units of
the cost driver is purchase orders. Direct labor the Beginner model and 600 units of the Pro
hours used on each product are 50,000 for A1, model each year. The company inspects one
40,000 for B2, and 110,000 for C3. How much Beginner for every 100 produced, and inspects
ordering and receiving overhead is assigned to one Pro for every 10 produced. The company
each product? expects to incur $56,400 of total inspecting
A1 B2 C3 costs this year. How much of the inspecting
a. $40,000 $40,000 $40,000 costs should be allocated to the Beginner
b. $30,000 $24,000 $66,000 model using ABC costing?
c. $24,000 $36,000 $60,000 a. $14,100
d. $27,000 $30,000 $63,000 b. $20,400
73. OldMaid Inc. computed an overhead rate for c. $28,200
machining costs ($1,000,000) of $10 per d. $47,940
machine hour. Machining costs are driven by
machine hours. If computed based on direct 75. Sasse Inc. manufactures 2 products, hammers
labor hours, the overhead rate for machining and screwdrivers. The company has estimated
costs would be $20 per direct labor hour. The its overhead in the assembling department to
company produces two products, Gert and be $165,000. The company produces 300,000
Mill. Gert requires 60,000 machine hours and hammers and 600,000 screwdrivers each year.
20,000 direct labor hours, while Mill requires Each hammer uses 2 parts, and each
40,000 machine hours and 30,000 direct labor screwdriver uses 3 parts. How much of the
hours. Using activity-based costing, machining assembly overhead should be allocated to
costs assigned to each product is hammers?
Gert Mill a. $41,250.
a. $400,000 $600,000 b. $55,000.
b. $500,000 $500,000 c. $66,000
c. $533,333 $466,667 d. $70,714.
d. $600,000 $400,000
Use the following information to answer questions 76–77:
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 Zones’s two
products is as follows:
Product A Product B
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
76. 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
77. Using ABC, how much overhead is assigned to Product A this year?
a. $84,167
b. $121,154
c. $170,000
d. $175,000
78. 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 Expected use of Driver Cost
Ordering and Receiving 2,000 $400,000
Mixing 50,000 500,000
Testing 1,500 450,000
Production information for Goo is as follows:

Department Expected use of Driver
Ordering and Receiving 400
Mixing 20,000
Testing 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 Expected use of Driver Cost
Ordering and Receiving 2,000 $400,000
Mixing 50,000 500,000
Testing 1,500 450,000
Production information for Slime is as follows:
Department Expected use of Driver
Ordering and Receiving 1,600
Mixing 30,000
Testing 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 82. As compared to a high-volume product, a low-
machine setups, with estimated overhead of volume product
$180,000. Astro produces sparklers (400 a. usually requires less special handling.
setups) and lighters (600 setups). How much b. is usually responsible for more overhead
of the machine setup cost pool should be costs per unit.
assigned to sparklers? c. requires relatively fewer machine setups.
a. $180,000 d. requires use of direct labor hours as the
b. $72,000 primary cost driver to ensure proper
c. $90,000 allocation of overhead.
d. $108,000
83. In Japan,
81. Which would be an appropriate cost driver for a. activity-based costing is used more than in
the ordering and receiving activity cost pool? the U.S.
a. Machine setups b. companies prefer volume measures such as
b. Purchase orders direct labor hours to assign overhead costs.
c. Machine hours c. labor cost reduction is less of a priority.
d. Inspections 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
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.
86. Overhead applied to Mini A using activity-based costing is
a. $1,800,000.
b. $2,304,000.
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?
Rain Snow Wind
a. $160,000 $160,000 $160,000
b. $100,000 $75,000 $225,000
c. $120,000 $90,000 $270,000
d. $90,000 $160,000 $230,000
89. Hammock Company manufactures two models

of its hammock, the Superior and the Deluxe. 90. Jaime Inc. manufactures two products,
The Superior model requires 10,000 direct sweaters and jackets. The company has
labor hours and the Deluxe model requires estimated its overhead in the order-processing
40,000 direct labor hours. The company department to be $240,000. The company
produces 4,000 units of the Superior model produces 50,000 sweaters and 80,000 jackets
and 1,000 units of the Deluxe model each each year. Sweater production requires 25,000
year. The company produces the Superior machine hours, jacket production requires
model in batch sizes of 200, while it produces 50,000 machine hours. The company places
the Deluxe model in batch sizes of 100. The raw materials orders 10 times per month, 2
company expects to incur $180,000 of total times for raw materials for sweaters and the
setup costs this year. How much of the setup remainder for raw materials for jackets. How
costs are allocated to the Superior model using much of the order processing overhead should
ABC costing? be allocated to jackets?
a. $120,000 a. $120,000
b. $90,000 b. $160,000
c. $36,000 c. $147,693
d. $150,000 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 Canterra’s
two products is as follows:
Product One Product Two
Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 350
Number of products manufactured 600 400
91. 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 Expected Use of Driver Cost
Processing 800 $750,000
Packaging 200,000 750,000
Testing 2,000 300,000
Production information for the two products is as follows:

Oil Sludge
Department Expected Use of Driver Expected Use of Driver
Processing 300 500
Packaging 120,000 80,000
Testing 1,600 400
94. 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 total processing costs are $290,000. Using
hotel industry. It has two products, Downy and ABC, how much overhead would be assigned
Firm, and total overhead is $790,000. The to the Downy product?
company plans to manufacture 400 Downy a. $395,000
mattresses and 100 Firm mattresses his year. b. $463,125
In manufacturing the mattresses, the company c. $326,875
must perform 600 material moves for the d. $559,583
Downy and 400 for the Firm; it processes 900
purchase orders for the Downy and 700 for the 97. Which of the following is a limitation of activity-
Firm; and the company’s employees work based costing?
1,400 direct labor hours on the Downy product a. More cost pools
and 3,400 on the Firm. Sleep-Tight’s total b. Less control over overhead costs
material handling costs are $500,000 and its c. Poorer management decisions
d. Some arbitrary allocations continue d. Poorer management decisions
98. Which of the following factors would suggest a 105. Which of the following is true about activity-
switch to activity-based costing? based costing?
a. Product lines similar in volume and a. Less cost pools
manufacturing complexity. b. Same base as traditional costing
b. Overhead costs constitute a significant c. More costly to use
portion of total costs. d. Eliminates arbitrary allocations
c. The manufacturing process has been
stable. 106. Each of the following is a limitation of activity-
d. Production managers use data provided by based costing except that
the existing system. a. it can be expensive to use.
b. it decreases control over overhead costs
99. Which of the following is true of activity-based c. it is complex and can be difficult to
costing? understand
a. More cost pools d. some arbitrary allocations continue.
b. Same base as traditional costing
c. Less costly to use 107. The presence of any of the following factors
d. Eliminates arbitrary allocations would suggest a switch to ABC except when
a. product lines differ greatly in volume.
100. The primary benefit of ABC is it provides b. overhead costs constitute a major portion
a. better management decisions. of total costs.
b. enhanced control over overhead costs. c. the manufacturing process has changed
c. more cost pools. significantly.
d. more accurate product costing. d. production managers are using data
provided by the existing system
101. Which of the following is not a benefit of
activity-based costing? 108. Activity-based costing uses
a. More accurate product costing a. one plantwide pool and a single cost driver.
b. Enhanced control over overhead costs b. departmental pools and a single cost
c. Better management decisions driver.
d. Less costly to use c. numerous cost pools and numerous cost
drivers.
102. Each of the following is a limitation of activity- d. one plantwide pool and numerous cost
based costing except that drivers
a. it can be expensive to use.
b. it is more complex than traditional costing. 109. Which of the following statements is false?
c. more cost pools are used. a. ABC can weaken control over overhead
d. some arbitrary allocations continue. costs.
b. Under ABC, companies can trace many
103. The presence of any of the following factors overhead costs directly to activities.
would suggest a switch to ABC except when c. ABC allows some indirect costs to be
a. product lines differ greatly in volume. identified as direct costs.
b. overhead costs constitute a minor portion d. managers become more aware of their
of total costs. responsibility to control the activities that
c. the manufacturing process has changed generate costs.
significantly.
d. production managers are ignoring data 110. Which of the following is a value-added
provided by the existing system. activity?
a. Inventory storage
104. Which of the following is a limitation of activity- b. Machining
based costing? c. Building maintenance
a. More cost pools d. Bookkeeping
b. Less control over overhead costs
c. ABC can be expensive to use 111. Which of the following is a value-added
activity?
a. Inventory control 119. Which of the following is a non-value-added
b. Inspections activity?
c. Packaging a. Engineering design
d. Repair of machines b. Machining
c. Inspection
112. Which of the following is a non-value-added d. Packaging
activity?
a. Inventory control 120. A non-value-added activity in a service
b. Machining enterprise is
c. Assembly a. taking appointments.
d. Painting b. traveling.
c. advertising.
113. Which of the following is a non-value-added d. all of these.
activity?
a. Painting 121. Value-added activities
b. Finishing a. should be reduced or eliminated.
c. Packaging b. involve resource usage customers are
d. Building maintenance willing to pay for.
c. add cost to a product without affecting
114. A non-value-added activity in a service
selling price.
enterprise is
d. cannot be differentiated from non-value-
a. providing legal research.
added activities.
b. delivering packages.
c. consulting.
122. All of the following are examples of a value-
d. bookkeeping.
added activity in a service company except
115. A value-added activity in a service enterprise is a. delivering packages by a delivery service.
a. performing landscaping services. b. ordering supplies.
b. reception. c. performing surgery.
c. billing. d. providing legal research for legal services.
d. ordering supplies.
123. Which of the following is not a facility-level
116. Non-value-added activities activity?
a. should be reduced or eliminated. a. Plant management
b. involve resource usage customers are b. Product design
willing to pay for. c. Personnel administration
c. increase both the cost and market value of d. Training
a product.
d. cannot be differentiated from value-added 124. Which of the following is not a product-level
activities. activity?
a. Product design
117. Value-added activities b. Engineering changes
a. increase the worth of a product or service c. Inventory management
to customers. d. Equipment setups
b. involve resource usage and related costs
that customers are willing to pay for. 125. Which of the following is not a batch-level
c. are the activities of actually manufacturing activity?
a product or performing a service. a. Engineering changes
d. all of the above. b. Equipment setups
118. Which of the following is a value-added c. Inspection
activity? d. Materials handling
a. Engineering design
126. Which of the following is not a unit-level
b. Machinery repair
activity?
c. Inventory storage
a. Purchase ordering
d. Inspections
b. Assembling
c. Painting
d. Sewing 133. Which of the following is a batch-level activity?
127. Which of the following is a batch-level activity? a. Assembling
a. Plant management b. Product design
b. Product design c. Engineering changes
c. Equipment setups d. Purchase ordering
d. Assembling
134. Which of the following is a product-level
128. Which of the following is not a facility-level activity?
activity? a. Equipment setups
a. Plant depreciation b. Product design
b. Property taxes c. Property taxes
c. Engineering changes d. Utilities
d. Utilities
135. Which of the following is a facility-level
129. Which of the following is not a product-level activity?
activity? a. Engineering changes
a. Product design b. Product design
b. Engineering changes c. Property taxes
c. Material handling d. Inspection
d. Inventory management 136. Activities required to support or sustain an
entire production process are called
130. Which of the following is not a batch-level a. unit-level activities.
activity? b. batch-level activities.
a. Purchase ordering c. product-level activities.
b. Equipment setups d. facility-level activities.
c. Inspection
d. Assembling 137. Which would be a cost driver for a facility-level
activity?
131. Which of the following is not a unit-level a. Number of setups
activity? b. Number of product designs
a. Drilling c. Square footage
b. Cutting d. Number of purchase orders
c. Sanding
d. Inspecting 138. Activity-based costing has been found to be
useful in each of the following service
132. Which of the following is a unit-level activity? industries except
a. Painting a. airlines.
b. Purchase ordering b. railroads.
c. Inspection c. hotels.
d. Material handling d. ABC has been useful in all of these
industries.
139.
Activity-based costing is used in b. the overall objective of ABC is different
than in manufacturing industries.
Service industries Manufacturing industries
c. a larger proportion of overhead costs are
a. Yes No
company-wide costs.
b. Yes Yes
d. activity cost pools cannot be identified..
c. No Yes
d. No No
141. Activity-based costing is used by
a. accounting firms.
140. In service industries
b. law firms.
a. activities cannot be labeled as value-added
c. consulting firms.
or non-value-added..
d. all of the above.
142. Ben and Jake’s 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. JC’s overhead costs consist of computer
support, $200,000; and legal support, $100,000. Information on the two services is:
Tax Consulting
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800
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 d. ABC has been useful in any of these
Morelli. Direct labor cost is $1,200; 600 CPU industries.
minutes were used; and 1 legal hour was 149. What sometimes makes implementation of
used. What is the total cost of the Morelli job? activity-based costing difficult in service industries is
a. $2,400 a. the labeling of activities as value-added.
b. $2,500 b. identifying activities, activity cost plus, and
c. $3,600 cost drivers.
d. $3,700 c. that a larger proportion of overhead costs
are company-wide costs.
148. Activity-based costing has been found to be d. attempting to reduce or eliminate non-
useful in each of the following service value-added activities.
industries except
a. banks. 150. All of the following statements are correct
b. hospitals. except that
c. telephone companies.
a. activity-based costing has been widely d. supplies.
adopted in service industries.
a
b. the objective of installing ABC in service 157. Just-in-time processing
firms is different than it is in a a. is based on a just-in-case philosophy.
manufacturing firm. b. results in higher inventory amounts.
c. a larger proportion of overhead costs are c. eliminates the push approach.
company-wide costs in service industries. d. all of the above.
d. the general approach to identifying
a
activities and activity cost pools is the 158. Just-in-time processing
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.
a
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.
a
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.
a
154. Which of the following is not a benefit of just-
in-time processing?
a. Control of significant inventory balances
b. Enhanced product quality
c. Reduction of rework costs
d. Production cost savings
a
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
a
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.
a. results in the opposite of a just-in-case philosophy. d. None of the above
b. results in a pull approach.
a
c. minimizes inventory storage and waiting 161. Which account is not used in just-in-time
time. processing?
d. all of the above. a. Accounts payable
b. Work-in-process inventory
a
159. An important element of just-in-time c. Finished goods inventory
processing is d. Raw and In-Process inventory
a. dependable suppliers who are willing to
a
deliver on short notice. 162. In the pull approach
b. a specialized workforce. a. subassembly parts are manufactured and
Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
31. d 50. C 69. c 88. C 107. d 126. a 145. c
32. a 51. D 70. a 89. A 108. c 127. c 146. b
33. a 52. D 71. d 90. D 109. a 128. c 147. d
34. c 53. b 72. c 91. A 110. b 129. c 148. d
35. a 54. b 73. d 92. D 111. c 130. d 149. c
36. c 55. b 74. b 93. C 112. a 131. d 150. b
37. a 56. a 75. a 94. B 113. d 132. a 151. d
38. d 57. c 76. c 95. B 114. d 133. d 152. c
39. d 58. b 77. a 96. B 115. a 134. b 153. D
40. a 59. d 78. b 97. D 116. a 135. c 154. a
41. b 60. c 79. c 98. B 117. d 136. d 155. d
42. c 61. d 80. b 99. A 118. a 137. c 156. d
43. c 62. a 81. b 100. D 119. c 138. d 157. c
44. b 63. a 82. b 101. D 120. d 139. b 158. d
45. b 64. b 83. b 102. C 121. b 140. c 159. a
46. d 65. d 84. a 103. B 122. b 141. d 160. d
47. d 66. c 85. d 104. C 123. b 142. d 161. b
48. b 67. c 86. c 105. C 124. d 143. a 162. c
49. a 68. b 87. b 106. B 125. a 144. d
c. less emphasis on a quality control system. stored just in case they are needed later in
d. all of the above. the manufacturing process.
b. Finished goods are completed and stored
a
160. Which of the following is a limitation of just-in- just in case unexpected and rush customer
time processing? orders are received.
a. Significant reduction of manufacturing c. the manufacturing process begins with a
inventories customer placing an order.
b. Less emphasis on product quality d. None of the above.
c. Higher production costs
MULTIPLE CHOICE QUESTIONS a. as variable or fixed and computes
31. Cost-volume-profit analysis is the study of the contribution margin.
effects of b. by function and computes a contribution
a. changes in costs and volume on a margin.
company’s profit. c. as variable or fixed and computes gross
b. cost, volume, and profit on the cash margin.
budget. d. by function and computes a gross margin.
c. cost, volume, and profit on various ratios.
d. changes in costs and volume on a 33. Contribution margin is the amount of revenue
company’s profitability ratios. remaining after deducting
a. cost of goods sold.
32. The CVP income statement classifies costs b. fixed costs.
c. variable costs.
d. contra-revenue. 40. Vazquez Company’s cost of goods sold is
$350,000 variable and $200,000 fixed. The
34. Buerhrle’s CVP income statement included company’s selling and administrative expenses
sales of 2,000 units, a selling price of $100, are $250,000 variable and $300,000 fixed. If
variable expenses of $60 per unit, and fixed the company’s sales is $1,400,000, what is its
expenses of $44,000. Contribution margin is contribution margin?
a. $200,000. a. $300,000
b. $120,000. b. $800,000
c. $80,000. c. $850,000
d. $36,000. d. $900,000
35. Buerhrle’s CVP income statement included 41. Vazquez Company’s cost of goods sold is
sales of 2,000 units, a selling price of $100, $350,000 variable and $200,000 fixed. The
variable expenses of $60 per unit, and fixed company’s selling and administrative expenses
expenses of $44,000. Net income is are $250,000 variable and $300,000 fixed. If
a. $200,000. the company’s sales is $1,400,000, what is its
b. $80,000. net income?
c. $76,000. a. $300,000
d. $36,000. b. $800,000
c. $850,000
36. For Dye Company, at a sales level of 5,000 d. $900,000
units, sales is $75,000, variable expenses total
$40,000, and fixed expenses are $21,000. 42. Garland’s CVP income statement included
What is the contribution margin per unit? sales of 3,000 units, a selling price of $100,
a. $2.80 variable expenses of $60 per unit, and net
b. $7.00 income of $50,000. Fixed expenses are
c. $8.00 a. $70,000.
d. $15.00 b. $120,000.
c. $180,000.
37. If contribution margin is $200,000, sales is d. $300,000.
$300,000, and net income is $30,000, then
variable and fixed expenses are 43. The contribution margin ratio is
a. sales divided by contribution margin.
Variable Fixed
b. sales divided by fixed expenses.
a. $100,000 $270,000 c. sales divided by variable expenses.
b. $100,000 $170,000 d. contribution margin divided by sales.
c. $170,000 $100,000
d. $500,000 $270,000 44. For Danks Company, sales is $500,000,
variable expenses are $310,000, and fixed
38. In a CVP income statement, cost of goods sold expenses are $140,000. Danks’ contribution
is generally margin ratio is
a. completely a variable cost. a. 10%.
b. completely a fixed cost. b. 28%.
c. neither a variable cost nor a fixed cost. c. 38%.
d. partly a variable cost and partly a fixed d. 62%.
cost. 45. For Contreras Company, sales is $1,000,000,
fixed expenses are $300,000, and the contribution
39. In a CVP income statement, a selling expense margin per unit is $72. What is the break-even point?
is generally a. $1,388,889 sales dollars
a. completely a variable cost. b. $416,667 sales dollars
b. completely a fixed cost. c. 13,889 units
c. neither a variable cost nor a fixed cost. d. 4,167 units
d. partly a variable cost and partly a fixed
cost. 46. For Garland Company, sales is $1,000,000,
fixed expenses are $300,000, and the
contribution margin ratio is 36%. What is net c. (fixed cost + target net income) divided by
income? contribution margin per unit.
a. $60,000 d. (fixed cost + target net income) divided by
b. $108,000 contribution margin ratio.
c. $252,000 52. For Jon Company, sales is $1,000,000, fixed
d. $360,000 expenses are $300,000, and the contribution margin
ratio is 36%. What is required sales in dollars to earn
47. For Garland Company, sales is $1,000,000, a target net income of $200,000?
fixed expenses are $300,000, and the a. $555,556
contribution margin ratio is 36%. What are the b. $833,333
total variable expenses? c. $1,388,889
a. $192,000 d. $2,777,778
b. $360,000
c. $640,000 53. Jenks Corporation reported sales of
d. $1,000,000 $2,000,000 last year (100,000 units at $20
each), when the break-even point was 80,000
48. In 2008, Masset sold 3,000 units at $500 each. units. Jenks’ margin of safety ratio is
Variable expenses were $350 per unit, and a. 20%.
fixed expenses were $200,000. What was b. 25%.
Masset’s 2008 net income? c. 80%.
a. $250,000 d. 120%.
b. $450,000
c. $1,050,000 54. For Bobby Company, sales is $1,000,000
d. $1,500,000 (5,000 units), fixed expenses are $300,000,
and the contribution margin per unit is $80.
49. In 2008, Masset sold 3,000 units at $500 each. What is the margin of safety in dollars?
Variable expenses were $350 per unit, and a. $50,000
fixed expenses were $200,000. The same b. $250,000
selling price, variable expenses, and fixed c. $450,000
expenses are expected for 2009. What is d. $700,000
Masset’s break-even point in sales dollars for
2009? 55. Margin of safety in dollars is
a. $666,667 a. expected sales divided by break-even
b. $1,333,333 sales.
c. $1,500,000 b. expected sales less break-even sales.
d. $2,142,857 c. actual sales less expected sales.
d. expected sales less actual sales.
50. In 2008, Masset sold 3,000 units at $500 each.
Variable expenses were $350 per unit, and 56. The margin of safety ratio is
fixed expenses were $200,000. The same a. expected sales divided by break-even
selling price, variable expenses, and fixed sales.
expenses are expected for 2009. What is b. expected sales less break-even sales.
Masset’s break-even point in units for 2009? c. margin of safety in dollars divided by
a. 1,333 expected sales.
b. 3,000 d. margin of safety in dollars divided by
c. 4,285 break-even sales.
d. 6,667
57. In 2008, McDougal sold 3,000 units at $500
51. The required sales in units to achieve a target each. Variable expenses were $350 per unit,
net income is and fixed expenses were $195,000. The same
a. (sales + target net income) divided by variable expenses per unit and fixed expenses
contribution margin per unit. are expected for 2009. If McDougal cuts selling
b. (sales + target net income) divided by price by 4%, what is McDougal’s break-even
contribution margin ratio. point in units for 2009?
a. 1,300
b. 1,354 unit of $30 and a selling price of $50. Q-Chip
c. 1,440 Plus has variable costs per unit of $35 and a
d. 1,500 selling price of $65. The weighted-average unit
contribution margin for Konerko is
58. In 2008, Thornton sold 3,000 units at $500 a. $23.
each. Variable expenses were $250 per unit, b. $25.
and fixed expenses were $150,000. The same c. $27.
selling price is expected for 2009. Thornton is d. $50.
tentatively planning to invest in equipment that
would increase fixed costs by 20%, while 63. Iguchi Company sells 2,000 units of Product A
decreasing variable costs per unit by 20%. annually, and 3,000 units of Product B
What is Thornton’s break-even point in units annually. The sales mix for Product A is
for 2009? a. 40%.
a. 600 b. 60%.
b. 720 c. 67%.
c. 750 d. cannot determine from information given.
d. 900
59. In 2008, Logan sold 1,000 units at $500 each, 64. Konerko Company sells two types of computer
and earned net income of $40,000. Variable chips. The sales mix is 30% (Q-Chip) and 70%
expenses were $300 per unit, and fixed (Q-Chip Plus). Q-Chip has variable costs per
expenses were $160,000. The same selling unit of $30 and a selling price of $50. Q-Chip
price is expected for 2009. Logan’s variable Plus has variable costs per unit of $35 and a
cost per unit will rise by 10% in 2009 due to selling price of $65. Konerko’s fixed costs are
increasing material costs, so they are $540,000. How many units of Q-Chip would be
tentatively planning to cut fixed costs by sold at the break-even point?
$10,000. How many units must Logan sell in a. 6,000
2009 to maintain the same income level as b. 7,043
2008? c. 10,000
a. 882 d. 14,000
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
Use the following information for questions 65 and 66. d. 50%.
Uribe Company has a weighted-average unit 68. The break-even point in dollars is
contribution margin of $30 for its two products, a. $821,400.
Standard and Supreme. Expected sales for Uribe are b. $5,162,791.
40,000 Standard and 60,000 Supreme. Fixed c. $5,550,000.
expenses are $1,800,000. d. $6,000,000.
65. How many Standards would Uribe sell at the 69. What will sales be for the Sporting Goods
break-even point? Division at the break-even point?
a. 24,000 a. $1,800,000
b. 36,000 b. $2,100,000
c. 40,000 c. $3,355,814
d. 60,000 d. $3,900,000
66. At the expected sales level, Uribe’s net income 70. What will be the total contribution margin at the
will be break-even point?
a. $(300,000). a. $1,910,233
b. $ - 0 -. b. $2,220,000
c. $1,200,000. c. $2,400,000
d. $3,000,000. d. $2,580,000
Use the following information for questions 67–70. 71. A shift from low-margin sales to high-margin
sales
Fields Corporation has two divisions; Sporting Goods a. may increase net income, even though
and Sports Gear. The sales mix is 65% for Sporting there is a decline in total units sold.
Goods and 35% for Sports Gear. Fields incurs b. will always increase net income.
$2,220,000 in fixed costs. The contribution margin c. will always decrease net income.
ratio for Sporting Goods is 30%, while for Sports Gear d. will always decrease units sold.
it is 50%. 72. A shift from high-margin sales to low-margin
sales
67. The weighted-average contribution margin a. may decrease net income, even though
ratio is there is an increase in total units sold.
a. 37%. b. will always decrease net income.
b. 40%. c. will always increase net income.
c. 43%. d. will always increase units sold.
Use the following information for questions 73 and 74.

Innova Discs has two divisions—Standard and Premium. Each division has hundreds of different types of golf discs
and disc golf products. The following information is available:
Standard Division Premium Division Total
Sales $400,000 $600,000 $1,000,000
Variable costs 280,000 360,000
Contribution margin $120,000 $240,000
Total fixed costs $300,000
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
c. $857,143
d. $882,353
75.The sales mix percentages for Guillen’s Chicago 77. Dye Company can sell all the units it can
and Charlotte Divisions are 70% and 30%. The produce of either Plain or Fancy but not both.
contribution margin ratios are: Chicago (40%) Plain has a unit contribution margin of $96 and
and Charlotte (30%). Fixed costs are takes two machine hours to make and Fancy
$555,000. What is Guillen’s break-even point has a unit contribution margin of $120 and
in dollars? takes three machine hours to make. There are
a. $194,250 2,400 machine hours available to manufacture
b. $1,500,000 a product. What should Dye do?
c. $1,585,714 a. Make Fancy which creates $24 more profit
d. $1681,818 per unit than Plain does.
b. Make Plain which creates $8 more profit
76. A company can sell all the units it can produce per machine hour than Fancy does.
of either Product A or Product B but not both. c. Make Plain because more units can be
Product A has a unit contribution margin of $16 made and sold than Fancy.
and takes two machine hours to make and d. The same total profits exist regardless of
Product B has a unit contribution margin of $30 which product is made.
and takes three machine hours to make. If there 78. What is the key factor in determining sales mix
are 1,000 machine hours available to if a company has limited resources?
manufacture a product, income will be a. Contribution margin per unit of limited
a. $2,000 more if Product A is made. resource
b. $2,000 less if Product B is made. b. The amount of fixed costs per unit
c. $2,000 less if Product A is made. c. Total contribution margin
d. the same if either product is made. d. The cost of limited resources
79. Jermaine’s Vittles can produce and sell only one of the following two products:
Oven Contribution
Hours Required Margin Per Unit
Crackers 0.2 $3
Bread sticks 0.3 $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. S-Pod’s contribution margin is $10 per unit for a. refers to the relative proportion of fixed
Product A and $12 for Product B. Product A versus variable costs that a company
requires 2 machine hours and Product B incurs.
requires 4 machine hours. How much is the b. generally has little impact on profitability.
contribution margin per unit of limited resource c. cannot be significantly changed by
for each product? companies.
A B d. refers to the relative proportion of operating
a. $5.00 $3.00 versus nonoperating costs that a company
b. $5.00 $3.33 incurs.
c. $4.00 $3.00
d. $4.00 $3.33 82. Outsourcing production will
a. reduce fixed costs and increase variable
81. Cost structure costs.
b. reduce variable costs and increase fixed c. .33.
costs. d. .75.
c. have no effect on the relative proportion of
fixed and variable costs. 87. Which of the following statements is not true?
d. make the company more susceptible to a. Operating leverage refers to the extent to
economic swings. which a company’s net income reacts to a
given change in sales.
83. Reducing reliance on human workers and b. Companies that have higher fixed costs
instead investing heavily in computers and relative to variable costs have higher
online technology will operating leverage.
a. reduce fixed costs and increase variable c. When a company’s sales revenue is
costs. increasing, high operating leverage is good
b. reduce variable costs and increase fixed because it means that profits will increase
costs. rapidly.
c. have no effect on the relative proportion of d. When a company’s sales revenue is
fixed and variable costs. decreasing, high operating leverage is
d. make the company less susceptible to good because it means that profits will
economic swings. decrease at a slower pace than revenues
84. Cost structure refers to the relative proportion decrease.
of
a. selling expenses versus administrative 88. Scottie Company’s degree of operating
expenses. leverage is 1.5. Erstadt Corporation’s degree
b. selling and administrative expenses versus of operating leverage is 4.5. Erstadt’s earnings
cost of goods sold. would go up (or down) by ________ as much
c. contribution margin versus sales. as Scottie’s with an equal increase (or
d. none of the above. decrease) in sales.
a. 1/3
Use the following information for questions 85 and 86. b. 2 times
c. 3 times
Small Fry Company has sales of $1,000,000, variable d. 6 times
costs of $400,000, and fixed costs of $450,000.
89. The margin of safety ratio
85. Small Fry’s degree of operating leverage is a. is computed as actual sales divided by
a. .80. break-even sales.
b. 1.50. b. indicates what percent decline in sales
c. 1.67 could be sustained before the company
d. 4.00. would operate at a loss.
c. measures the ratio of fixed costs to
86. Small Fry’s margin of safety ratio is variable costs.
a. .18. d. is used to determine the break-even point.
b. .25.
90.A cost structure which relies more heavily on fixed b. less sensitive to changes in sales revenue.
costs makes the company c. either more or less sensitive to changes in
a. more sensitive to changes in sales sales revenue, depending on other factors.
revenue. d. likely to have a lower breakeven point.
b. less sensitive to changes in sales revenue.
c. either more or less sensitive to changes in 92. The degree of operating leverage
sales revenue, depending on other factors. a. does not provide a reliable measure of a
d. have a lower break-even point. company’s earnings volatility.
b. cannot be used to compare companies.
91. A company with a higher contribution margin c. is computed by dividing total contribution
ratio is margin by net income.
a. more sensitive to changes in sales d. measures how much of each sales dollar is
revenue. available to cover fixed expenses.
c. under absorption costing, but not under
a
93. Only direct materials, direct labor, and variable variable costing.
manufacturing overhead costs are considered d. under variable costing, but not under
product costs when using absorption costing.
a. full costing.
a
b. absorption costing. 100. Which cost is not charged to the product under
c. variable costing. variable costing?
d. product costing. a. Direct materials
b. Direct labor
a
94. When a company assigns the costs of direct c. Variable manufacturing overhead
materials, direct labor, and both variable and d. Fixed manufacturing overhead
fixed manufacturing overhead to products, that
a
company is using 101. Which cost is charged to the product under
a. operations costing. variable costing?
b. absorption costing. a. Variable manufacturing overhead
c. variable costing. b. Fixed manufacturing overhead
d. product costing. c. Variable administrative expenses
d. Fixed administrative expenses
a
95. Companies recognize fixed manufacturing
a
overhead costs as period costs (expenses) 102. Variable costing
when incurred when using a. is used for external reporting purposes.
a. full costing. b. is required under GAAP.
b. absorption costing. c. treats fixed manufacturing overhead as a
c. product costing. period cost.
d. variable costing. d. is also known as full costing.
a
96. Under absorption costing and variable costing, Use the following information for questions 103–107.
how are fixed manufacturing costs treated?
Briscoe Company sells its product for $40 per unit.
Absorption Variable
During 2008, it produced 60,000 units and sold 50,000
a. Product Cost Product Cost
units (there was no beginning inventory). Costs per
b. Product Cost Period Cost
unit are: direct materials $10, direct labor $6, and
c. Period Cost Product Cost
variable overhead $2. Fixed costs are: $480,000
d. Period Cost Period Cost
manufacturing overhead, and $60,000 selling and
a administrative expenses.
97. Under absorption costing and variable costing,
how are variable manufacturing costs treated? a
103. The per unit manufacturing cost under
Absorption Variable absorption costing is
a. Product Cost Product Cost a. $16.
b. Product Cost Period Cost b. $18.
c. Period Cost Product Cost c. $26.
d. Period Cost Period Cost d. $27.
a
104. The per unit manufacturing cost under variable
a
98. Under absorption costing and variable costing, costing is
how are direct labor costs treated? a. $16.
Absorption Variable b. $18.
a. Product Cost Product Cost c. $26.
b. Product Cost Period Cost d. $27.
c. Period Cost Product Cost a
d. Period Cost Period Cost 105. Cost of goods sold under absorption costing is
a. $900,000.
a
99. Fixed selling expenses are period costs b. $1,080,000.
a. under both absorption and variable costing. c. $1,300,000.
b. under neither absorption nor variable d. $1,560,000.
costing.
a
106. Ending inventory under variable costing is c. variable costing, companies charge the
a. $180,000. variable manufacturing overhead as an
b. $260,000. expense in the current period.
c. $400,000. d. absorption costing, companies charge the
d. $900,000. variable manufacturing overhead as an
expense in the current period.
a a
107. Under absorption costing, what amount of 112. Net income under absorption costing is higher
fixed overhead is deferred to a future period? than net income under variable costing
a. $20,000 a. when units produced exceed units sold.
b. $80,000 b. when units produced equal units sold.
c. $100,000 c. when units produced are less than units
d. $480,000 sold.
d. regardless of the relationship between
a
108. Net income under absorption costing is gross units produced and units sold.
profit less
a
a. cost of goods sold. 113. Some fixed manufacturing overhead costs of
b. fixed manufacturing overhead and fixed the current period are deferred to future
selling and administrative expenses. periods under
c. fixed manufacturing overhead and variable a. absorption costing.
manufacturing overhead. b. variable costing.
d. variable selling and administrative c. both absorption and variable costing.
expenses and fixed selling and d. neither absorption nor variable costing.
administrative expenses.
a
109. Net income under variable costing is
contribution margin less Jack Company sells its product for $11,000 per unit.
a. cost of goods sold. Variable costs per unit are: manufacturing, $6,000,
b. fixed manufacturing overhead and fixed and selling and administrative, $125. Fixed costs are:
selling and administrative expenses. $30,000 manufacturing overhead, and $40,000 selling
c. fixed manufacturing overhead and variable and administrative. There was no beginning inventory
manufacturing overhead. at 1/1/07. Production was 20 units per year in 2007–
d. variable selling and administrative 2009. Sales was 20 units in 2007, 16 units in 2008,
expenses and fixed selling and and 24 units in 2009.
administrative expenses.
a
a
114. Income under absorption costing for 2008 is
110. The manufacturing cost per unit for absorption a. $8,000.
costing is b. $14,000.
a. usually, but not always, higher than c. $16,000.
manufacturing cost per unit for variable d. $22,000.
costing.
b. usually, but not always, lower than a
115. Income under absorption costing for 2009 is
manufacturing cost per unit for variable a. $33,000.
costing. b. $39,000
c. always higher than manufacturing cost per c. $41,000
unit for variable costing. d. $47,000.
d. always lower than manufacturing cost per
unit for variable costing. a
116. Income under variable costing for 2008 is
a a. $8,000.
111. The one primary difference between variable
b. $14,000
and absorption costing is that under
c. $16,000
a. variable costing, companies charge the
d. $22,000.
fixed manufacturing overhead as an
expense in the current period. a
117. Income under variable costing for 2009 is
b. absorption costing, companies charge the
a. $33,000.
fixed manufacturing overhead as an
b. $39,000.
expense in the current period.
c. $41,000. c. absorption costing, in order to increase net
d. $47,000. income.
d. absorption costing, in order to decrease
a
118. For the three years 2007–2009, net income.
a. absorption costing income exceeds
a
variable costing income by $6,000. 122. If a division manager’s compensation is based
b. absorption costing income equals variable upon the division’s net income, the manager
costing income. may decide to meet the net income targets by
c. variable costing income exceeds increasing production when using
absorption costing income by $6,000. a. variable costing, in order to increase net
d. absorption costing income may be greater income.
than, equal to, or less than variable costing b. variable costing, in order to decrease net
income, depending on the situation. income.
c. absorption costing, in order to increase net
a
119. When production exceeds sales, income.
a. some fixed manufacturing overhead costs d. absorption costing, in order to decrease
are deferred until a future period under net income.
absorption costing.
a
b. some fixed manufacturing overhead costs 123. Expected sales for next year for the Huxtable
are deferred until a future period under Division is 150,000 units. Bill Cosby, manager
variable costing. of the Huxtable Division, is under pressure to
c. variable and fixed manufacturing overhead improve the performance of the Division. As he
costs are deferred until a future period plans for next year, he has to decide whether
under absorption costing. to produce 150,000 units or 180,000 units. The
b. variable and fixed manufacturing overhead Huxtable Division will have higher net income if
costs are deferred until a future period Bill Cosby decides to produce
under variable costing. a. 180,000 units if income is measured under
absorption costing.
a
120. When production exceeds sales, b. 180,000 units if income is measured under
a. ending inventory under variable costing will variable costing.
exceed ending inventory under absorption c. 150,000 units if income is measured under
costing. absorption costing.
b. ending inventory under absorption costing d. 150,000 units if income is measured under
will exceed ending inventory under variable variable costing.
costing.
a
c. ending inventory under absorption costing 124. Which of the following is a potential advantage
will be equal to ending inventory under of variable costing relative to absorption
variable costing. costing?
d. ending inventory under absorption costing a. Net income is affected by changes in
may exceed, be equal to, or be less than production levels.
ending inventory under variable costing. b. The use of variable costing is consistent
with cost-volume-profit analysis.
a
121. Management may be tempted to overproduce c. Net income computed under variable
when using costing is not closely tied to changes in
a. variable costing, in order to increase net sales levels.
income. d. More than one of the above.
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 Ans Item Ans Item Ans Item Ans Item Ans Item Ans. Item Ans.
. . . . . a a
31. a 45. d 59. d 73. C 87. d 101. a 115. c
a a
32. a 46. a 60. a 74. B 88. c 102. c 116. a
a a
33. c 47. c 61. a 75. B 89. b 103. c 117. d
a a
34. c 48. a 62. c 76. C 90. a 104. b 118. b
a a
35. d 49. a 63. a 77. B 91. a 105. c 119. a
a a
36. b 50. a 64. a 78. A 92. c 106. a 120. b
a a a
37. b 51. c 65. a 79. C 93. c 107. b 121. c
a a a
38. d 52. c 66. c 80. A 94. b 108. d 122. c
a a a
39. d 53. a 67. a 81. A 95. d 109. b 123. a
a a a
40. b 54. b 68. d 82. A 96. b 110. c 124. b
a a a
41. a 55. b 69. d 83. B 97. a 111. a 125. b
a a
42. a 56. c 70. b 84. d 98. a 112. a
a a
43. d 57. d 71. a 85. d 99. a 113. a
a a
44. c 58. a 72. a 86. B 100. d 114. b

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MULTIPLE CHOICE QUESTIONS a. user-specific.

43. Managerial accounting applies to each of the b. general-purpose.

Use the following information for questions 107–109.

Use the following information for questions 117–118.

MULTIPLE CHOICE QUESTIONS a. job order and job accumulation systems.

106. Baxter Company's direct labor cost for the year is

107. Baxter Company's ending work in process inventory is

111. Gannon Company had the following information at December 31:

Use the following information for questions 113–114.

115. Chmelar Manufacturing Company developed the following data:

116. Barger Company had the following information at December 31:

122. A company assigned overhead to work in d. prepaid.

Additional Multiple Choice Questions b. fringe benefits incurred by the employer.

Answers to Multiple Choice Questions

Ite An Ite An Ite An Ite An Ite An Item An Item An

65. It is necessary to calculate equivalent units of production in a department because

Use the following information for questions 66–68.

Use the following information for questions 95–96.

95. How many units were started into production in Department 1?

96. How many units were transferred out to Department 2?

105. The following department data are available:

108. A department had the following information for the month:

Use the following information for questions 110–111. d. $6.25

Additional Multiple Choice Questions 130. In computing equivalent units, ___________ is

Answers to Multiple Choice Questions

Use the following information to answer questions 47–48.

49. The last step in activity-based costing is to

Use the following information to answer questions 68–71.

70. Overhead applied to Standard using activity-based costing is

71. Overhead applied to DeLuxe using activity-based costing is

72. Calvin Co. produces 3 products: A1, B2, and

Production information for Goo is as follows:

Compute the amount of overhead assigned to Goo.

Compute the amount of overhead assigned to Slime.

Use the following information to answer questions 84–87.

87. Overhead applied to Maxi B using activity-based costing is

89. Hammock Company manufactures two models

Use the following information to answer questions 94–95.

Production information for the two products is as follows:

95. The amount of overhead assigned to sludge is

143. Overhead applied to tax services using traditional costing is

144. Overhead applied to consulting services using traditional costing is

145. Overhead applied to tax services using activity-based costing is

146. Overhead applied to consulting services using activity-based costing is

151. The use of activity-based costing in service

60. Sales mix is

61. In a sales mix situation, at any level of units

62. Konerko Company sells two types of computer

Use the following information for questions 73 and 74.

73. What is the weighted-average contribution margin ratio?

74. What is the break-even point in dollars?

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