Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 1
Which of the following is the best example of a value-adding activity from the
customer’s perspective?
A. Testing a product during the manufacturing process.
B. Training human resources (HR) personnel to interview job candidates more
effectively.
C. Using advanced software to reduce delivery time by two days.
D. Reducing the capital asset approval process by three days.
Question 2
At the end of Year 3, the managers of Guardian Company are planning for Year 4. In Year
3, manufacturing overhead was $349,600, direct labor hours equaled 16,000 hours, and
machine hours totaled 48,000 hours. For Year 4, manufacturing overhead is estimated to
be $524,400, directlabor hours are estimated at 20,000 hours, and machine hours are
estimated at 50,000 hours. If overhead is applied based on direct labor hours, what is
the predetermined overhead rate for Year 4 (if necessary, round your answer to two
decimal places)?
A. $10.49 per direct labor hour.
B. $32.78 per direct labor hour.
C. $21.85 per direct labor hour.
D. $26.22 per direct labor hour.
Question 3
All of the following statements regarding throughput accounting are true except:
A. Operational expense represents all costs other than raw materials used to convert
inventory into throughput
B. Inventory represents all the money tied up in the production system, including
purchased inventory, machines, buildings, and other assets.
C. Throughput accounting supports a very specific and extremely short-term
managerial view of an operation.
D. Through put is computed as revenue minus extremely variable costs, which
typically are the cost of raw materials and direct labor.
Question 4
Jensen Fly Fishing Shop applies overhead at a rate of $5 per direct labor hour. At the end
of the month, the company had accumulated 7,000 direct labor hours and 7,800
machine hours. The company incurred $38,000 in actual manufacturing overhead.
Manufacturing overhead was:
 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. $3,000 overapplied.
B. $1,000 underapplied.
C. $1,000 overapplied.
D. $3,000 underapplied.
Question 5
Which of the following does not accurately describe supply chain management?
A. Supply chain management focuses on developing a master production schedule
and then breaking it down into detailed daily schedules.
B. Supply chain management involves establishing partnerships with parties outside
of an organization.
C. Companies typically use enterprise resource planning (ERP) systems to implement
supply chain management.
D. Outsourcing is one aspect of supply chain management.
Question 6
Using job order costing, what general ledger accounts are involved when a job is
finished?
A. Debit(increase) Finished Goods Inventory and credit(decrease) Work-in-Process
Inventory.
B. Debit(increase) Work-in-Process Inventory and credit(decrease) Finished Goods
Inventory.
C. Debit(increase) Cost of Goods Sold and credit(decrease) Finished Goods
Inventory.
D. Debit(increase) Finished Goods Inventory and credit(decrease) Manufacturing
Overhead.
Question 7
Which of the following statements is correct concerning a company using theoretical
capacity to calculate an allocation rate?
A. The company will be less likely to be able to evaluate the cost of unused capacity
than if it used budgeted output to calculate its allocation rate.
B. The company will be less likely to experience a product pricing death spiral than if
it used budgeted output to calculate its allocation rate
C. The company will allocate more cost to its products than if it used practical
capacity to calculate its allocation rate.
D. The company will be more likely to have to adjust its allocation rates than if it
used practical capacity to calculate its allocation rate.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 8
John at Tim's Toys was working on a custom-made miniature car for a customer. The job,
BCB101, was started in March. At the end of March, the job cost sheet for BCB101
showed direct materials of $6,000, direct labor of 200 hours at $75 per hour, and
overhead of 80% of direct labor cost. During April, direct materials of $1,700 were
added, and John's time ticket showed 50 hours on Job BCB101, 25 hours on Job BCB102,
and 40 hours on a new job, BCB103. Job BCB101 was completed on April 29. What is the
balance in the Work-in-Process Inventory related to Job BCB101 as of March 31?
A. $41,450
B. $8,450
C. $21,000
D. $33,000
Question 9
SMF Company has a facility that focuses on producing two products. Product 1 sells for
$100 per unit and Product 2 sells for $250 per unit. SMF estimates weekly demand is
500 units for Product 1 and 200 units for Product 2. Material HJG is the only raw material
in both products. Product 1 uses $20 of HJG per unit and Product 2 uses $60 of HJG per
unit.
The products are largely built by hand using four employees. The employee names and
their average production times per product are provided below.

SMF allows 10 hours of overtime per week, so each employee has the capacity to work
for 50 hours (3,000 minutes) per week.
What is the weekly production mix that maximizes operating income?
A. 500 of Product 1 and 100 of Product 2
B. 0 of Product 1 and 600 of Product 2
C. 500 of Product 1 and 200 of Product 2
 Part 1 FIRST Comprehensive Exam on Cost Accounting

D. 400 of Product 1 and 200 of Product 2

Question 10
Basic Products Company has a plantthatfocuses on manufacturing Widget 1 and Widget
2. Widget 1 is sold for $90 and Widget 2 is sold for $115. Material X is the only raw
material in both products. Widget 1 requires $35 of Material X and Widget 2 requires
$55 of Material X. The widgets are largely built by hand using five employees. The
employee names and their production times per product are provided below.

Basic Products Company allows only six hours of overtime a week. Hence, each
employee has the capacity to work 46 hours (2,760 minutes) per week. Currently, the
market demand for Widget 1 is 100 per week. Similarly, market demand for Widget 2 is
100 per week.
Which of the following represents the correct throughput per bottleneck minute for
Widget 1 and Widget 2?
A. Widget 1: $3.33; Widget 2: $3.67
B. Widget 1: $3.67; Widget 2: $3.33
C. Widget 1: $4.58; Widget 2: $4.00
D. Widget 1: $4.00; Widget 2: $4.58
Question 11
Which of the following correctly orders the steps in the benchmarking process?
A. Select project and organize the benchmarking team; identify and research the
benchmarking target; document the current strategy, process, or product; analyze
benchmarking data and identify improvements; implement the recommendations
and recalibrate as needed.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

B. Document the current strategy, process, or product; select project and organize
the benchmarking team; identify and research the benchmarking target; analyze
benchmarking data and identify improvements; implement the recommendations
and recalibrate as needed.
C. Select project and organize the benchmarking team; document the current
strategy, process, or product; identify and research the benchmarking target;
analyze benchmarking data and identify improvements; implement the
recommendations and recalibrate as needed.
D. Identify and research the benchmarking target; document the current strategy,
process, or product; select project and organize the benchmarking team; analyze
benchmarking data and identify improvements; implement the recommendations
and recalibrate as needed.
Question 12
Variable costing enables more efficient:
A. External reporting.
B. Physical inventory counts.
C. Financial statement analysis.
D. Cost-volume-profit(CVP) analysis.
Question 13
The BVC Company separates its activities into two operating departments and two
support departments. Support Department 1 had budgeted costs of $90,000 and
Support Department 2 had budgeted costs of $180,000 during the month of April. BVC
allocates the costs of each support department based on service hours. The table here
shows how many service hours each support department provided to the two operating
departments, to the other support department, and to itself.

If BVC uses the step-down method starting with Support Department 1 to allocate
support department costs, how much will be allocated to Operating Department 1 and
Operating Department 2, respectively, in April?
A. $133,200 and $136,800
B. $145,800 and $124,200
 Part 1 FIRST Comprehensive Exam on Cost Accounting

C. $140,400 and $129,600

D. $139,461 and $130,539
Question 14
Company A and Company B have identical operations (same theoretical capacity, same
practical capacity, same actual production, same units sold, and same costs). Company A
uses theoretical capacity to calculate its allocation rate and Company B uses practical
capacity to calculate its allocation rate. Which of the following statement about
Company A and B is correct?
A. Company A’s allocation rate will be higher than Company B’s allocation rate.
B. Company A is less likely to have under-applied overhead than Company B.
C. Company A’s allocation rate is more likely to change from one period to the next
than Company B’s.
D. Company A’s ending inventory will be lower than Company B’s.
Question 15
Dobbins Resources pays sales commissions of $2 per unit and shipping costs of $0.75 per
unit. If Dobbins expects to sell 12,000 units in the third quarter, what will their total
variable expenses be?
A. $24,000
B. $33,000
C. $9,000
D. $42,000
Question 16
Maury Industries has the following cost structure. Each unit sells for $50, and 7,000 units
were produced and sold.

Calculate the contribution margin.

 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. $168,000
B. $113,000
C. $126,000
D. $182,000
Question 17
Houlihan Automotive specializes in replacing the brake pads and shoes on domestic
automobiles. The replacement is similar for each type of automobile. Each replacement
takes one labor hour, 0.75 machine hours, and costs $55 in direct materials. Houlihan
charges customers a flat fee of $120. Which cost system should Houlihan use and why?
A. The process cost system because the service Houlihan provides is repetitive and
routine.
B. The process cost system because the service Houlihan provides always costs the
customers the same amount of money.
C. The job order cost system because the service Houlihan provides represents an
individual job.
D. The job order cost system because the service Houlihan provides cannot be
performed continuously.
Question 18
DAF Company has a facility that focuses on producing two products. Product 1 sells for
$120 per unit and Product 2 sells for $200 per unit. DAF estimates weekly demand is 300
units for Product 1 and 100 units for Product 2. Material KLM is the only raw material in
both products. Product 1 uses $15 of KLM per unit and Product 2 uses $25 of KLM per
unit.
The products are largely built by hand using four employees. The employee names and
their average production times per product are provided below.

DAF allows 5 hours of overtime per week, so each employee has the capacity to work for
45 hours (2,700 minutes) per week.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

What is the weekly operating profit based on the optimal production mix that exploits
the constrained operation, assuming operating expense totals $22,500 each week?
A. $24,085
B. $47,250
C. $24,750
D. $26,500
Question 19
At the beginning of the year, managers at King Industries estimated $400,000 in
manufacturing overhead, 20,000 direct labor hours, and 30,000 machine hours. Actual
manufacturing costs at the end of the year were $425,000 in manufacturing overhead.
During the year, 22,000 direct labor hours and 27,000 machine hours were incurred. If
King Industries uses a normal costing system, and if overhead is applied based on direct
labor hours, how much overhead was applied during the year?
A. $440,000
B. $540,000
C. $400,000
D. $425,000
Question 20
The UFZ Company processes a single material into three separate products: L, M, and N.
During October, the joint costs of processing were $215,000. Production and sales value
information for the month were as follows:

If UFZ allocates joint costs using the physical measure method, how much would be
allocated to Products L, M, and N, respectively?
A. $26,875, $80,625, and $107,500
B. $21,500, $64,500, and $129,000
C. $71,667, $71,667, and $71,667
D. $80,625, $80,625, and $53,750
Question 21
Which of the following statements is correct concerning separable costs?
 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. Separable costs are used in the sales-value-at-split-off method.

B. Separable costs need to be allocated to joint products in order to calculate cost of
goods sold.
C. Separable costs are incurred prior to the split-off point.
D. Separable costs are relevant to whether a product should be sold at the split-off
point or processed further.
Question 22
Wilson Tech's production cost data for the current period is:

Materials are entered at the beginning of the process. The Ending Work-in-Process units
are 40% complete as to conversion costs. Using the FIFO method, what are the
equivalent units of production for materials?
A. 12,280 units.
B. 16,000 units.
C. 9,800 units.
D. 6,200 units.
Question 23
Book World is an online bookstore specializing in used books. Book World sold 3,400
copies of the Harry Potter books in June and 1,150 in September. Shipping costs for the
two months were $8,020 and $4,015, respectively. Using these two months’ data as a
basis for the high-low method, the fixed cost is best estimated as:
A. $4,005.
B. $1,968.
C. $3,400.
D. $1,150.
Question 24
Which of the following actions is least likely to improve the quality of an organization’s
accounting operations?
 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. Automating the creation and distribution of commonly used reports

B. Reducing the number of categories in an accounts receivable aging schedule from
six to three
C. Giving management the ability to create its own reports
D. Conducting a walk-through of the warranty accrual process
Question 25
Which of the following statements concerning the relationship between continuous
improvement techniques, activity-based management(ABM), and quality performance is
not correct?
A. The ABM model can be used to foster continuous improvement of quality
performance by providing measures concerning competitors’ quality
performance.
B. The ABM model can be used to foster continuous improvement of quality
performance by providing metrics concerning performance in activities expected
to improve an organization’s quality.
C. The ABM model can be used to foster continuous improvement of quality
performance by identifying activities that improve an organization’s quality.
D. The ABM model can be used to foster continuous improvement of quality
performance by providing information on cost driver usage in value-added
activities.
Question 26
Which of the following is included in the Work-in-Process Inventory?
A. All goods sold during the period.
B. All materials purchased during the last period.
C. All goods which are completed and ready to sell.
D. Goods which are only partially completed.
Question 27
All of the following are true statements about activity-based costing except:
A. Activity-based costing discourages the allocation of common fixed costs that are
not consumed by any customer or product line.
B. Activity-based costing is only used for manufacturing products.
C. Activity-based costing helps prevent cross-subsidization errors.
D. Activity-based costing breaks down fixed overhead costs into cost pools that
relate to product or customer lines using activities other than volume of units.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 28
A company produces a wide variety of hand-crafted rocking chairs. The most appropriate
allocation base for allocating production supervisor salaries to the products is
A. direct labor hours.
B. machine hours.
C. number of products.
D. sales dollars.
Question 29
Based on the following information from AGF Corporation, calculate AGF's contribution
margin.

A. $860,000
B. $570,000
C. $830,000
D. $980,000
Question 30
Which best describes costs that vary in total directly and proportionately with changes in
the activity level?
A. Fixed costs.
B. Mixed costs.
C. Semi-variable costs.
D. Variable costs.
Question 31
What is the purpose of supply chain management(SCM) systems?
A. To computerize inventory control
 Part 1 FIRST Comprehensive Exam on Cost Accounting

B. To automate customer service and support

C. Production planning and inventory control
D. To organize activities between a company and its suppliers, distributors, and
customers
Question 32
At the beginning of the year, managers at King Industries estimated $420,000 in
manufacturing overhead, 20,000 direct labor hours, and 30,000 machine hours. Actual
manufacturing costs at the end of the year were $425,000 in manufacturing overhead.
During the year, 22,000 direct labor hours and 27,000 machine hours were incurred. If
overhead is applied based on direct labor hours, what is the predetermined overhead
rate for the coming year?
A. $19.32 per direct labor hour.
B. $15.74 per direct labor hour.
C. $21.00 per direct labor hour.
D. $14.00 per direct labor hour.
Question 33
Clary Company currently sells its only product for $54 per unit. Variable manufacturing
cost per unit is $24 while fixed manufacturing overhead totals $50,000. Variable selling
and administrative expenses are $4 per unit sold. Fixed selling and administrative
expenses total $23,000. What is the effect on gross margin when production increases
from 5,000 to 5,500 units if all units produced are sold each year?
A. $13,000 increase.
B. $27,000 increase.
C. $12,000 increase.
D. $15,000 increase.
Question 34
The UFZ Company processes a single material into three separate products: L, M, and N.
During October, the joint costs of processing were $215,000. Production and sales value
information for the month were as follows:
 Part 1 FIRST Comprehensive Exam on Cost Accounting

If UFZ allocates joint costs using the constant gross margin method, how much would be
allocated to Products L, M, and N, respectively?
A. $27,000, $78,000, and $110,000
B. $21,500, $64,500, and $129,000
C. $26,875, $80,625, and $107,500
D. $26,807, $82,061, and $106,132
Question 35
A company’s budget indicated it should produce 11,000 units of finished goods using
22,000 hours of direct labor at a cost of $20 per hour. Actual results showed that 10,000
units of finished goods were manufactured, utilizing 21,000 labor hours at $19.75 per
hour. If the company used a standard cost system, the dollar amount of budgeted direct
labor cost allocated to the actual units manufactured would total:
A. $440,000.
B. $420,000.
C. $414,750.
D. $400,000.
Question 36
A process cost accounting system is most appropriate when:
A. Similar products are mass produced.
B. A variety of different products are produced, each one requiring different types of
materials, labor, and overhead.
C. Different amounts of materials, labor, and overhead are applied to particular jobs
or orders.
D. Similar products are mass produced and then finished to the specification of
customers.
Question 37
All of the following statements concerning using practical capacity are correct except:
A. Using practical capacity rather than budgeted output as the denominator for an
allocation rate enables a company to avoid increasing the allocation rate when
budgeted production decreases.
B. Using practical capacity rather than theoretical capacity as the denominator for
an allocation rate enables a company to more accurately measure inventory
costs.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

C. Using practical capacity rather than theoretical capacity as the denominator for
the fixed cost allocation rate results in a more realistic allocation rate.
D. Using practical capacity rather than budgeted output as the denominator for an
allocation rate makes it more difficult for a company to measure the cost of
unused capacity.
Question 38
What is the core difference between theory of constraints (TOC) and just-in-time (JIT)
management systems?
A. TOC focuses the process on the bottleneck and uses a buffer of inventory to keep
the bottleneck at full capacity while JIT seeks to remove all inventory.
B. TOC focuses on a horizontal process while JIT focuses on a vertical process.
C. TOC recognizes a problem with inventory while JIT does not.
D. TOC focuses on optimizing each operation as a coordinated system to produce
only what is needed while JIT focuses on optimizing each operation by maximizing
its individual production capacity.
Question 39
When managers produce more units than can be sold, full costing can:
A. Increase unit costs.
B. Deflate income
C. Inflate income.
D. Decrease taxes.
Question 40
Which of the following is least likely to be a benefit of benchmarking?
A. Higher quality strategic planning
B. Greater understanding of organizational strengths and weaknesses
C. Higher employee motivation
D. Greater operational efficiency
Question 41
All of the following statements about supply chain management are true except:
A. Organizations practicing supply chain management typically share less data with
partners than organizations not practicing supply chain management.
B. Organizations practicing supply chain management typically have more reliable
operations than organizations not practicing supply chain management.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

C. Organizations practicing supply chain management typically have less uncertainty

in their operations than organizations not practicing supply chain management.
D. Organizations practicing supply chain management typically have more robust
communication with partners than organizations not practicing supply chain
management.
Question 42
A company has the following information:

Determine the cost per unit under full costing.

A. $53.90
B. $62.88
C. $27.90
D. $66.88
Question 43
Which of the following is least likely to be an example of a lean resource management
technique?
A. Training employees to help reduce scrap in a manufacturing process
B. Redesigning a manufacturing facility to reduce the time spent moving a product
through the facility
C. Installing an enterprise resource planning (ERP) system
D. Interviewing customers to determine the desirability of features included in a
product
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 44
Which of the following is not a benefit of an enterprise resource planning (ERP) system?
A. An ERP system creates a single database that all of an entity’s business units and
functions can access.
B. An ERP system more easily provides a company with information and analytics to
manage its activities.
C. An ERP system helps a company standardize its activities and processes across
business units and geographic regions.
D. An ERP system requires little work and expense to maintain once itis
implemented.
Question 45
Stockholm Skis makes two different products: downhill racing skis and cross-country skis.
The company uses an ABC system that features the following activity cost pools and
drivers:

For the coming year, Stockholm estimates that it will use 36,000 parts in the assembly of
its downhill skis and 31,500 parts in the assembly of its crosscountry skis. Based on this
information, we can conclude that:
A. Downhill skis will account for a larger percentage of overhead costs from the
manufacturing pool.
B. Cross-country skis will account for a smaller percentage of overhead costs from
the inspection and testing pool.
C. Downhill skis will account for a larger percentage of overhead costs from the
ordering and receiving pool.
D. Cross-country skis will account for a smaller percentage of overhead costs from
the assembly pool.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 46
The ABC Company has the following information:

During the year, ABC produced 22,000 units and spent $740,000 on capacity costs. What
is the cost of planned idle capacity, the cost of unplanned idle capacity, and the amount
allocated to production if theoretical capacity is used to calculate the allocation rate?
A. $562,500, $22,500, and $165,000
B. $0, $90,000, and $660,000
C. $437,500, $37,500, and $275,000
D. $555,000, $22,200, and $162,800
Question 47
Which of the following is a correct description of the lean technique of “Mistake
Proofing” or “Poka Yoke”?
A. A technique where employees at all levels of a company work to achieve regular,
incremental improvements to a process on a regular basis
B. A visual scheduling system that uses cards to tell you what to produce, when to
produce it, and how much to produce
C. The use of an automatic device or method that makes it impossible for an error to
occur or makes it obvious to see that an error has occurred
D. A system where one product is always being worked on at any given stage of the
process, nothing is left waiting for a station to be free, and tasks are grouped to
spread the work as evenly as possible between work stations
Question 48
Which of the following best describes the logic underlying a cost of quality analysis?
A. A company attempts to minimize the sum of internal and external failure costs by
maximizing investments in prevention and appraisal costs.
B. A company attempts to minimize the sum of prevention and appraisal costs by
making investments in internal failure and external failure costs.
C. A company strives to minimize all four cost of quality categories simultaneously.
D. A company attempts to minimize the sum of internal and external failure costs by
making investments in prevention and appraisal costs.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 49
Ed was working on a custom-made workbench for a customer. The job, TB0414, was
started in November. At the end of November, the job cost sheet for TB0414 showed
direct materials of $215, direct labor of 14 hours at $18 per hour, and overhead of 50%
of direct labor cost. During December, $85 of direct materials were added to Job TB0414
and Ed's time ticket showed 15 hours on Job TB0414, 25 hours on Job TB0614, 10 hours
of maintenance on the lathe, and 40 hours on a new job, DR1014. Job TB0414 was
completed on December 28. What is the balance in Work-in-Process Inventory related to
Job TB0414 as of November 30?
A. $1,083
B. $593
C. $490
D. $467
Question 50
Which of the following is least likely to be a result of implementing a just-in-time (JIT)
system?
A. Lower inventory levels
B. Fewer defects in the production process
C. Less risk in the supply chain
D. Less time wasted during production
Question 51
The HGF Company separates its activities into two operating departments and two
support departments. Support Department 1 had budgeted costs of $60,000 and
Support Department 2 had budgeted costs of $45,000 during the month of March. HGF
allocates the costs of each support department based on service hours. The table here
shows how many service hours each support department provided to the two operating
departments, to the other support department, and to itself.

If HGF uses the reciprocal method to allocate support department costs, how much will
be allocated to Operating Department 1 and Operating Department 2, respectively, in
March?
 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. $37,000 and $68,000

B. $36,735 and $68,265
C. $37,688 and $67,312
D. $37,194 and $67,806
Question 52
From the perspective of the customer, which of the following is a value-added activity?
A. The company building a relationship with a new supplier
B. The company installing a new ERP system for itself
C. The company sending service techs to install the customer's purchase
D. The company providing cutting-edge training to its own accounting department
Question 53
Which of the following is a reason to allocate support department costs?
A. To more accurately reflect the true cost of support departments
B. To encourage operating departments to use support departments in an efficient
way
C. To encourage support departments to use operating departments in an efficient
way
D. To measure income more accurately for external purposes
Question 54
A processing department produces joint products Ajac and Bjac, each of which incurs
separable production costs after split-off. Information concerning a batch of these
products produced with a $60,000 joint cost follows:

What amount of the joint cost would be allocated to Ajac if joint costs are allocated to
products using the net realizable value method?
A. $56,000
B. $12,000
 Part 1 FIRST Comprehensive Exam on Cost Accounting

C. $48,000
D. $40,000
Question 55
Mandy Appliances manufactures toaster ovens. Each oven contains 15 parts totaling $35
in direct materials. Each oven requires 3 hours of machine time and 1.5 hours for
inspection. The company has the following information regarding activities, activity
drivers, and cost per driver units:

What is the cost of machining per toaster oven?

A. $18.00
B. $12.75
C. $11.25
D. $17.70
Question 56
Basic Products Company has a plant that focuses on manufacturing Widget 1 and Widget
2. Widget 1 is sold for $90 and Widget 2 is sold for $115. Material X is the only raw
material in both products. Widget 1 requires $35 of Material X and Widget 2 requires
$55 of Material X. The widgets are largely built by hand using five employees. The
employee names and their production times per product are provided below.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Basic Products Company allows only six hours of overtime a week. Hence, each
employee has the capacity to work 46 hours (2,760 minutes) per week. Currently, the
market demand for Widget 1 is 100 per week. Similarly, the demand for Widget 2 is 100
per week.
What is operating profit based on the optimal production mix that exploits the
constrained operation? Assume operational expense totals $6,000 each week.
A. $11,050
B. $17,050
C. $9,700
D. $3,700
Question 57
At the end of the year, Ferguson Furniture has a Manufacturing Overhead account
balance of $4,329 (cr.). This means that Ferguson:
A. Overapplied overhead to manufacturing jobs.
B. Underapplied overhead to manufacturing jobs.
C. Applied the exact amount of actual overhead to manufacturing jobs.
D. Did not apply overhead to manufacturing jobs.
Question 58
Gill's Golf Gear (GGG) conducted a regression analysis on its shipping costs for the last
year using number of boxes shipped as the independent variable. The regression
analysis resulted in the following equation: $2.30x + $1,375. If GGG plans to produce
1,500 golf balls and ship 1,280 golf balls next month with 4 golf balls per box, what are
the shipping costs expected to be?
 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. $4,319.00
B. $4,825.00
C. $2,111.00
D. $2,237.50
Question 59
DAF Company has a facility that focuses on producing two products. Product 1 sells for
$120 per unit and Product 2 sells for $200 per unit. DAF estimates weekly demand is 300
units for Product 1 and 100 units for Product 2. Material KLM is the only raw material in
both products. Product 1 uses $15 of KLM per unit and Product 2 uses $25 of KLM per
unit. Product 1 uses $9 per unit of direct labor and Product 2 uses $12 per unit of direct
labor.
The products are largely built by hand using four employees. The employee names and
their average production times per product are provided below.

DAF allows 5 hours of overtime per week, so each employee has the capacity to work for
45 hours (2,700 minutes) per week.
Which of the following represents the correct throughput per bottleneck minute for
Product 1 and Product 2?
A. $26.25 and $17.50
B. $23.33 and $15.22
C. $19.44 and $14.58
D. $17.78 and $14.05
Question 60
Mink Manufacturing used $2,200 of indirect raw materials and $21,000 of direct raw
materials during the period. The company incurred $14,000 of direct factory labor and
$2,400 of indirect factory labor during the period. What amount will Mink assign to
manufacturing overhead?
A. $18,600
 Part 1 FIRST Comprehensive Exam on Cost Accounting

B. $4,600
C. $23,200
D. $35,000
Question 61
Which of the following statements is correct concerning a company using practical
capacity to calculate an allocation rate?
A. The company will be more likely to be able to evaluate the cost of unused
capacity than if it used budgeted output to calculate its allocation rate.
B. The company will be more likely to be able to evaluate its potential capacity than
if it used theoretical capacity to calculate its allocation rate.
C. The company will be less likely to have to adjust its allocation rates than if it used
theoretical capacity to calculate its allocation rate.
D. The company will be more likely to experience a product pricing death spiral than
if it used budgeted output to calculate its allocation rate.
Question 62
A product currently sells for $50 per unit and has variable manufacturing costs of $15
per unit, and variable selling and administrative costs of $6 per unit. How will the total
contribution margin change when output is increased from 8,000 to 9,000 units?
A. Decrease of $15,000
B. Increase of $29,000
C. Decrease of $6,000
D. Increase of $50,000
Question 63
Which of the following correctly describes theoretical capacity?
A. Theoretical capacity is the level of output that the organization actually achieves
in a period.
B. Theoretical capacity is the amount of capacity that management predicts the
organization will produce in the period.
C. Theoretical capacity represents the level of output if all policy constraints and
scheduling limitations are removed. It also assumes that no productivity is lost
due to breakdowns, errors, etc.
D. Theoretical capacity represents the level of output that can be realistically
achieved based on current management policies, as well as based on machine
and labor scheduling expectations.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 64
In the month of November, Terpak Industries had the following costs:

How much total manufacturing overhead will Terpak have for the month of November?
A. $59,340
B. $26,383
C. $85,723
D. $36,340
Question 65
Which of the following costs generally are included in a calculation of operating income
when using absorption costing?

A. II and III only

B. I and IV only
C. I, II and III only
D. I, II, III, and IV
Question 66
Which of the following does not correctly explain a way that value chain analysis helps
an organization understand its competitive advantage?
A. Value chain analysis helps an organization determine what is valued in the
marketplace.
B. Value chain analysis helps an organization determine how its activities relate to its
strategy.
C. Value chain analysis helps an organization determine which activities it should
work to improve and which it should outsource.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

D. Value chain analysis helps an organization determine which activities help create
and capture customer value and which ones do not.
Question 67
All of the following are limitations of outsourcing except:
A. Significantly more costs are incurred if the vendor is international.
B. The vendor having access to sensitive proprietary information.
C. The vendor lacking transparency about the handling of the outsourced process.
D. The vendor going out of business or having legal problems.
Question 68
Austin Company manufactures two products, Flacca and Gordo. Overhead costs are
comprised of machine setups, $1,600,000; machining, $3,600,000; and inspecting,
$1,200,000. Recent data are shown below:

Overhead assigned to Gordo using a single overhead (OH) rate based on direct labor
hours and using ABC, respectively, would be:
A. $4,000,000 and $2,400,000
B. $4,000,000 and $3,072,000
C. $2,400,000 and $3,328,000
D. $2,400,000 and $3,072,000
Question 69
A manufacturer of mobile phones has identified two models for analysis under activity-
based costing. Each model is associated with two activity pools: Soldering and Assembly.
Model J requires 14 solders, and Model P requires 24 solders. Total direct labor hours
required for Models J and P are 0.35 per unit and 1.15 per unit, respectively. Factory
overhead amounting to $550,000 is assigned as follows: $375,000 to the Soldering cost
pool and the balance to the Assembly cost pool. The cost driver for Soldering is the
 Part 1 FIRST Comprehensive Exam on Cost Accounting

number of solders, and the cost driver for Assembly is direct labor hours. Furthermore,
$295,000 of product design overhead is also allocated to these two product lines and is
split equally between them. What is the factory overhead cost per driver unit for
Soldering if the company manufactures 500,000 phones, of which 65% are Model J?
A. $0.0337 per solder
B. $0.0429 per solder
C. $0.0824 per solder
D. $0.0892 per solder
Question 70
The YKZ Company processes a single material into three separate products: G, H, and I.
During May, the joint costs of processing were $20,000. Production and sales value
information for the month were as follows:

YKZ allocates joint costs using the estimated net realizable value (NRV) method.
Assuming YKZ separately processes Product I and sells 5,600 units of it in May, how
much cost of goods sold would YKZ record for these sales?
A. $25,760
B. $28,000
C. $26,152
D. $16,800
Question 71
Which of the following is a product cost under full costing?
A. CEO's salary.
B. Depreciation of office equipment.
C. Depreciation of manufacturing equipment.
D. Selling expenses.
Question 72
Using job order costing, what general ledger accounts are involved when a job is
delivered to the customer?
 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. Increase (debit) Finished Goods Inventory and decrease (credit) Work-in-Process

Inventory.
B. Increase (debit) Cost of Goods Sold and decrease (credit) Finished Goods
Inventory.
C. Increase (debit) Finished Goods Inventory and decrease (credit) Cost of Goods
Sold.
D. Increase (debit) Cost of Goods Sold and decrease (credit) Work-in-Process
Inventory.
Question 73
A company planned to produce 50,000 units with $500,000 of manufacturing overhead.
The budgeted machine hours per unit is 2 hours. The company’s actual results indicated
that it spent $505,000 for manufacturing overhead, produced 49,000 units, and used
99,000 machine hours. Under a standard cost system that allocates overhead based
upon machine hours, the manufacturing overhead traced to the products would total:
A. $505,000.
B. $500,000.
C. $495,000.
D. $490,000.
Question 74
Within the relevant range, fixed cost per unit will
A. increase as the activity level increases.
B. decrease as the activity level decreases.
C. remain the same as the activity level decreases.
D. decrease as the activity level increases.
Question 75
The CDF Company produces a single product that sells for $250 per unit. Each product
goes through two production departments. Information on those departments is in the
table below. In addition, the company pays direct labor employees $18 per unit(based
on capacity) and has a policy to not lay-off employees. What is the amount of the
throughput contribution per unit as computed using the theory of constraints?
 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. $156
B. $174
C. $150
D. $132
Question 76
Tom worked 40 hours during the week ending February 28. On his time ticket, he
recorded the following:

On Tom's time ticket, how many hours of labor will be allocated to indirect labor?
A. 5 hours indirect labor.
B. 33 hours indirect labor.
C. 40 hours indirect labor.
D. 7 hours are indirect labor.
Question 77
Elaine's Fine Furniture has just started operations. Elaine's had the following job cost
sheets for the month of January.
 Part 1 FIRST Comprehensive Exam on Cost Accounting

What was the balance in Elaine's Finished Goods Inventory account as of January 31?
A. $37,739
B. $34,101
C. $5,889
D. $23,411
Question 78
Which amount of production and sales would produce a net income of $75,000 if the
selling price is $125 per unit, the contribution ratio is 0.40, and total fixed expenses are
$25,000?
A. 2,000 units.
B. 800 units.
C. 1,500 units.
D. 600 units.
Question 79
Adams Accounting has compiled the following information related to its ABC system:

What is Adams’ cost per driver unit for customer management?

 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. $19.50 per order.

B. $11.50 per hour.
C. $8.52 per mile.
D. $14.78 per mile.
Question 80
Catherine B. is working with her production supervisor to compute a predetermined
overhead rate for the coming year. Catherine and her production supervisor have put
together a budget of 1,400 direct labor hours for the coming year. During the same
period, they plan to use 2,000 machine hours. Catherine has assembled the following
information for the upcoming year:

If Catherine decides to use a predetermined overhead rate based on machine hours,

what would be the predetermined overhead rate?
A. $255 per direct labor hour.
B. $126 per machine hour.
C. $160 per direct labor hour.
D. $178.50 per machine hour.
Question 81
Which of the following targets would most likely be associated with a continuous
improvement model?
A. Reducing waste by 12% within the next year
B. Reducing waste by a total of 12% over the next four years
C. Reducing waste by 3% each year for the next four years
 Part 1 FIRST Comprehensive Exam on Cost Accounting

D. Reducing waste by 5% within the next year, 4% the following year, 2% the year
after that, and 1% the year after that
Question 82
Which of the following is not a step in value chain analysis?
A. Identify activities that are candidates for outsourcing
B. Classify activities as value-adding or non-value-adding
C. Identify the organization’s competitive advantage
D. Document the current process (perform gap analysis)
Question 83
Which of the following is a correct description of the lean technique of “One Piece
Flow”?
A. A technique where employees at all levels of a company work to achieve regular,
incremental improvements to a process on a regular basis.
B. A visual scheduling system that uses cards to tell you what to produce, when to
produce it, and how much to produce.
C. The use of an automatic device or method that makes it impossible for an error to
occur or makes it obvious to see that an error has occurred.
D. A system where one product is always being worked on at any given stage of the
process, nothing is left waiting for a station to be free, and tasks are grouped to
spread the work as evenly as possible between work stations.
Question 84
Sweetums Syrup adds raw materials costs at the beginning of its manufacturing process
and incurs conversion costs uniformly throughout the process. At the beginning of last
month, Sweetums had 20,000 units that were 40% complete in its Beginning Work-in-
Process Inventory. Over the course of the month, the company began production of
150,000 units; at month's end, 90,000 of those units were finished and transferred out,
while the remaining units were 90% complete. Using the Weighted Average method,
what was Sweetums’ equivalent units of production for materials for the month?
A. 170,000 equivalent units.
B. 98,000 equivalent units.
C. 162,000 equivalent units.
D. 240,000 equivalent units.
Question 85
Catherine B. is working with her production supervisor to compute a predetermined
 Part 1 FIRST Comprehensive Exam on Cost Accounting

overhead rate for the coming year. Catherine and her production supervisor have put
together a budget of 1,400 direct labor hours for the coming year. During the same
period, they plan to use 2,000 machine hours. Catherine has assembled the following
information for the upcoming year:

If Catherine decides to use a predetermined overhead rate based on machine hours,

what would be the predetermined overhead rate (if necessary, round your answer to
two decimal places)?
A. $212.10 per machine hour.
B. $121.10 per machine hour.
C. $91.00 per machine hour.
D. $173.00 per machine hour.
Question 86
Jolly Manufacturing produces furniture. Jolly has three jobs in process at the end of the
month with the following information:

Jolly's average direct labor rate is $20 per hour, and Jolly applies overhead at the rate of
$17 per direct labor hour. What is the balance in Jolly's Work-inProcess Inventory at the
end of the month?
A. $2,140
 Part 1 FIRST Comprehensive Exam on Cost Accounting

B. $1,088
C. $2,368
D. $3,228
Question 87
In March, Kepner Manufacturing incurred actual manufacturing overhead of $10,581.
During the month, the company applied manufacturing overhead of $9,185 to Work-in-
Process. Before adjustments, the balance in the company's Work-in-Process account was
$25,200, and the balance in the Cost of Goods Sold account was $9,486. If under- and
overapplied overhead is charged to Cost of Goods Sold, what is the balance in Cost of
Goods Sold after adjustments are made?
A. $9,185
B. $10,882
C. $8,090
D. $10,581
Question 88
Dawson Company manufactures two products, Regular and Deluxe. Manufacturing
overhead costs consist of $2,500,000 for Machining with machine hours as the driver,
and $1,250,000 for Assembly with direct labor hours as the driver. Other recent data are
provided below:

Using machine hours and direct labor hours to assign costs, what is the total overhead
assigned to Deluxe?
A. $2,625,000
B. $2,500,000
C. $2,437,500
D. $1,125,000
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 89
Tasty Brands Company manufactures candy from a joint production process and has four
main products: Choco Bar, Nougat Bar, Peanut Bar, and Coconut Bar. Joint costs for one
batch are as follows:

At the split-off point, one joint process batch yields 30,000 Choco Bars, 25,000 Nougat
Bars, 20,000 Peanut Bars, and 15,000 Coconut Bars. If all products are sold at the split-
off point, prices are $0.75 per Choco Bar, $1.00 per Nougat Bar, $1.25 per Peanut Bar,
and $1.50 per Coconut Bar.
Tasty Brands has the option of further processing all products into king-sized bars with
the following added costs and premium prices:

What are the joint costs allocated to the Peanut Bars under the NRV method? Round
intermediate calculations to two decimal points. (Note: This means the allocations
across all four bars won't add up perfectly to the joint cost.)
A. $18,340
B. $19,000
C. $20,160
D. $16,000
Question 90
Techy Trendy Company (TTC) creates generic computer chips using high-tech machinery.
TTC has two service departments (IT and Legal) that provide services for one another as
 Part 1 FIRST Comprehensive Exam on Cost Accounting

well as for two production departments, Fabrication and Finishing. Data for the month
follow:

IT Department costs for the month were $120,000, and Legal Department costs were
$150,000. TTC uses IT support tickets as the assignment base for IT Department costs
and uses legal inquiries as the assignment base for Legal Department costs.
What amount of overhead would be allocated to the Fabrication and Finishing
department using the step-down method, with IT costs assigned first? In order for the
solution to balance out with the original amount of support department cost, DO NOT
round intermediate calculations.
A. Fabrication: $172,000; Finishing: $98,000
B. Fabrication: $173,103.45; Finishing: $96,896.55
C. Fabrication: $170,333.33; Finishing: $99,666.67
D. Fabrication: $171,470.59; Finishing: $98,529.41
Question 91
The LMN Company runs its production line for 50 weeks each year. Workers work eight
hours per day for five days each week and can realistically produce five units per hour.
Ideally, it could produce 15 units per hour and run 24 hours a day for seven days each
week for 52 weeks. LMN budgeted to produce 6,552 units and to spend $655,200 for
capacity costs (all fixed) in 2X19. It actually produced 5,000 units in 2X19. What is the
cost of unplanned unused capacity in 2X19 if LMN allocates these costs using budgeted
output, practical capacity, and theoretical capacity, respectively?
A. $155,200, $327,600, and $630,200
B. $155,200, $101,687, and $7,760
C. $0, $225,913, and $622,440
D. $500,000, $327,600, and $25,000
Question 92
AJF Company has a facility that focuses on producing two products. Product 1 sells for
 Part 1 FIRST Comprehensive Exam on Cost Accounting

$80 per unit and Product 2 sells for $140 per unit. AJF estimates weekly demand is 400
units for Product 1 and 200 units for Product 2. Material DFR is the only raw material in
both products. Product 1 uses $30 of DFR per unit and Product 2 uses $60 of DFR per
unit. Product 1 uses $10 per unit of direct labor and Product 2 uses $18 per unit of direct
labor.
The products are largely built by hand using four employees. The employee names and
their average production times per product are provided below.

AJF does not allow any overtime, so each employee has the capacity to work for 40
hours (2,400 minutes) per week.
Which of the following represents the correct throughput per bottleneck minute for
Product 1 and Product 2?
A. $20.00 and $14.55
B. $16.67 and $12.80
C. $22.22 and $12.31
D. $13.33 and $8.86
Question 93
Last year, Blake Company's income under absorption costing was $3,600 lower than its
income under variable costing. The company sold 10,000 units during the year, and its
total variable costs were $9 per unit, of which $1 was variable selling expense. If total
production costs were $11 per unit under absorption costing, then how many units did
the company produce during the year?
A. 11,200 units produced
B. 10,000 units produced
C. 8,800 units produced
D. 1,200 units produced
 Part 1 FIRST Comprehensive Exam on Cost Accounting

Question 94
Yard Beautiful Enterprises produces lawn mowers. The total cost for the month of June is
$201,780. During June, Yard Beautiful manufactured 580 lawn mowers. If the variable
cost for one lawn mower is $206 and the selling price is $475, what is the fixed cost for
June?
A. $201,780
B. $73,720
C. $82,300
D. $119,480
Question 95
Hinkle Furniture Company has accumulated the following costs in relation to the
production and sales of 7,500 units during its first year of operations:

Using full costing, determine Hinkle's total period costs for the year.
A. $225,000
B. $75,000
C. $325,000
D. $768,750
Question 96
Which of the following would be considered a type of product costs under absorption
costing?
 Part 1 FIRST Comprehensive Exam on Cost Accounting

A. I, II, and III

B. I and II
C. I and III
D. I
Question 97
A process cost accounting system would most likely be used for:
A. Toy doll production.
B. Motion picture production.
C. Custom home building.
D. Developing advertising campaigns.
Question 98
Sugar Industries manufactures specialized candy dispensers. One of Sugar's customers
ordered 500 candy dispensers, Job 317C, which was started in March and finished on
March 31. The job cost sheet for Job 317C as of March 31 shows $1,750 in direct
materials, 30 direct labor hours, and 40 machine hours. The labor rate is $18 per direct
labor hour and overhead is applied at the rate of $25 per machine hour. What is the cost
per candy dispenser as of March 31 for Job 317C?
A. $6.08
B. $6.94
C. $4.58
D. $6.58
Question 99
All of the following are considered to be support activities in value chain analysis except:
A. Installation of an ERP system
B. Employee recruitment events
C. Order processing
D. Starting a supplier management program
Question 100
An accounting system that uses budgeted costs for all three cost flows (direct materials,
direct labor, and overhead) going into work-in-process accounts describes what kind of
cost accounting system?
A. Actual Cost Accounting System
B. Standard Cost Accounting System
C. Budgeted Cost Accounting System
 Part 1 FIRST Comprehensive Exam on Cost Accounting

D. Normal Cost Accounting System

Part 1 FIRST Comprehensive Exam on Cost Accounting
Part 1 FIRST Comprehensive Exam on Cost Accounting
Part 1 FIRST Comprehensive Exam on Cost Accounting