1. A product requires processing in two departments, the Baking Department and then the Packaging Department, before it is completed. Costs transferred out of the Baking Department will be transferred to:
Cost of Goods
Work in Process—Packaging Department.
Finished Goods Inventory.
2. A process cost accounting system is most appropriate when
the focus of attention is on a particular job or order.
similar products are mass-produced.
a variety of different products are produced, each one requiring different types of materials, labor, and overhead.
individual products are custom made to the specification of customers.
3. In process cost accounting, manufacturing costs are summarized on a
production cost report.
manufacturing cost sheet.
process order cost sheet.
job order cost sheet.
4. Which of these best reflects a distinguishing factor between a job order cost system and a process cost system?
The manufacturing cost elements included.
The detail at which costs are calculated.
The time period each covers.
The number of work in process accounts.
5. When manufacturing overhead costs are assigned to production in a process cost system, they are debited to
a Manufacturing Overhead account.
the Work in Process account.
the Finished Goods Inventory account.
Cost of Goods
6. Which of the following would not appear as a debit in the Work in Process account of a second department in a two stage production process?
Cost of products transferred out.
7. A characteristic of products that are mass-produced in a continuous fashion is that
their costs are accumulated on job cost sheets.
they are grouped in batches.
they are produced at the time an order is received.
the products are identical or very similar in nature.
8. In Moyer Company, the Cutting Department had beginning work in process of 6,000 units, transferred out 16,000 units, and had an ending work in process of 3,000 units. How many units were started by Moyer during the month?
9. Hanker Company had the following department data on physical units:
Work in process, beginning 3,000
Completed and transferred out 12,000
Work in process, ending 2,400
Materials are added at the beginning of the process. What is the total number of equivalent units for materials during the period?
10. If beginning work in process is 4,000 units, ending work in process is 2,000 units, and the units accounted for equals 12,000 units, what must units started into production be?
11. The relevant range of activity refers to the
geographical areas where the company plans to operate.
activity level where all costs are curvilinear.
level of activity where all costs are constant.
levels of activity over which the company expects to operate.
12. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs:
Unit Variable Cost Unit Fixed Cost
Remains constant Remains constant
Decreases Remains constant
Cost behavior analysis is a study of how a firm’s costs
relate to competitors’ costs.
respond to changes in the gross national product.
relate to general price level changes.
respond to changes in the level of business activity.
14. Which of the following would be the least controllable fixed costs?
Management training programs
Research and development
15. If Whisper Wings Airlines cuts its domestic fares by 30%,
a profit can be earned either by increasing the number of passengers or by decreasing variable costs.
profit will increase by 30%.
its fixed costs will decrease.
a profit can only be earned by decreasing the number of flights.
16. A mixed cost contains
both retailing and manufacturing costs.
a variable element and a fixed element.
both selling and administrative costs.
both operating and nonoperating costs.
17. Sutton Company produces flash drives for computers, which it sells for $20 each. The variable cost to make each flash drive is $13. During April, 700 drives were sold. Fixed costs for April were $2 per unit for a total of $1,400 for the month. How much is the monthly break-even level of sales in dollars for Sutton Company?
18. A company has total fixed costs of $160,000 and a contribution margin ratio of 20%. The total sales necessary to break even are
19. Keith Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $14 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?
20. Isakson Company has a contribution margin per unit of $21 and a contribution margin ratio of 60%. How much is the selling price of each unit?
Cannot be determined without more information.
21. Small Tots Toys has actual sales of $400,000 and a break-even point of $300,000. How much is its margin of safety ratio?
22. Brown Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $4.90 per unit for a total of $4,900 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Brown Company?
It decreases about 35 units.
It depends on the number of units the company expects to produce and sell.
It is 10% higher than the original break-even point.
It decreases about 14 units.
23. The most common budget period is
24. Which of the following does not appear as a separate section on the cash budget?
25. A master budget consists of
financial budgets and a long-term plan.
interrelated financial budgets and operating budgets.
an interrelated long-term plan and operating budgets.
all the accounting journals and ledgers used by a company.
26. Which is true of budgets?
They are voted on and approved by stockholders.
There is a standard form and structure for budgets.
They are used in performance evaluation.
They are used in the planning, but not in the control, process.
27. Which of the following statements about budget acceptance in an organization is true?
Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.
The most widely accepted budget by the organization is the one prepared by top management.
The most widely accepted budget by the organization is the one prepared by the department heads.
Budgets are hardly ever accepted by anyone except top management.
28. The financial budgets include the
cash budget and the production budget.
cash budget and the budgeted balance sheet.
budgeted balance sheet and the budgeted income statement.
cash budget and the selling and administrative expense budget.
29. Crumine Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels are planned for the fiscal year of July 1, 2012 to June 30, 2013:
June 30, 2013 June 30, 2012
Raw Materials 3,000 kilos 2,000 kilos
Three kilos of raw materials are needed to produce each unit of finished product. If Crumine plans to produce 560,000 units during the 2012-2013 fiscal year, how many kilos of materials will the company need to purchase for its production during the year?
30. The direct materials budget shows:
Desired ending direct materials 72,000 pounds
Total materials required 108,000 pounds
Direct materials purchases 94,800 pounds
The total direct materials needed for production is
31. Jacob Manufacturing is planning to sell 1,200 boxes of ceramic tile, with production estimated at 1,160 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.50 per pound and employees of the company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Jacob has 5,200 pounds of clay mix in beginning inventory and wants to have 6,000 pounds in ending inventory.
What is the total amount to be budgeted for manufacturing overhead for the month?
32. Davis Company has 12,000 units in beginning finished goods. The sales budget shows expected sales to be 48,000 units. If the production budget shows that 56,000 units are required for production, what was the desired ending finished goods?
33. The following information is taken from the production budget forthe first quarter:
Beginning inventory in units 1,800
Sales budgeted for the quarter 684,000
Capacity in units of production facility 708,000
How many finished goods units should be produced during the quarter if the company desires 4,800 units available to start the next quarter?
34. A static budget is not appropriate in evaluating a manager’s effectiveness if a company has
planned activity levels that match actual activity levels.
substantial variable costs.
no variable costs.
substantial fixed costs.
All of the following statements are correct about management by exception except it
means that top management’s review of a budget report is focused primarily on differences between actual results and planned objectives.
requires that there must be some guidelines for identifying an exception.
means that management has to investigate every budget difference.
enables top management to focus on problem areas that need attention.
36. Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?
direct labor cost
variable manufacturing overhead
fixed manufacturing overhead
direct materials cost
37. Under management by exception, which differences between planned and actual results should be investigated?
controllable and noncontrollable
material and controllable
All differences should be investigated.
material and noncontrollable
The flexible budget
is a series of static budgets at different levels of activity.
is prepared before the master budget.
is relevant both within and outside the relevant range.
eliminates the need for a master budget.
39. If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on
60,000 units of activity.
54,000 units of activity.
48,000 units of activity.
the original planned level of activity.
40. The current controllable margin for Stern Division is $124,000. Its current operating assets are $400,000. The division is considering purchasing equipment for $120,000 that will increase annual controllable margin by an estimated $20,000. If the equipment is purchased, what will happen to the return on investment for Stern Division?
a decrease of 7.2%
an increase of 16.1%
a decrease of 13.3%
a decrease of 3.3%
41. Kessler Industries is evaluating its Mountain division, an investment center. The division has a $90,000 controllable margin and $600,000 of sales. How much will Kessler’s average operating assets be when its return on investment is 10%?
42. If controllable margin is $600,000 and the average investment center operating assets are $2,000,000, the return on investment is
43. Kessler Company uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Kessler had actual overhead costs of $250,000 for 18,000 units produced, what is the difference between actual and budgeted costs?
44. Center Industries had average operating assets of $4,000,000 and sales of $2,000,000 in 2012. If the controllable margin was $600,000, the ROI was
45. If an investment center has generated a controllable margin of $150,000 and sales of $600,000, what is the return on investment for the investment center if average operating assets were $1,000,000 during the period?
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