True or False

1) Managerial accounting is primarily concerned with the organization as a whole

rather than with segments of the organization. FALSE

2) Managerial accounting places less emphasis on nonmonetary data than financial

accounting. FALSE

3) Direct labor is a part of both prime cost and conversion cost. TRUE

4) Wages paid to production supervisors would be considered direct

labor. FALSE

5) Direct material cost combined with manufacturing overhead cost is known as

conversion cost. FALSE

6) Although depreciation is always a period cost in a merchandising firm, it can be

a product cost in a manufacturing firm. TRUE

7) In a manufacturing firm, all costs are product costs. FALSE

8) The cost of shipping parts from a supplier is considered a product cost. TRUE

9) Differential costs can be either fixed or variable. TRUE

10) A fixed cost is constant per unit of product. FALSE

11) The variable cost per unit is constant and does not depend on how many units
are produced. TRUE

12) A factory supervisor's salary would be classified as a direct cost of a unit of

product. FALSE
Multiple Choice Questions
1) Managerial accounting:
A. has its primary emphasis on the future.
B. is required by regulatory bodies such as the SEC.
C. focuses on the organization as a whole, rather than on the organization's
segments.
D. Responses a, b, and c are all correct.

2) The costs of direct materials are classified as:

A. Choice A
B. Choice B
C. Choice C
D. Choice D

3) Manufacturing overhead:
A. can be either a variable cost or a fixed cost.
B. includes the costs of shipping finished goods to customers.
C. includes all factory labor costs.
D. includes all fixed costs.

4) The three basic elements of manufacturing cost are direct materials, direct
labor, and:
A. cost of goods manufactured.
B. cost of goods sold.
C. work in process.
D. manufacturing overhead.

5) Prime cost consists of direct materials combined with:

A. direct labor.
B. manufacturing overhead.
C. indirect materials.
D. cost of goods manufactured.
 6) Which terms below correctly describe the cost of the black paint used to paint
the dots on a pair of dice?

A. Choice A
B. Choice B
C. Choice C
D. Choice D

7) The cost of fire insurance for a manufacturing plant is generally considered to

be a:
A. product cost.
B. period cost.
C. variable cost.
D. all of these.

8) An example of a period cost is:

A. fire insurance on a factory building.
B. salary of a factory supervisor.
C. direct materials.
D. rent on a headquarters building.

9) Transportation costs incurred by a manufacturing company to ship its product to

its customers would be classified as which of the following?
A. Product cost
B. Manufacturing overhead
C. Period cost
D. Administrative cost

10) Micro Computer Company has set up a toll-free telephone line for customer
inquiries regarding computer hardware produced by the company. The cost of
this toll-free line would be classified as which of the following?
A. Product cost
B. Manufacturing overhead
C. Direct labor
D. Period cost
11) Which two terms below describe the wages paid to security guards that monitor
a factory 24 hours a day?
A. variable cost and direct cost
B. fixed cost and direct cost
C. variable cost and indirect cost
D. fixed cost and indirect cost

12) Each of the following would be classified as variable in terms of cost behavior
except:
A. cost of shipping goods to customers via express mail.
B. sales commissions.
C. plant manager's salary.
D. direct materials.

13) An opportunity cost is:

A. the difference in total costs which results from selecting one alternative
instead of another.
B. the benefit forgone by selecting one alternative instead of another.
C. a cost which may be saved by not adopting an alternative.
D. a cost which may be shifted to the future with little or no effect on current
operations.

14) Buford Company rents out a small unused portion of its factory to another
company for $1,000 per month. The rental agreement will expire next month,
and rather than renew the agreement Buford Company is thinking about using
the space itself to store materials. The term to describe the $1,000 per month is:
A. sunk cost.
B. period cost.
C. opportunity cost.
D. variable cost.

15) The following costs were incurred in August:

Conversion costs during the month totaled:

A. $127,000
B. $51,000
 C. $52,000
D. $75,000

16) The following costs were incurred in August:

Prime costs during the month totaled:

A. $39,000
B. $59,000
C. $96,000
D. $38,000

17) During the month of August, direct labor cost totaled $13,000 and direct labor
cost was 20% of prime cost. If total manufacturing costs during August were
$88,000, the manufacturing overhead was:
A. $75,000
B. $23,000
C. $65,000
D. $52,000
0.20 x Prime cost = Direct labor
0.20 x Prime cost = $13,000
Prime cost = $65,000
Prime cost = Direct materials + Direct labor
$65,000 = Direct materials + $13,000
Direct materials = $52,000

18) In August direct labor was 60% of conversion cost. If the manufacturing
 overhead for the month was $54,000 and the direct materials cost was $34,000,
the direct labor cost was:
A. $36,000
B. $22,667
C. $51,000
D. $81,000
0.60 x Conversion costs = Direct labor
0.40 x Conversion costs = Manufacturing overhead
0.40 x Conversion costs = $54,000
Conversion costs = $135,000
Conversion costs = Direct labor + Manufacturing overhead
$135,000 = Direct labor + $54,000
Direct labor = $81,000

19) Williams Company's direct labor cost is 25% of its conversion cost. If the
manufacturing overhead for the last period was $45,000 and the direct materials
cost was $25,000, the direct labor cost was:
A. $15,000
B. $60,000
C. $33,333
D. $20,000
0.25 x Conversion costs = Direct labor
0.75 x Conversion costs = Manufacturing overhead
0.75 x Conversion costs = $45,000
Conversion costs = $60,000
Conversion costs = Direct labor + Manufacturing overhead
$60,000 = Direct labor + $45,000
Direct labor = $15,000

20) Consider the following costs incurred in a recent period:

What was the total amount of the period costs listed above for the period?
A. $78,000
 B. $71,000
C. $46,000
D. $37,000

21) Walton Manufacturing Company gathered the following data for the month.

How much net operating income will be reported for the period?
A. $54,000
B. $17,000
C. $52,000
D. Cannot be determined.

22) How much opportunity cost is represented in the following information

concerning a machine?

A. $80,000
B. $14,000
C. $25,000
D. $68,000
 $25,000: Only the resale value of the current machine is an opportunity cost in the
above list.

Corcetti Company manufactures and sells prewashed denim jeans. Large rolls of
denim cloth are purchased and are first washed in a giant washing machine. After
the cloth is dried, it is cut up into jean pattern shapes and then sewn together. The
completed jeans are sold to various retail chains.

23) Which of the following terms could be used to correctly describe the cost of the
soap used to wash the denim cloth?

A. Choice A
B. Choice B
C. Choice C
D. Choice D

24) Which of the following terms could be used to correctly describe the wages
paid to the workers that cut up the cloth into the jean pattern shapes?

A. Choice A
B. Choice B
C. Choice C
D. Choice D

25) Which of the following terms could be used to correctly describe the cost of the
thread used to sew the jeans together?

A. Choice A
B. Choice B
 C. Choice C
D. Choice D

26) Which of the following terms could be used to correctly describe the wages
paid to the data entry clerk who enters customer order information into the
company's computer system?

A. Choice A
B. Choice B
C. Choice C
D. Choice D

A partial listing of costs incurred during February at Urfer Corporation appears

below:

27) The total of the period costs listed above for February is:
A. $379,000
B. $277,000
C. $61,000
D. $318,000

28) The total of the manufacturing overhead costs listed above for February is:
A. $61,000
B. $595,000
 C. $277,000
D. $33,000

29) The total of the product costs listed above for February is:
A. $277,000
B. $595,000
C. $318,000
D. $61,000

30) South Coast Appliance Store is a small company that has hired you to perform
some management advisory services. The following information pertains to
2017 operations.
Sales (5,600 microwave ovens) £5,600,000
Cost of goods sold 912,800
Store manager's salary per year 125,000
Operating costs per year 210,000
Advertising and promotion per year 31,520
Commissions (4.5% of sales) 252,000
What were the total fixed costs for 2017?
A: £1,531,320
B: £366,520
C: £335,000
D: £1,164,800
ANSWER: B
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31) South Coast Appliance Store is a small company that has hired you to perform
some management advisory services. The following information pertains to
2017 operations.
Sales (6,000 microwave ovens) £6,000,000
Cost of goods sold 870,000
 Store manager's salary per year 192,000
Operating costs per year 305,000
Advertising and promotion per year 40,000
Commissions (4.1% of sales) 246,000
What are the estimated total costs if South Coast's store expects to sell 8,900 units
next year?
A: £3,567,950
B: £2,192,400
C: £4,104,950
D: £901,900
ANSWER: B
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32) For Heavy Manufacturing Company, labor-hours are 40,000 and wages
£144,000 at the high point of the relevant range, and labor-hours are 24,000 and
wages £96,000 at the low point of the relevant range. What is the slope
coefficient?
A: £3.75
B: £3.00
C: £3.60
D: £4.00
ANSWER: B
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33) The Connors Company has assembled the following data pertaining to certain
costs that cannot be easily identified as either fixed or variable. Connors
Company has heard about a method of measuring cost functions called the
high-low method and has decided to use it in this situation.
Cost Hours
£23,000 5,000
£26,000 6,450
£34,600 7,650
£42,000 10,000
£38,000 9,350
What is the estimated total cost at an operating level of 9,000 hours?
A: £34,200
B: £38,200
C: £41,400
D: £37,800
ANSWER: B
 -----------

34) Quantum Company uses the high-low method to estimate the cost function.
The information for 2017 is provided below:
Machine-hours Labor Costs
Highest observation of cost driver 1,000 £32,000
Lowest observation of cost driver 200 £16,000
What is the constant for the estimated cost equation?
A: £12,000
B: £16,000
C: £20,000
D: £32,000
ANSWER: A
-----------

35) Quantum Company uses the high-low method to estimate the cost function.
The information for 2017 is provided below:
Machine-hours Labor Costs
Highest observation of cost driver 900 £36,000
Lowest observation of cost driver 100 £14,000
What is the estimated total cost when 450 machine-hours are used?
A: £63,000
B: £32,000
C: £18,000
D: £23,625
ANSWER: D
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36) Taunton Company uses the high-low method to estimate its cost function. The
information for 2017 is provided below:
Machine-hours Costs
Highest observation of cost driver 3,000 £345,000
Lowest observation of cost driver 2,500 £315,000
What is the slope coefficient?
A: £115.00
B: £126.00
C: £60.00
D: £120.00
ANSWER: C
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37) For Heavy Manufacturing Company, labor-hours are 40,000 and wages
£184,000 at the high point of the relevant range, and labor-hours are 24,000
and wages £120,000 at the low point of the relevant range. What is the
constant?
A: £24,000
B: £64,000
C: £120,000
D: £184,000
ANSWER: A
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38) For Heavy Manufacturing Company, labor-hours are 48,000 and wages
£156,000 at the high point of the relevant range, and labor-hours are 32,000
and wages £112,000 at the low point of the relevant range. What is the
estimated total labor costs at Heavy Manufacturing Company when 11,400
labor-hours are used?
A: £38,190
B: £55,350
C: £39,900
D: £37,050
ANSWER: B
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39) A manufacturing company that produces a single product has provided the
following data concerning its most recent month of operations:
Selling Price £ 103
Units in beginning inventory 0
Units produced 1,700
Units sold 1,600
Units in ending inventory 100
Variable costs per unit:
Direct materials £46
Direct labor £14
Variable manufacturing overhead £4
Variable selling and administrative £9
Fixed costs:
Fixed manufacturing overhead £ 11,900
Fixed selling and administrative £ 22,400

What is the net operating income for the month under variable costing?
 A: £7,300
B: £14,400
C: £13,700
D: £700
ANSWER: C
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40) A manufacturing company that produces a single product has provided the
following data concerning its most recent month of operations:
Selling Price £ 103
Units in beginning inventory 0
Units produced 1,700
Units sold 1,400
Units in ending inventory 300
Variable costs per unit:
Direct materials £39
Direct labor £32
Variable manufacturing overhead £6
Variable selling and administrative £5
Fixed costs:
Fixed manufacturing overhead £ 6,800
Fixed selling and administrative £ 8,400

What is the net operating income for the month under absorption costing?
A: £14,200
B: (£8,900)
C: £1,200
D: £15,400
ANSWER: D
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41) Abbey Company, which has only one product, has provided the following data
concerning its most recent month of operations:-
Selling Price £ 129
Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200
Variable costs per unit:
Direct materials £32
 Direct labor £50
Variable manufacturing overhead £5
Variable selling and administrative £11
Fixed costs:
Fixed manufacturing overhead £ 88,200
Fixed selling and administrative £ 97,600
What is the unit product cost for the month under variable costing?
A: £87
B: £101
C: £112
D: £98
ANSWER: A
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42) Abbey Company, which has only one product, has provided the following data
concerning its most recent month of operations:-
Selling Price £ 129
Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200
Variable costs per unit:
Direct materials £32
Direct labor £50
Variable manufacturing overhead £5
Variable selling and administrative £11
Fixed costs:
Fixed manufacturing overhead £ 88,200
Fixed selling and administrative £ 97,600
What is the unit product cost for the month under absorption costing?
A: £101
B: £98
C: £87
D: £112
ANSWER: A
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43) Abbey Company, which has only one product, has provided the following data
concerning its most recent month of operations:-
Selling Price £ 129
 Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200
Variable costs per unit:
Direct materials £32
Direct labor £50
Variable manufacturing overhead £5
Variable selling and administrative £11
Fixed costs:
Fixed manufacturing overhead £ 88,200
Fixed selling and administrative £ 97,600
The total contribution margin for the month under the variable costing approach
is:-
A: £170,800
B: £256,200
C: £100,900
D: £189,100
ANSWER: D
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44) Abbey Company, which has only one product, has provided the following data
concerning its most recent month of operations:-
Selling Price £ 129
Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200
Variable costs per unit:
Direct materials £32
Direct labor £50
Variable manufacturing overhead £5
Variable selling and administrative £11
Fixed costs:
Fixed manufacturing overhead £ 88,200
Fixed selling and administrative £ 97,600
The total gross margin for the month under the absorption costing approach is:-
A: £189,100
B: £6,100
C: £170,800
 D: £191,000
ANSWER: C
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45) Abbey Company, which has only one product, has provided the following data
concerning its most recent month of operations:-
Selling Price £ 129
Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200
Variable costs per unit:
Direct materials £32
Direct labor £50
Variable manufacturing overhead £5
Variable selling and administrative £11
Fixed costs:
Fixed manufacturing overhead £ 88,200
Fixed selling and administrative £ 97,600
What is the total period cost for the month under the variable costing approach?
A: £252,900
B: £164,700
C: £88,200
D: £185,800
ANSWER: A
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46) Abbey Company, which has only one product, has provided the following data
concerning its most recent month of operations:-
Selling Price £ 129
Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200
Variable costs per unit:
Direct materials £32
Direct labor £50
Variable manufacturing overhead £5
Variable selling and administrative £11
Fixed costs:
 Fixed manufacturing overhead £ 88,200
Fixed selling and administrative £ 97,600
What is the total period cost for the month under the absorption costing approach?
A: £88,200
B: £252,900
C: £97,600
D: £164,700
ANSWER: D
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47) Abbey Company, which has only one product, has provided the following data
concerning its most recent month of operations:-
Selling Price £ 129
Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200
Variable costs per unit:
Direct materials £32
Direct labor £50
Variable manufacturing overhead £5
Variable selling and administrative £11
Fixed costs:
Fixed manufacturing overhead £ 88,200
Fixed selling and administrative £ 97,600
What is the net operating income for the month under variable costing?
A: £3,300
B: £2,800
C: (£14,100)
D: £6,100
ANSWER: A
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48) Abbey Company, which has only one product, has provided the following data
concerning its most recent month of operations:-
Selling Price £ 129
Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200
 Variable costs per unit:
Direct materials £32
Direct labor £50
Variable manufacturing overhead £5
Variable selling and administrative £11
Fixed costs:
Fixed manufacturing overhead £ 88,200
Fixed selling and administrative £ 97,600
What is the net operating income for the month under absorption costing?
A: £3,300
B: £2,800
C: (£14,100)
D: £6,100
ANSWER: D
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Happy new Year 2024

Good Luck