Part 1 Costing Systems

Question 1
Elaine's Fine Furniture has just started operations. Elaine's had the following job cost sheets for the
month of January

What was the balance in Elaine's Cost of Goods Sold account as of January 31?

A. $34,101
B. $5,889
C. $43,628
D. $37,739

Question 2
Larry S. owns Sizzle Company. The following information is available for Sizzle Company:

If Sizzle Company uses machine hours to calculate the predetermined overhead rate, how much
overhead was applied during the period (if necessary, round your answer to the nearest dollar)?

A. $613,333
B. $666,667
C. $735,000
D. $676,200

Question 3
Savior Corporation assembles backup tape drive systems for home microcomputers. For the first
 Part 1 Costing Systems

quarter, the budget for sales is 67,500 units. Savior will finish the fourth quarter of last year with an
inventory of 3,500 units, of which 200 are obsolete. The target ending inventory is 10 days of sales
(based upon 90 days in a quarter). What is the budgeted production for the first quarter?

A. 71,500 units.
B. 71,700 units.
C. 64,200 units.
D. 75,000 units.

Question 4
Elaine's Fine Furniture has just started operations. Elaine's had the following job cost sheets for the
month of January.

Assuming that the total costs listed on these cost sheets were all incurred in January, what was the
balance in Elaine's Work-in-Process Inventory account as of January 31?

A. $37,739
B. $34,101
C. $5,889
D. $77,729

Question 5
Baldwin Printing Company uses a job order costing system and applies overhead based on machine
hours. A total of 150,000 machine hours have been budgeted for the year. During the year, an order for
1,000 units was completed and incurred the following:

The accountant calculated the inventory cost of this order to be $4.30 per unit. The annual budgeted
overhead in dollars was:
 Part 1 Costing Systems

A. $600,000.
B. $270,000.
C. $660,000.
D. $645,000.

Question 6
Apex Corporation manufactures two types of widgets: Standard and Pro. For the past quarter, Apex's
overhead costs consist of $1.25 million in machining costs, with a driver of machine hours, and $1.45
million in assembly costs, with a driver of direct labor hours. Other data for the period include the
following:

What is the total overhead allocated to the Pro widgets under activity-based costing?

A. $1,080,000
B. $1,620,000
C. $1,670,000
D. $1,450,000

Question 7
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 total amount of overhead applied to Job TB0414?

A. $126
B. $135
C. $300
D. $261

Question 8
Inspections for All (IFA) is a company that provides home inspections for individuals looking into
purchasing a home. IFA has two portions of the inspection process—outside inspection and inside
inspection. The following data show the production and cost results for outside inspections for the
month of July:
 Part 1 Costing Systems

Costs of direct materials (paper, ink, etc.) are immaterial for IFA. Hence, all production costs are
conversion costs (labor and overhead).

Using the first in first out (FIFO) method of process costing, compute for July the cost of outside
inspections completed and transferred out to inside inspections, and compute the value of work-in-
process inspections at the end of the month.

A. Completed and transferred out: $94,576; Ending work-in-process inspections: $2,944

B. Completed and transferred out: $100,156; Ending work-in-process inspections: $2,944
C. Completed and transferred out: $100,106; Ending work-in-process inspections: $2,994
D. Completed and transferred out: $100,156; Ending work-in-process inspections: $3,680

Question 9
Select between job order and process costing for what is best suited to each of the products:

A. Job order costing for II and III; process costing for I, IV, and V.
B. Job order costing for I, IV, and V; process costing for II and III.
C. Job order costing for III and IV; process costing for I, II and V.
D. Job order costing for I, II and IV; process costing for III and V.

Question 10
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.
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Question 11
Wherry Furnishings uses job order costing. The company has a contract to deliver furniture to a hotel.
The hotel has 60 basic hotel rooms that each need two double beds and 15 suites that each need one
king-size bed. Each double bed has direct material costs of $200 and direct labor costs of $125. Each
king-size bed has direct material costs of $350 and direct labor costs of $175. For all beds, overhead was
50% of direct labor cost. Wherry started the project in January and by the end of the month had
completed 34 basic rooms and 8 suites. Neither Work-in-Process nor Finished Goods had a beginning
balance in January. What was Wherry's Finished Goods Inventory account balance on January 31?

A. $26,350
B. $31,250
C. $18,075
D. $13,175

Question 12

Young’s policy is that it maintains an ending finished goods inventory of 10% of the following month’s
sales. Furthermore, assume that Young’s policy is to maintain an ending direct materials inventory of
20% of the following month’s direct materials usage budget. Sales the previous December were 4,800
units. The firm generally ends each month by completing all units; therefore, there is no work-in-process
inventory at the beginning or end of any period.

Standard (budgeted) production costs associated with one unit are:

Using the information from Exhibit C, how many pounds of direct materials must be purchased in
February?

A. 15,615 pounds.
B. 15,600 pounds.
C. 15,630 pounds.
D. 15,687 pounds.
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Question 13
Turnbull Company produces two products, Beta and Delta. Overhead consists of the following:

$20,000 in setup costs with number of setups as the driver; $2,220,000 in machining costs with machine
hours as the driver; and $80,000 in packing costs with packing orders as the driver. Data for the current
year follow:

What is the total overhead allocated to Beta under a traditional allocation based on machine hours?

A. $473,000
B. $773,333
C. $1,392,000
D. $464,000

Question 14
A manufacturing company has begun work on a batch of units at the beginning of the current period
with no work in process at that point. The manufacturing process adds direct materials at the beginning
of the process and adds direct labor and factory overhead evenly throughout the process. If the units
are considered to be 60% complete in conversion costs at the end of the period, in which of the
following accounts are the costs held?

A. 60% of conversion costs are in factory overhead and direct materials costs are in finished goods
inventory.
B. 60% of conversion costs are in work-in-process inventory and direct materials costs are in
finished goods inventory.
C. Direct materials costs are in materials inventory and all conversion costs are in work-in-process
inventory.
D. All costs are in work-in-process inventory.

Question 15
The Assembly Department at Saint-Simon, Inc. started 6,000 units and completed 7,000 units. The
Beginning Work-in-Process was 3,000 units. What is the number of units in Ending Work-in-Process?

A. 3,000 units.
B. 2,000 units.
C. 1,000 units.
D. 0 units.

Question 16
Keystone Company applies overhead on the basis of machine hours. Given the following data, compute
the amount of overhead applied for the period.
 Part 1 Costing Systems

Given the above data, compute the amount of overhead applied for the period.

A. $2,212,500
B. $2,400,000
C. $2,288,136
D. $2,320,667

Question 17
A company that uses a process costing system inspects its goods at the 60% stage of completion. If the
firm's ending work-in-process inventory is 80% complete, how would the firm account for its normal and
abnormal spoilage?

A. Both normal and abnormal spoilage costs would be added to the cost of the good units
completed during the period.
B. Normal spoilage costs would be allocated between the cost of good units completed during the
period and the ending work-in-process inventory. In contrast, abnormal spoilage costs would be
written off as a loss.
C. Normal spoilage costs would be added to the cost of the good units completed during the
period; in contrast, abnormal spoilage costs would be written off as a loss.
D. Both normal and abnormal spoilage costs would be written off as an expense of the period.

Question 18
Bing Book Bindery has identified two activity cost pools: printing, with an activity driver of batches
processed, and binding, with an activity driver of direct labor hours. For the coming quarter, total
factory overhead of $140,000 is split such that 65% is allocated to printing and 35% is allocated to
binding. Bing makes two types of books: hard cover and soft cover. During the quarter, it expects to
produce 5,200 hard cover books and 12,000 soft cover books. Hard covers are produced in batch sizes of
100 and soft covers are produced in batch sizes of 300. A hard cover book requires 0.75 hours of direct
labor, while a soft cover book requires 0.25 hours. What is the overhead allocation to hard covers for
printing?

A. $59,150
B. $39,565
C. $27,696
D. $51,435

Question 19
Hardwood Floorings, Inc. has identified two activity cost pools: gluing, with an activity driver of batches
processed, and pressing, with an activity driver of direct labor hours. Total factory overhead of $250,000
is split between the two cost pools in the following proportion: 70% gluing and 30%pressing. Hardwood
produces two types of flooring: oak and maple. Last quarter, it produced 13,200 sheets of oak and
 Part 1 Costing Systems

25,000 sheets of maple. Oak is produced in batch sizes of 60, and maple is produced in batch sizes of 50.
A sheet of oak requires 1.5 hours of direct labor, and a sheet of maple requires 1.25 hours. What is the
overhead allocation to oak for gluing?

A. $122,500
B. $53,472
C. $121,528
D. $29,089

Question 20
Weiske Industries hires a cleaning company to clean its office building, factory, and warehouse. The
cleaning company charges one amount for cleaning all three areas. How will Weiske need to categorize
this cost?

A. Weiske will not be required to allocate the cost, and the entire cleaning amount will be
considered manufacturing overhead.
B. Weiske will not be required to allocate the cost, and the entire cleaning amount will be
considered a period cost.
C. Weiske will be required to allocate the cost, using relative square feet or some other rational
method. Cleaning for the office building and the warehouse will be considered a period cost,
and cleaning for the factory will be considered manufacturing overhead.
D. Weiske will be required to allocate the cost, using relative square feet or some other rational
method. Cleaning for the office building will be considered a period cost, and cleaning for the
factory and warehouse will be considered manufacturing overhead.

Question 21
Paper Company (PC) produces several different kinds of paper products for businesses across the
country. PC began the March period with 500 reams of paper in Work-in-Process, started 15,000 new
reams, and ended the period with 600 units still in process. PC deems it acceptable (normal) for as many
as 200 reams of paper to be spoiled in the production process during the month. However, PC had 400
reams of paper spoiled during the March production process, and. 14,500 reams of good paper were
transferred to Finished Goods. How are the costs treated that are associated with the 400 reams of
spoiled paper?

A. The costs associated with the 400 reams of paper that were spoiled will be transferred
immediately to a loss account and reported on the income statement.
B. The costs associated with the 200 reams of paper that are spoiled and considered normal costs
will be transferred immediately to a loss account and reported on the income statement. The
200 reams of paper that are spoiled and considered abnormal costs will be included with the
rest of the costs of goods manufactured that are transferred to the finished goods inventory
account.
C. The costs associated with the 400 reams of paper that were spoiled will be included with the
rest of the costs of goods manufactured that are transferred to the finished goods inventory
account.
D. The costs associated with the 200 reams of paper that are spoiled and considered abnormal
costs will be transferred immediately to a loss account and reported on the income statement.
The costs associated with the 200 reams of paper that are spoiled and considered normal will be
 Part 1 Costing Systems

included with the rest of the costs of goods manufactured that are transferred to the finished
goods inventory account.

Question 22
Dr. Durango uses job order costing in her dental practice. Some services, like root canals, involve
multiple visits, often over more than a month's time. At the end of May, Dr. Durango had three patients
with partially completed procedures. Patient A had incurred direct material costs of $250 and direct
labor costs of $300. Patient B had direct material costs of $150 and direct labor costs of$150. Patient C
had direct material costs of $300 and direct labor costs of $300. Dr. Durango uses a direct labor rate of
$100 per hour and applies overhead at the rate of $75 per direct labor hour. What was the balance in
the Work-in-Process Inventory account as of May 31?

A. $1,450.00
B. $2,200.00
C. $1,187.50
D. $2,012.50

Question 23
The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of
a product line by comparing revenues to the cost of goods sold. However, Barry White, the firm's new
accountant, wants to use an activity-based costing system that takes into consideration the cost of the
delivery person. Listed below are activity and cost information relating to two of Chocolate Baker's
major products.

Using activity-based costing, which one of the following statements is correct?

A. The cheesecakes are $75 more profitable.

B. The muffins are $2,000 more profitable.
C. The muffins have a higher profitability as a percentage of sales and, therefore, are more
advantageous.
D. The muffins are $1,925 more profitable.

Question 24
Pinnacle Industries’ Fabrication Department had the following data for September:
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Pinnacle adds materials at the beginning of the fabrication process, and, with respect to conversion
costs, the Beginning Work-in-Process is 40%, while the Ending Work-in-Process is 75% complete. Using
the FIFO method, what is the department's total number of equivalent units for conversion costs in
September?

A. 240,000 equivalent units.

B. 250,000 equivalent units.
C. 281,000 equivalent units.
D. 360,000 equivalent units

Question 25
Waller Co. uses a weighted-average process-costing system. Material B is added at two different points
in the production of shirts, 40% is added when the units are 20% completed, and the remaining 60% of
Material B is added when the units are 80% completed. At the end of the quarter, there are 22,000
shirts in process, all of which are 50% completed. With respect to Material B, the ending shirts in
process represent how many equivalent units?

A. 8,800 units.
B. 4,400 units.
C. 11,000 units.
D. 22,000 units.

Question 26
What factors should a service company consider when determining whether to use process costing or
job order costing?

A. Whether the services are provided continuously. If they are continuous, process costing is
appropriate; if they are not continuous, job order costing is appropriate.
B. Whether the services are provided independently of other services. If they are independent, job
order costing is appropriate; if they are not, process costing is appropriate.
C. Whether a service is provided or a good is manufactured. If a service is provided, job order
costing is appropriate; if a good is manufactured, process costing is appropriate.
D. Whether the services provided require similar amounts of materials, labor, and overhead. If they
require similar inputs, process costing is appropriate; if the inputs are not similar, job order
costing is appropriate.

Question 27
TopCo manufactures two types of gadgets: Regular and Deluxe. The firm's overhead consists of the
following: $375,000 in setup costs with number of setups as the driver; $1,500,000 in machining costs
with machine hours as the driver; and $750,000 in packing costs with packing orders as the driver. Data
for the current period follow:
 Part 1 Costing Systems

What is the total overhead allocated to Regular gadgets under a traditional allocation based on machine
hours?

A. $875,000
B. $1,050,000
C. $825,000
D. $1,750,000

Question 28
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 direct labor?

A. 40 hours direct labor.

B. 35 hours direct labor.
C. 33 hours direct labor.
D. 7 hours direct labor.

Question 29
This month, the Roasting Department of Java Coffee Company completed and transferred out 75,000
one-pound bags of coffee. The department also had 25,000 units that were 80% complete with respect
to conversion costs and no Beginning Work-in-Process. Using the FIFO method, how many equivalent
units of production for conversion costs does the department have for the month?

A. 70,000
B. 95,000
C. 100,000
D. 80,000

Question 30
Hardwood Floorings, Inc. has identified two activity cost pools: gluing, with an activity driver of batches
processed, and pressing, with an activity driver of direct labor hours. Total factory overhead of $250,000
is split between the two cost pools in the following proportion: 70% gluing and 30%pressing. Hardwood
produces two types of flooring: oak and maple. Last quarter, it produced 13,200 sheets of oak and
25,000 sheets of maple. Oak is produced in batch sizes of 60, and maple is produced in batch sizes of 50.
A sheet of oak requires 1.5 hours of direct labor, and a sheet of maple requires 1.25 hours. What is the
overhead allocation to oak for pressing?

A. $121,528
B. $45,911
 Part 1 Costing Systems

C. $22,500
D. $29,089

Question 31
Ehsani Enterprises is a manufacturing company and has calculated depreciation on their factory
equipment, factory building, and office building. What is the difference between these types of
depreciation?

A. Factory equipment depreciation is manufacturing overhead, whereas factory building and office
building depreciation are period costs.
B. Factory equipment and factory building depreciation are period costs, whereas office building
depreciation is manufacturing overhead.
C. Factory equipment and factory building depreciation are manufacturing overhead, whereas
office building depreciation is a period cost.
D. Factory equipment depreciation is a period cost, whereas factory building and office building
depreciation are manufacturing overhead.

Question 32
Inspections for All (IFA) is a company that provides thorough home inspections for individuals looking
into purchasing a home. IFA has two portions of the inspection process—outside inspection and inside
inspection. The following data show the production and cost results for outside inspections for the
month of July:

Costs of direct materials (paper, ink, etc.) are immaterial for IFA. Hence, all production costs are
conversion costs (labor and overhead).

Using the weighted-average (W/A) method for process costing, compute for July the cost of outside
inspections completed and transferred out to inside inspections, and compute the value of work-in-
process inspections at the end of the month.

A. Completed and transferred out: $100,106; Ending work-in-process inspections: $2,994

B. Completed and transferred out: $100,106; Ending work-in-process inspections: $3,742
C. Completed and transferred out: $94,688; Ending work-in-process inspections: $2,832
D. Completed and transferred out: $100,156; Ending work-in-process inspections: $2,944

Question 33
Ed was working on a custom-made workbench for a customer. The job, TB0414, was started in
 Part 1 Costing Systems

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 34
A wig company using process costing has a weaving department and a cutting and styling department
for the same product. When weaving is complete, all weaving department costs should:

A. be transferred to finished goods inventory.

B. remain in the weaving department's WIP inventory account until all departments finish the wig
and then debited to the company's transferred-in costs account.
C. be transferred to the cutting and styling department's work-in-process (WIP) inventory account.
D. remain in the company's WIP inventory account until the good is complete and then be
transferred to finished goods inventory.

Question 35
In the month of November, Terpak Industries had the following costs:

What are Terpak's total period costs for the month of November?

A. $59,340
B. $26,383
C. $85,723
D. $36,340

Question 36
Life-cycle costing:

A. includes only manufacturing costs incurred over the life of the product.
B. is often used in financial and income tax reporting.
C. includes only manufacturing cost, selling expense, and distribution expense.
D. is sometimes used as a basis for cost planning and product pricing.
 Part 1 Costing Systems

Question 37
In a weighted-average process cost system, unit costs are determined using a:

A. Denominator of equivalent units in Beginning Work-in-Process + Units in Ending Work-in-

Process.
B. Denominator of units completed + Equivalent units in Ending Work-in-Process.
C. Numerator of costs added during the period.
D. Denominator of units completed + Equivalent units in Beginning Work-in-Process.

Question 38
Which of the following is not an advantage of using activity-based cost drivers?

A. Costs are more reliably determined.

B. Implementation is relatively inexpensive compared to other methods.
C. Detailed breakdown of activities helps firms remove non-value-added activities.
D. Cost deviations from expectations are highlighted.

Question 39
Sutton Enterprises makes gadgets using a two-step process that involves machining first and assembly
second. Sutton adds all direct materials at the beginning of the production process. Conversion occurs
uniformly throughout the process. During the period, the Assembly Department completed 10,200
gadgets and transferred them out. Of the 10,200 gadgets completed, 2,000 were 70% complete at the
beginning of the period. In addition, Sutton had 2,600 units in process that were 65% complete at the
end of the period. Using the FIFO method of process costing, what are the equivalent units of
production for conversion costs in Assembly?

A. 10,490 gadgets
B. 9,710 gadgets
C. 12,800 gadgets
D. 9,890 gadgets

Question 40
A company uses job order costing and begins the period with no finished goods inventory, but with a
beginning work-in-process (WIP) of these jobs:

During the period, a new job is started (Job #18) and these costs are incurred:
 Part 1 Costing Systems

Jobs #15 and #16 are completed and sold during the period. What is ending WIP inventory?

A. $90,000.
B. $98,000.
C. $12,000.
D. $110,000.

Question 41
A characteristic of products that use a process cost accounting system and are mass produced in a
continuous fashion is:

A. They are grouped in small batches.

B. They are custom produced at the time an order is received.
C. The accounting system assumes the products require identical amounts of materials, labor, and
overhead.
D. Their costs are accumulated on job cost sheets.

Question 42
Which of these are a benefit of using activity-based costing (ABC)?

A. ABC reduces distortions caused by traditional methods that may make one product seem more
or less profitable than it really is.
B. ABC uses traditional rules for managers, so acceptance is usually automatic.
C. ABC reports conform to GAAP and save the expense of needing to create more than one format.
D. ABC simplifies the amount of information supplied to managers so that only relevant
information is supplied.

Question 43
Atmel Inc. manufactures and sells two products. Data with regard to these products are given below.

Total budgeted machine hours are 100,000. The budgeted overhead costs are shown below.
 Part 1 Costing Systems

Using activity-based costing, the per unit overhead cost allocation of receiving costs for product A is:

A. $10.75.
B. $8.13.
C. $3.75.
D. $10.71.

Question 44
Sip Healthy Company manufactures juicers and blenders. Management has compiled the following
information:

Production costs are as follows:

What is the cost per driver unit for the cost of equipment setup?

A. $8.40 per machine hour

B. $6.80 per direct labor hour
C. $6.40 per batch
D. $37.11 per unit

Question 45
When considering normal and abnormal spoilage, which one of the following is theoretically the best
accounting method for spoilage in a process-costing system?
 Part 1 Costing Systems

A. Both normal and abnormal spoilage costs should be charged to good units.
B. Normal spoilage costs should be charged to a separate expense account and abnormal spoilage
cost should be charged to good units.
C. Both normal and abnormal spoilage cost should be charged to a separate expense account.
D. Normal spoilage cost should be charged to good units and abnormal spoilage cost should be
charged to a separate expense account.

Question 46
Loyal Co. produces three types of men's undershirts: T-shirts, V-neck shirts, and athletic shirts. In the
Folding and Packaging Department, operations costing is used to apply costs to individual units, based
on the standard time allowed to fold and package each type of undershirt. The standard time to fold and
package each type of undershirt is as follows.

During the month of April, Loyal produced and sold 50,000 T-shirts, 30,000 V-neck shirts, and 20,000
athletic shirts. If costs in the Folding and Packaging Department were $78,200 during April, how much
folding and packaging cost should be applied to each T-shirt?

A. $0.0217.
B. $0.7820.
C. $0.8689.
D. $1.5640.

Question 47
Smile Labs develops 35mm film using a four-step process that moves progressively through four
departments. The company specializes in overnight service and has the largest drug store chain as its
primary customer. Currently, direct labor, direct materials, and overhead are accumulated by
department. The cost accumulation system that best describes the system Smile Labs is using is:

A. operation costing.
B. job order costing.
C. activity-based costing.
D. process costing.

Question 48
Gable Industries provided the following information for Job 387 from its accounting records for the most
recent year:
 Part 1 Costing Systems

A. $100,800
B. $88,800
C. $64,800
D. $105,600

Question 49
The following information was gathered for the current period of manufacturing production for a firm:

There were 100 units in beginning work-in-process (WIP), which were 30% complete in direct materials
(DM) and 40% complete in conversion costs (CC). During the period 2,000 units were started in
production and 1,900 were completed. Ending WIP inventory was 70% complete in DM and
60%complete in CC. If the firm uses the weighted-average inventory method, what are equivalent units
for the period?

A. DM: 2,040 units; CC: 2,020 units.

B. DM: 2,000 units; CC: 2,000 units.
C. DM: 2,140 units; CC: 2,120 units.
D. DM: 1,900 units; CC: 1,900 units.

Question 50
A promotional department for a retailer uses job order costing. At the beginning of the period Job #154
had a work-in-process (WIP) inventory balance of $5,000. During the current period, Job #154 required
$4,000 in direct materials and $6,000 in direct labor. The department has an overhead cost pool of
$80,000 for all jobs. (The pool uses labor-hours as a cost-allocation base.) All jobs in the department
consumed 10,000 labor-hours. If Job #154 used 1,000 labor-hours and sold for $34,000, what is its gross
profit margin?

A. $16,000.
B. $11,000.
C. $19,000.
D. $23,000.

Question 51
San Jose Inc. uses a weighted-average process costing system. All materials are introduced at the start of
manufacturing, and conversion cost is incurred evenly throughout production. The company started
70,000 units during May and had the following work-in-process inventories at the beginning and end of
the month.
 Part 1 Costing Systems

Assuming no spoilage or defective units, the total equivalent units used to assign costs for May are:

A. Materials = 100,000, Conversion Cost = 82,000.

B. Materials = 70,000, Conversion Cost = 70,000.
C. Materials = 82,000, Conversion Cost = 82,000.
D. Materials = 100,000, Conversion Cost = 70,000.

Question 52
In life-cycle costing, which of the these is the primary method of lowering downstream costs?

A. Improving supplier relationships.

B. Improving product designs in the downstream phase.
C. Improving the upstream and manufacturing cost phases.
D. Proactive management during the downstream phase such as streamlining manufacturing costs.

Question 53
Hannon Retailing Company prices its products by adding 30% to its cost. Hannon anticipates sales
of$715,000 in July, $728,000 in August, and $624,000 in September. Hannon's policy is to have on hand
enough inventory at the end of the month to cover 25% of the next month's sales. What will be the cost
of the inventory that Hannon should budget for purchase in August?

A. $624,000.
B. $702,000.
C. $540,000.
D. $580,000.

Question 54
A sporting goods manufacturer buys wood as a direct material for baseball bats. The Forming
Department processes the baseball bats, and the bats are then transferred to the Finishing Department
where a sealant is applied. The Forming Department began manufacturing 10,000

“Casey Sluggers” during the month of May. There was no beginning inventory. Costs for the Forming
Department for the month of May were:

A total of 8,000 bats were completed and transferred to the Finishing Department; the remaining 2,000
bats were still in the forming process at the end of the month. All of the Forming Department's direct
materials were placed in process but, on average, only 25% of the conversion cost was applied to the
ending work-in-process inventory.

The cost of the work-in-process inventory in the Forming Department at the end of May is:

A. $0.
B. $1,000.
C. $10,000.
 Part 1 Costing Systems

D. $7,600.

Question 55
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 56
MegaMouth Inc. produces two megaphone models, the Boomer and the Blaster. The company makes
15,000 units of the Boomer model and 16,400 of the Blaster model each year. MegaMouth inspects 1
Boomer for every 100 produced and 1 Blaster for every 80 produced. The company expects $11,360 in
total inspecting costs for the coming year. What amount of the inspecting costs should be allocated to
the Blaster model under activity-based costing?

A. $5,680
B. $5,933
C. $6,560
D. $4,800

Question 57
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
total amount of overhead applied to Job BCB101?

A. $12,000
B. $3,000
C. $15,000
D. $18,750

Question 58
Watson Company applies overhead on the basis of machine hours.
 Part 1 Costing Systems

Given the above data, compute the amount of overhead applied for the period.

A. $1,525,424
B. $1,575,000
C. $1,500,000
D. $1,475,000

Question 59
Maker Distributors has a policy of maintaining inventory at 15% of the next month's forecasted sales.
The cost of Maker's merchandise averages 60% of the selling price. The inventory balance as of May 31
is $63,000, and the forecasted dollar sales for the last seven months of the year are as follows:

What is the budgeted dollar amount of Maker's purchases for July?

A. $360,000.
B. $355,500.
C. $418,500.
D. $364,500.

Question 60
Kimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining
industry. The following information pertains to operations for the month of May.
 Part 1 Costing Systems

A. $1.86.
B. $6.24.
C. $6.20.
D. $5.83.