Chapter 2
1. Which of the following would be considered a product cost for external financial
reporting purposes?
a.
b.
Cost of a warehouse used to store
finished goods.
Cost of guided public tours through the
company's facilities.
c.
Cost of travel necessary to sell the
manufactured product.
d.
Cost of sand spread on the factory floor
to absorb oil from manufacturing
machines.
1. Which of the following would be considered a product cost for external financial
reporting purposes?
a.
b.
c.
Cost of a warehouse used to store
finished goods.
Cost of guided public tours through the
company's facilities.
Cost of travel necessary to sell the
manufactured product.
d. Cost of sand spread on the factory
floor to absorb oil from
manufacturing machines.
Cost of goods manufactured
2. Beginning work in process was $125,000. Manufacturing
costs incurred for the month were $835,000. There were
$200,000 of partially finished goods remaining in work in process
inventory at the end of the month. What was the cost of goods
manufactured during the month?
a.
b.
c.
d.
$1,160,000
$ 910,000
$ 760,000
$ 730,000
Cost of goods manufactured
2. Beginning work in process was $125,000. Manufacturing
costs incurred for the month were $835,000. There were
$200,000 of partially finished goods remaining in work in process
inventory at the end of the month. What was the cost of goods
manufactured during the month?
a.
b.
c.
d.
$1,160,000
$ 910,000
$ 760,000
$ 730,000
Cost Behaviour
3. Last month, when 10,000 units of a product were
manufactured, the average cost per unit was $60. At this
level of activity, variable costs are 50% of total unit costs. If
10,500 units are manufactured next month and cost behavior
patterns remain unchanged, how will costs be affected?
A) Total variable costs will remain unchanged.
B) Fixed costs will increase in total.
C) Variable cost per unit will increase.
D) Total cost per unit will decrease.
Cost Behaviour
3. Last month, when 10,000 units of a product were
manufactured, the average cost per unit was $60. At this
level of activity, variable costs are 50% of total unit costs. If
10,500 units are manufactured next month and cost behavior
patterns remain unchanged, how will costs be affected?
A) Total variable costs will remain unchanged.
B) Fixed costs will increase in total.
C) Variable cost per unit will increase.
D) Total cost per unit will decrease.
Chapter 3
Self-test #1
1.
Which of the following companies is
most likely to use a job-order costing system
rather than a process costing
system?
A)Fast food restaurant
B)Shipbuilder
C)Crude oil refinery
D)Candy maker
Self-test #1
1.
Which of the following companies is
most likely to use a job-order costing system
rather than a process costing
system?
A)Fast food restaurant
B)Shipbuilder
C)Crude oil refinery
D)Candy maker
Self-test #2
2.Which of the following statements about labour time
and cost in a job-order costing system is NOT correct?
– A)Time tickets are kept by employees showing the amount of
work on specific jobs.
– B)The job cost sheet for a job contains all direct labour
charges to that particular job.
– C)Labour cost that can be traced to a job only with a great deal
of effort is treated as part of manufacturing overhead.
– D)A machine operator performing routine annual maintenance
work on a piece of equipment charges the maintenance time to
a specific job.
Self-test #2
2.Which of the following statements about labour time
and cost in a job-order costing system is NOT correct?
– A)Time tickets are kept by employees showing the amount of
work on specific jobs.
– B)The job cost sheet for a job contains all direct labour
charges to that particular job.
– C)Labour cost that can be traced to a job only with a great deal
of effort is treated as part of manufacturing overhead.
– D)A machine operator performing routine annual
maintenance work on a piece of equipment charges the
maintenance time to a specific job.
Self-test #3
3.In a job-order costing system, when a job remains
incomplete at the end of a period, how is the amount of
overhead cost that has been applied to that job treated?
A)It is deducted on the Income Statement
overapplied overhead.
B)It is closed out to Cost of Goods Sold.
C)It is transferred to Finished Goods.
D)It is part of the ending balance of the
in Process inventory account
as
Work
Self-test #3
3.In a job-order costing system, when a job remains
incomplete at the end of a period, how is the amount of
overhead cost that has been applied to that job treated?
A)It is deducted on the Income Statement
overapplied overhead.
B)It is closed out to Cost of Goods Sold.
C)It is transferred to Finished Goods.
D)It is part of the ending balance of the
Work in Process inventory account
as
4.Lucy Sportswear manufactures a specialty line of T-shirts. The
company uses a job-order costing system. During March, the
following costs were incurred on Job ICU2:
Direct materials:
$13,700
Direct labour:
$4,800
In addition, selling and shipping costs of $7,000 were incurred on the
job. Manufacturing overhead was applied at the rate of $25 per
machine hour, and Job ICU2 required 800 machine hours.
If Job ICU2 consisted of 7,000 shirts, what was the Cost of Goods
Sold per shirt?
A)$5.50.
B)$5.70.
C)$6.00.
D)$6.50.
4.Lucy Sportswear manufactures a specialty line of T-shirts. The
company uses a job-order costing system. During March, the
following costs were incurred on Job ICU2:
Direct materials:
$13,700
Direct labour:
$4,800
In addition, selling and shipping costs of $7,000 were incurred on the
job. Manufacturing overhead was applied at the rate of $25 per
machine hour, and Job ICU2 required 800 machine hours.
If Job ICU2 consisted of 7,000 shirts, what was the Cost of Goods
Sold per shirt?
A)$5.50.
B)$5.70.
C)$6.00.
D)$6.50.
Self-test #5
5.
For the current year, Paxman Company incurred
$150,000 in actual manufacturing overhead cost. The
Manufacturing Overhead account showed that
overhead was overapplied in the amount of $6,000
for the year.
If the predetermined overhead rate was $8.00 per
direct labour hour, how many hours were worked
during the year?
A)17,750 hours.
B)18,000 hours.
C)18,750 hours.
D)19,500 hours.
Self-test #5
5.
For the current year, Paxman Company incurred
$150,000 in actual manufacturing overhead cost. The
Manufacturing Overhead account showed that
overhead was overapplied in the amount of $6,000
for the year.
If the predetermined overhead rate was $8.00 per
direct labour hour, how many hours were worked
during the year?
A)17,750 hours.
B)18,000 hours.
C)18,750 hours.
D)19,500 hours.
Self-test #6
6.
Harrell Company uses a predetermined overhead rate based on
direct labour hours to apply manufacturing overhead to jobs. At
the beginning of the year, the company estimated its total
manufacturing overhead cost at $400,000 and its direct labour
hours at 100,000 hours. The actual overhead cost incurred
during the year was $350,000 and the actual direct labour hours
incurred on jobs during the year was 90,000 hours. By how
much is overhead under or over applied for the year?
A)$10,000 underapplied.
B)$10,000 overapplied.
C)$50,000 underapplied.
D)$50,000 overapplied.
Self-test #6
6. Harrell Company uses a predetermined overhead rate based on
direct labour hours to apply manufacturing overhead to jobs. At
the beginning of the year, the company estimated its total
manufacturing overhead cost at $400,000 and its direct labour
hours at 100,000 hours. The actual overhead cost incurred during
the year was $350,000 and the actual direct labour hours incurred
on jobs during the year was 90,000 hours.
What would be the manufacturing overhead for the year?
A)$10,000 underapplied.
B)$10,000 overapplied.
C)$50,000 underapplied.
D)$50,000 overapplied.
Self-test #7
7. Which of the following suggests the need for
multiple departmental overhead rates:
A. A highly automated production process.
B. The majority of overhead is incurred in one
department.
C. Significant overhead costs in several departments,
each with a unique cost driver.
D. The company produces two products each
requiring very similar production processes.
Self-test #7
7. Which of the following suggests the need for
multiple predetermined overhead rates:
A. A highly automated production process.
B. The majority of overhead is incurred in one
department.
C. Significant overhead costs in several
departments, each with a unique cost driver.
D. The company produces two products each
requiring very similar production processes.
Chapter 4
1.Jawson Company uses the weighted-average method in its
process costing system. Operating data for the Painting
Department for the month of April appear below:
What were the equivalent units of production for conversion
costs in the Painting Department for April?
A)67,300 units.
B)68,820 units.
C)70,520 units.
D)63,900 units.
1.Jawson Company uses the weighted-average method in its
process costing system. Operating data for the Painting
Department for the month of April appear below:
What were the equivalent units of production for conversion
costs in the Painting Department for April?
A)67,300 units.
B)68,820 units.
C)70,520 units.
D)63,900 units.
2.Black Company uses the weighted-average method in its process
costing system. The company's ending work-in-process inventory
consists of 5,000 units, 80% complete with respect to materials
and 50% complete with respect to labour and overhead.
If the total dollar value of the ending inventory is $60,000 and the
cost per equivalent unit for labour and overhead is $8.00, what is
the cost per equivalent unit for materials?
A)$5.00.
B)$10.00.
C)$8.00.
D)$4.00.
2.Black Company uses the weighted-average method in its process
costing system. The company's ending work-in-process inventory
consists of 5,000 units, 80% complete with respect to materials
and 50% complete with respect to labour and overhead.
If the total dollar value of the ending inventory is $60,000 and the
cost per equivalent unit for labour and overhead is $8.00, what is
the cost per equivalent unit for materials?
A)$5.00.
B)$10.00.
C)$8.00.
D)$4.00.
3.Department 2 is the second of three sequential processes. All materials are
added at the beginning of processing in Department 2. During October,
Department 2 reported the following data:
The company uses the weighted-average method in its process costing
system. To the nearest cent, what is the cost per equivalent unit on the
production report for conversion costs?
A)$5.51.
B)$6.45.
C)$6.30.
D)$7.38.
3. Department 2 is the second of three sequential processes. All materials are
added at the beginning of processing in Department 2. During October,
Department 2 reported the following data:
The company uses the weighted-average method in its process costing
system. To the nearest cent, what is the cost per equivalent unit on the
production report for conversion costs?
A)$5.51.
B)$6.45.
C)$6.30.
D)$7.38.
4.Valley Manufacturing Company's beginning work-in-process
inventory consisted of 10,000 units, 100% complete with respect to
materials cost and 40% complete with respect to conversion costs.
The total cost in the beginning inventory was $30,000. During the
month, 50,000 units were transferred out. The equivalent unit cost
was computed to be $2.00 for materials and $3.70 for conversion
costs under the weighted-average method.
Given this information, what was the total cost of the units
completed and transferred out?
A)$255,000.
B)$270,000.
C)$240,000.
D)$285,000.
4.Valley Manufacturing Company's beginning work-in-process
inventory consisted of 10,000 units, 100% complete with respect to
materials cost and 40% complete with respect to conversion costs.
The total cost in the beginning inventory was $30,000. During the
month, 50,000 units were transferred out. The equivalent unit cost
was computed to be $2.00 for materials and $3.70 for conversion
costs under the weighted-average method.
Given this information, what was the total cost of the units
completed and transferred out?
A)$255,000.
B)$270,000.
C)$240,000.
D)$285,000.
Chapter 8
1. Why may departmental overhead rates NOT correctly
assign overhead costs?
A) Because of the potential use of machine hours in
allocating overhead costs to products rather than
direct labour hours or direct labour cost.
B) Because of the high correlation between direct
labour hours and the incurrence of overhead costs.
C) Because of the over-reliance on volume as a
basis for allocating overhead costs where products
differ regarding the number of units produced,
batch size, or complexity of production.
D) Because of the difficulties associated with
identifying cost pools for the first stage of the
allocation process.
1. Why may departmental overhead rates NOT
correctly assign overhead costs?
A) Because of the potential use of machine hours in
allocating overhead costs to products rather than direct
labour hours or direct labour cost.
B) Because of the high correlation between direct labour
hours and the incurrence of overhead costs.
C) Because of the over-reliance on volume as a basis
for allocating overhead costs where products differ
regarding the number of units produced, batch size,
or complexity of production.
D) Because of the difficulties associated with identifying
cost pools for the first stage of the allocation process.
2. A company inspects 10 finished units in every
production run, regardless of how many units are
produced in that run. What kind of activity is
this?
•
•
•
•
A)
B)
C)
D)
unit-level activity.
batch-level activity.
product-level activity
customer-level activity
2. A company inspects 10 finished units in every
production run, regardless of how many units are
produced in that run. What kind of activity is
this?
•
•
•
•
A)
B)
C)
D)
unit-level activity.
batch-level activity.
product-level activity
customer-level activity
3. Which of the following is least likely to be
classified as an organization sustaining activity
in an activity based costing system?
A)
B)
plant maintenance
property taxes
C)
machine processing costs
D)plant depreciation
3. Which of the following is least likely to be
classified as an organization sustaining activity
in an activity based costing system?
A)
B)
plant maintenance
property taxes
C)
machine processing costs
D)plant depreciation
4. When selecting a cost driver, which of the
following should be considered:
A)
the correlation between the cost driver and
overhead costs.
B)
the total amount of the overhead costs
C)
the potential effects of selecting a particular
cost driver on managers’ behavior.
D) Both A & C
4. When selecting a cost driver, which of the
following should be considered:
A)
the correlation between the cost driver and
overhead costs.
B)
the total amount of the overhead costs
C)
the potential effects of selecting a particular
cost driver on managers’ behavior.
D) Both A & C
5. Dundas Company uses an activity-based costing
system. Consider the following information:
Manufacturing
Activity Area
Machine set -up
Material handling
Milling
Assembly
Cost Driver Used
As Application
Base
Number of set-ups
Number of parts
Machine hours
Direct labour hours
Conversion Cost
per Unit of
Application Base
$100
5
40
20
During the past month, 40 units of a component were produced. Two set-ups
were required. Each unit needs 25 parts, 3 direct labour hours and 5 machine
hours. Direct materials costs $125 per finished unit. All other costs are
classified as conversion costs.
The total manufacturing cost per unit of the component is:
A) $139.63.
B) $290.00.
C) $390.00.
D) $515.00.
E) $710.00.
5. Dundas Company uses an activity-based costing
system. Consider the following information:
Manufacturing
Activity Area
Machine set -up
Material handling
Milling
Assembly
Cost Driver Used
As Application
Base
Number of set-ups
Number of parts
Machine hours
Direct labour hours
Conversion Cost
per Unit of
Application Base
$100
5
40
20
During the past month, 40 units of a component were produced. Two set-ups
were required. Each unit needs 25 parts, 3 direct labour hours and 5 machine
hours. Direct materials costs $125 per finished unit. All other costs are
classified as conversion costs.
The total manufacturing cost per unit of the component is:
A) $139.63.
B) $290.00.
C) $390.00.
D) $515.00.
E) $710.00.
6. Which of the following statements is false?
A)
A traditional volume-based system based
using direct labor hours as the driver generally
overcosts high volume product lines.
B)
A traditional volume-based system using
direct labor hours as the driver generally distorts
product costs.
C)
In a traditional volume-based costing system
based on direct labor, high-volume products
generally subsidize low-volume products.
D)
An activity-based costing system generally
undercosts low-volume, complex product lines.
6. Which of the following statements is false?
A)
A traditional volume-based system based
using direct labor hours as the driver generally
overcosts high volume product lines.
B)
A traditional volume-based system using
direct labor hours as the driver generally distorts
product costs.
C)
In a traditional volume-based costing system
based on direct labor, high-volume products
generally subsidize low-volume products.
D)
An activity-based costing system generally
undercosts low-volume, complex product lines.
7. Consider the following statements concerning
activity-based management (ABM) and ABC:
I) ABM complements ABC.
II) ABM is an alternative to ABC.
III) ABM is incompatible with ABC.
A)
B)
C)
D)
I is true.
II is true.
III is true.
I and II are true.
7. Consider the following statements concerning
activity-based management (ABM) and ABC:
I) ABM complements ABC.
II) ABM is an alternative to ABC.
III) ABM is incompatible with ABC.
A)
B)
C)
D)
I is true.
II is true.
III is true.
I and II are true.