Bu330 accounting for managers set-2

  

Question-1

The cost of downtime caused by quality problems with the raw materials would be classified as what type of cost?

    

A. Prevention cost 

B. Appraisal cost 

C. External failure cost 

D. Internal failure cost

Question-2

Which of the following is a result of cost distortion?

    

A. Over costing of all products 

B. Under costing of all products 

C. Accurate costing of all products 

D. Over costing of some products and under costing of other products

Question-3

Which term listed below describes a system where companies purchase raw materials when needed in production and complete finished goods when needed by customers?

    

A. Internal failure costs 

B. Backflush costing 

C. Just-in-time 

D. External failure costs

Question-4

Which of the following is a lean strategy?

    

A. Group like machines together. 

B. Produce in smaller batches than a traditional system. 

C. Maintain a higher level of inventory than a traditional system. 

D. Lengthen setup times relative to a traditional system.

Question-5

The entry to record the purchase of raw materials on account using a job costing system would include a:

    

A. credit to work-in-process inventory. 

B. debit to accounts payable. 

C. debit to work-in-process inventory. 

D. debit to raw materials inventory.

Question-6

Kramer Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee table consists of 20 separate parts totaling $240 in direct materials, and each requires 5 hours of machine time to produce. Additional information follows.

  

Activity

Allocation Base

Cost Allocation Rate

 

Materials handling

Number of parts

$2.00 per part

 

Machining

Machine hours

$2.75 per machine hour

 

Assembling

Number of parts

$1.00 per part

 

Packaging

Number of finished units

$3.00 per finished unit

 What is the cost of machining per coffee table?

    

A. $15 

B. $21 

C. $13.75 

D. $55

Question-7

The predetermined indirect cost allocation rate is computed as:

    

A. total estimated indirect costs / total estimated amount of the allocation base. 

B. total amount of the allocation base / total estimated indirect costs. 

C. total estimated indirect costs + total estimated amount of the allocation base. 

D. total amount of the allocation base – total estimated indirect costs

Question-8

Watson’s Computer Company uses ABC to account for its manufacturing process. 

  

Activities

Indirect   activity budget

Allocation base (cost driver)

 

Materials handling

$52,000

Based on number of parts

 

Machine setup

30,000

Based on number of setups

 

Assembling

9,750

Based on number of parts

 

Packaging

15,300

Based on number of finished units

 Watson’s Computer Company expects to produce 2,250 computers. Watson’s Computer Company also expects to use 13,000 parts and have 20 setups. The allocation rate for materials handling will be:

    

A. $4. 

B. $6.80. 

C. $23.11. 

D. $7.01.

Question-9

In job costing, the journal entry to record the use of direct materials on jobs is to debit work-in-process inventory and credit:

    

A. raw materials inventory. 

B. finished goods inventory. 

C. manufacturing overhead. 

D. wages payable.

Question-10

Venus Crates manufactures custom crates for a variety of uses. The following data have been recorded for Job 551, which was recently completed. Direct materials used cost $7,200. There were 82 machine hours used on this job. The predetermined overhead rate is $30 per machine hour used. There were 175 direct labor hours worked on this job at a direct labor wage rate of $24 per hour. What is the total manufacturing cost of Job 551?

    

A. $13,860 

B. $4,200 

C. $2,460 

D. $7,457

Question-11

A system that focuses on activities as the fundamental cost object and uses the costs for these activities to compile indirect costs of goods and services is:

    

A. appraisal costs. 

B. value engineering. 

C. activity-based costing. 

D. prevention costs.

Question-12

If jobs have been under costed due to under allocation of manufacturing overhead, then cost of goods sold (COGS) is too low and which of the following corrections must be made?

    

A. Decrease COGS for the amount of the under allocation 

B. Increase COGS for double the amount of the under allocation 

C. Decrease COGS for double the amount of the under allocation 

D. Increase COGS for the amount of the under allocation

Question-13

The first step in developing an ABC system is:

    

A. calculate an activity cost allocation rate for each activity. 

B. allocate the costs to the cost object using the activity cost allocation rates. 

C. select an allocation base for each activity. 

D. identify the primary activities and estimate a total cost pool for each.

Question-14

Service firms develop a predetermined rate for some costs. This rate is called the:

    

A. labor rate. 

B. direct cost rate. 

C. indirect cost allocation rate. 

D. hourly cost rate.

Question-15

Here are selected data for Sunny Sky Corporation.
 

  

Beginning raw materials inventory

$37,000

Beginning work-in-process   inventory

$62,200

 

Beginning finished goods inventory

58,300

Cost of materials purchased

151,000

 

Cost of direct materials   requisitioned

91,300

Direct labor incurred

135,000

 

Actual manufacturing overhead

160,000

Cost of goods manufactured

287,000

 

Cost of goods sold

265,000

Manufacturing overhead rate (% of   direct labor)

125%

What is the ending work-in-process inventory balance?

    

A. $161,500 

B. $170,250 

C. $211,200 

D. $229,950

Question-16

Showboat Corporation had actual manufacturing overhead costs for the most recent year of $29,500. Manufacturing overhead is allocated using a predetermined manufacturing overhead rate of $1.50 per direct labor hour. Direct labor cost is $19 per hour. At the end of the year, Cabaret Corporation found it had over allocated manufacturing overhead by $1,250. How much manufacturing overhead was allocated in total during the year?

    

A. $28,250 

B. $29,500 

C. $30,750 

D. $1,250

Question-17

Which term listed below describes costs incurred when the company fails to detect poor quality goods or services before delivery to the customer?

    

A. Internal failure costs 

B. Value-added activity 

C. External failure costs 

D. Just-in-time production

Question-18

Which of these documents informs the storeroom to send specific materials to the factory floor?

    

A. Receiving report 

B. Bill of materials 

C. Purchase order 

D. Materials requisition

Question-19

The benefits of using the ABC costing system are higher if the company:

    

A. has high indirect costs. 

B. produces many different products that use differing amounts of resources. 

C. has high indirect costs and produces many different products that use differing amounts of resources. 

D. produces only one product.

Question-20

A(n) ________ is an estimated manufacturing overhead rate computed before the year begins.

    

A. cost allocation 

B. cost driver 

C. predetermined manufacturing overhead rate 

D. actual manufacturing overhead rate

Question-21

The representation for fixed cost per unit of activity is:

    

A. vx divided by v. 

B. vx divided by y. 

C. y divided by x. 

D. f divided by x.

Question-22

When units are moved from one processing department to the next, the cost associated with those units must also be moved from one WIP account to the next. What are these costs called?

    

A. Transported costs 

B. Transmitted costs 

C. Transferred costs 

D. Conveyed costs

Question-23

Which of the following is unique to a process costing system?

    

A. Work is not started on a product until an order is received. 

B. Direct materials, direct labor, and manufacturing overhead are assigned to the first department only. 

C. Costs for each process stay with that process until the goods are moved to finished goods. 

D. Each process has its own WIP account.

Question-24

When absorption costing is used and management bonuses are related to operating income, managers are more likely to:

    

A. decrease inventory levels. 

B. increase inventory levels. 

C. keep inventory levels consistent. 

D. steal from the company.

Question-25

The Jones Corporation uses a process system. During the current period, 2,500 units were started and 1,100 units were completed and transferred out. Ending units were 60% complete for materials and 45% complete for conversion costs. Direct materials costs added were $35,405 and conversion costs added were $32,870. There was no beginning WIP inventory and conversion costs are added evenly throughout the process. At the end of the period, what are the total equivalent units for conversion costs?

    

A. 1,940 

B. 1,400 

C. 1,100 

D. 1,730

Question-26

The use of either absorption or variable costing will make little difference in companies:

    

A. using just-in-time inventory methods. 

B. with large inventories. 

C. with high fixed costs. 

D. with high variable costs.

Question-27

Total fixed costs for Purple Figs Company are $52,000. Total costs, both fixed and variable, are $160,000 if 80,000 units are produced. The fixed cost per unit at 80,000 units would be:

    

A. $1.35/unit. 

B. $0.65/unit. 

C. $2.00/unit. 

D. $2.65/unit.

Question-28

The contribution margin is equal to:

    

A. sales minus cost of goods sold. 

B. sales minus operating expenses. 

C. sales minus fixed expenses. 

D. sales minus variable expenses.

Question-29

A company manufactures mirrors. Last month’s costs were as follows. 

  

Direct materials

$90,000

 

Direct labor

144,000

 

Manufacturing overhead

158,000

 What were the conversion costs for the month?

    

A. $302,000 

B. $392,000 

C. $234,000 

D. $90,000

Question-30

Which of the following does NOT appear on an income statement prepared using variable costing?

    

A. Fixed production costs 

B. Contribution margin 

C. Gross margin 

D. Variable production costs

Question-31

In process costing, ________ is/are found by taking the number of partially completed physical units and multiplying it by the percentage of the process completed.

    

A. cost of goods sold 

B. equivalent units 

C. fixed manufacturing overhead costs 

D. conversion costs

Question-32

Sugartown Corporation has total sales revenues of $930,000. If its total fixed costs are $182,000 and its total variable costs are $267,000, then the total contribution margin is:

    

A. total revenue minus total fixed costs. 

B. total revenue minus total variable costs. 

C. total variable costs minus total fixed costs. 

D. equal to operating income.

Question-33

At Hodgson Corporation, direct materials are added at the beginning of the process, and conversion costs are uniformly applied. Other details include the following. 

  

Beginning WIP direct materials

$32,000

 

Beginning WIP conversion costs

$20,250

 

Costs of materials added

$384,100

 

Costs of conversion added

$271,125

 

WIP beginning (50% for conversion)

19,200   units

 

Units started

119,500   units

 

Units completed and transferred   out

115,700   units

 

WIP ending (60% for conversion)

23,000   units

 What are the total equivalent units for conversion costs?

    

A. 127,200 

B. 125,300 

C. 129,500 

D. 138,700

Question-34

Fixed costs that are the result of previous management decisions that current managers have no control over in the short run are called ________ fixed costs.

    

A. discretionary 

B. committed 

C. standard 

D. past

Question-35

When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis, managers should consider:

    

A. outliers. 

B. general inflation. 

C. seasonality. 

D. All of the above

Question-36

The first step of the 5-step process costing procedure is.

    

A. compute output in terms of equivalent units. 

B. summarize total costs to account for. 

C. compute the cost per equivalent unit. 

D. summarize the flow of physical units.

Question-37

The following information is provided by Adametz Company. 

  

WIP inventory, January 1

0   units

 

Units started

7,500

 

Units completed and transferred   out

3,300

 

WIP inventory, December 31

4,200

 

Direct materials

$15,500

 

Direct labor

$18,400

 

Manufacturing overhead

$9,000

 
 

The units in ending WIP inventory were 90% complete for materials and 50% complete for conversion costs. At the end of the year, what are the equivalent units for conversion costs?

    

A. 3,750 

B. 3,300 

C. 5,400 

D. 2,100

Question-38

Fun Stuff Manufacturing produces Frisbees using a three-step process that includes molding, coloring, and finishing. Which of the following accounts is debited for conversion costs?

    

A. WIP inventory-finishing 

B. Finished goods inventory 

C. Raw materials inventory 

D. Cost of goods sold

Question-39

Fun Stuff Manufacturing produces ping pong balls using a three-step sequential process that includes molding, coloring, and finishing. When the balls and associated costs are transferred from the coloring process to the finishing process, which account is credited?

    

A. WIP inventory-coloring 

B. WIP inventory-molding 

C. Raw materials inventory 

D. WIP inventory-finishing

Question-40

On a traditional income statement, sales revenue less cost of goods sold equals:

    

A. gross profit. 

B. contribution margin. 

C. operating income. 

D. operating expenses

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