Multiple Choice Questions

1. Managerial accounting:
A. has its primary emphasis on the Iuture.
B. is required by regulatory bodies such as the SEC.
C. Iocuses on the organization as a whole, rather than on the organization's segments.
D. Responses a, b, and c are all correct.
2. The corporate controller's salary would be considered a(n):
A. manuIacturing cost.
B. product cost.
C. administrative cost.
D. selling expense.
3. ManuIacturing overhead:
A. can be either a variable cost or a Iixed cost.
B. includes the costs oI shipping Iinished goods to customers.
C. includes all Iactory labor costs.
D. includes all Iixed costs.
4. Prime cost consists oI direct materials combined with:
A. direct labor.
B. manuIacturing overhead.
C. indirect materials.
D. cost oI goods manuIactured.
5. The cost oI Iire insurance Ior a manuIacturing plant is generally considered to be a:
A. product cost.
B. period cost.
C. variable cost.
D. all oI the above.
6. Transportation costs incurred by a manuIacturing company to ship its product to its
customers would be classiIied as which oI the Iollowing?
A. Product cost
B. ManuIacturing overhead
C. Period cost
D. Administrative cost
7. Which oI the Iollowing companies would be most likely to use a job-order costing
system rather than a process costing system?
A. Iast Iood restaurant
B. shipbuilding
C. crude oil reIining
D. candy making
. For which situation(s) below would an organization be more likely to use a job-order
costing system oI accumulating product costs rather than a process costing system?
A. a steel Iactory that processes iron ore into steel bars
B. a Iactory that processes sugar and other ingredients into black licorice
C. a costume maker that makes specialty costumes Ior Iigure skaters
D. all oI the above
9. Choice oI allocation base should be made based on:
A. the relative size oI the base.
B. the base's relation to direct labor.
C. the base's activity.
D. whether the base actually drives the cost being allocated.
10.In a job-order costing system, the use oI indirect materials would usually be recorded
as a debit to:
A. Raw Materials.
B. Work in Process.
C. ManuIacturing Overhead.
D. Finished Goods.
11.When applying manuIacturing overhead to jobs, the Iormula to calculate the amount
is as Iollows:
A. Predetermined overhead rate divided by the actual manuIacturing overhead
incurred on the particular job.
B. Predetermined overhead rate times the actual manuIacturing overhead incurred on
the particular job.
C. Predetermined overhead rate divided by the actual units oI allocation base charged
to the particular job.
D. Predetermined overhead rate times the actual units oI allocation base charged to
the particular job.
12.Which oI the Iollowing situations always results in underapplied overhead?
A. actual overhead is greater than applied overhead
B. actual overhead is less than applied overhead
C. estimated overhead is greater than actual overhead
D. estimated overhead is less than actual overhead
13.Purchase order processing is an example oI a:
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Facility-level activity.
14.Departmental overhead rates may not correctly assign overhead costs due to:
A. the use oI direct labor hours in allocating overhead costs to products rather than
machine time or quantity oI materials used.
B. the high correlation between direct labor-hours and the incurrence oI overhead
costs.
C. overreliance on volume as a basis Ior allocating overhead costs where products
diIIer regarding the number oI units produced, lot size, or complexity oI production.
D. diIIiculties associated with identiIying cost pools Ior the Iirst stage oI the
allocation process.
15.In activity-based costing, the total activity in an activity cost pool can be computed
by:
A. dividing the total overhead cost in the activity cost pool by the activity cost pool's
activity rate.
B. multiplying the total overhead cost in the activity cost pool by the activity cost
pool's activity rate.
C. dividing the activity cost pool's activity rate by the direct labor-hours required to
make a product.
D. multiplying the activity cost pool's activity rate by the direct labor-hours required
to make a product.
16.When applying overhead to products in an activity-based costing system:
A. Cash or a liability is debited and ManuIacturing Overhead is credited.
B. ManuIacturing Overhead is debited and Cash or a liability is credited.
C. ManuIacturing Overhead is debited and Work In Process is credited.
D. Work In Process is debited and ManuIacturing Overhead is credited.
17.Viren Corporation has provided the Iollowing data Irom its activity-based costing
system:



The company makes 240 units oI product T91H a year, requiring a total oI 550
machine-hours, 90 orders, and 40 inspection-hours per year. The product's direct
materials cost is $16.9 per unit and its direct labor cost is $12.09 per unit.
According to the activity-based costing system, the unit product cost oI product T91H
is closest to:
A. $79.66 per unit
B. $90.1 per unit
C. $29.07 per unit
D. $75.70 per unit
1.Marton Corporation has provided the Iollowing data Irom its activity-based costing
accounting system:



The activity rate Ior the "designing products" activity cost pool is closest to:
A. $124 per product design hour
B. $11 per product design hour
C. $55 per product design hour
D. $1,526,916 per product design hour
19.An operation costing system is:
A. identical to a process costing system except that actual manuIacturing overhead
costs are traced to units oI product.
B. the same as a process costing system except that direct materials costs are
accounted Ior in the same way as in job order costing.
C. the same as a job order system except that direct materials costs are accounted Ior
in the same way as in process costing.
D. identical to a job order costing system except that actual manuIacturing overhead
costs are traced to units oI product.
20.Assume there was no beginning work in process inventory and the ending work in
process inventory is 70 complete with respect to conversion costs. Under the
weighted-average method, the number oI equivalent units oI production with respect
to conversion costs would be:
A. the same as the units completed.
B. less than the units completed.
C. the same as the units started during the period.
D. less than the units started during the period.
21.The Assembly Department started the month with 59,000 units in its beginning work
in process inventory. An additional 274,000 units were transIerred in Irom the prior
department during the month to begin processing in the Assembly Department. There
were 21,000 units in the ending work in process inventory oI the Assembly
Department.
How many units were transIerred to the next processing department during the
month?
A. 333,000
B. 236,000
C. 354,000
D. 312,000
22.LuIt Company uses the weighted-average method in its process costing system.
Operating data Ior the Iirst processing department Ior the month oI June appear
below:




According to the company's records, the conversion cost in beginning work in process
inventory was $79,93 at the beginning oI June. Additional conversion costs oI
$343,30 were incurred in the department during the month.
What was the cost per equivalent unit Ior conversion costs Ior the month? (Round oII
to three decimal places.)
A. $.070
B. $7.91
C. $5.92
D. $4.54
23.Hanson Company uses the weighted-average method in its process costing system.
The Iirst processing department, the Welding Department, started the month with
17,000 units in its beginning work in process inventory that were 60 complete with
respect to conversion costs. The conversion cost in this beginning work in process
inventory was $90,70. An additional 4,000 units were started into production during
the month and 2,000 units were completed in the Welding Department and
transIerred to the next processing department. There were 19,000 units in the ending
work in process inventory oI the Welding Department that were 40 complete with
respect to conversion costs. A total oI $690,70 in conversion costs were incurred in
the department during the month.
The cost per equivalent unit Ior conversion costs is closest to:
A. $6.707
B. $.224
C. $.900
D. $.723
24.The Morgan Company uses the weighted-average method in its process costing
system. For a particular department, the company had 54,000 equivalent units with
respect to conversion costs in March. There were 7,500 units in the department's
beginning work in process inventory, two thirds complete with respect to conversion
costs. During March, 52,500 units were started and 50,000 were completed and
transIerred out oI the department. The ending work in process inventory in the
department:
A. consisted oI 5,000 units.
B. consisted oI 2,500 units.
C. was 65 complete with respect to conversion costs.
D. was 40 complete with respect to conversion costs.
25.Expense A is a Iixed cost; expense B is a variable cost. During the current year the
activity level has increased, but is still within the relevant range. In terms oI cost per
unit oI activity, we would expect that:
A. expense A has remained unchanged.
B. expense B has decreased.
C. expense A has decreased.
D. expense B has increased.
26.Within the relevant range, the variable cost per unit:
A. remains constant as activity changes.
B. increases as activity increases.
C. decreases as activity increases.
D. can increase or decrease as the activity changes.
27.The linear equation Y a bX is oIten used to express cost Iormulas. In this
equation:
A. the b term represents variable cost per unit oI activity.
B. the a term represents variable cost in total.
C. the X term represents total cost.
D. the Y term represents total Iixed cost.
2.An example oI a cost that is variable with respect to the number oI units produced and
sold is:
A. insurance on the headquarters building.
B. power to run production equipment.
C. supervisory salaries.
D. depreciation oI Iactory Iacilities.
29.Contribution margin is the excess oI revenues over:
A. cost oI goods sold.
B. manuIacturing cost.
C. all direct costs.
D. all variable costs.
30.The approach to the income statement organizes costs by
Iunction.
A. contribution
B. traditional
C. comparable
D. None oI the above is true.