Strayer ACC 499 Final Cost MCQs

1. Urban Company manufacturers tables.  If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $17,000 and $21,000, what was amount of raw material was purchased? (Points: 4)
        $76,000
        $118,000
        $84,000
        $101,000

2. Gary Corporation has developed the following flexible budget formula for monthly overhead:
For output of less than 200,000 units: $36,600 + $.80(units)
For output of 200,000 units or more: $43,000 + $.80(units)

How much overhead should Gary expect if the firm plans to produce 200,000 units? (Points: 4)
        $52,600
        $59,000
        $196,600
        $203,000

3. At its present level of operations, a small manufacturing firm has total variable costs equal to 75 percent of sales and total fixed costs equal to 15 percent of sales. Based on variable costing, if sales change by $1.00, income will change by _______. (Points: 4)
        $0.25
        $0.10
        $0.75
        can't be determined from the information given

4. Long Company transferred 5,500 units to Finished Goods Inventory during September. On September 1, the company had 300 units on hand (40 percent complete as to both material and conversion costs). On June 30, the company had 800 units (10 percent complete as to material and 20 percent complete as to conversion costs). The number of units started and completed during September was _______. (Points: 4)
        5,200
        5,380
        5,500
        6,300

5. Green Company started 9,000 units in February. The company transferred out 7,000 finished units and ended the period with 3,500 units that were 40 percent complete as to both material and conversion costs. Beginning Work in Process Inventory units were _______. (Points: 4)
        500
        600
        1,500
        2,000

6. Dixie Company uses a weighted average process costing system. Material is added at the start of production. Dixie Company started 13,000 units into production and had 4,500 units in process at the start of the period that were 60 percent complete as to conversion costs. If Dixie transferred out 11,750 units, how many units were in ending Work in Process Inventory? (Points: 4)
        1,250
        3,000
        3,500
        5,750

7. Actual fixed overhead is $33,300 (12,000 machine hours) and fixed overhead was estimated at $34,000 when the predetermined rate of $3.00 per machine hour was set. If 11,500 standard hours were allowed for actual production, applied fixed overhead is _______. (Points: 4)
        $33,300
        $34,000
        $34,500
        not determinable without knowing the actual number of units produced

8. One unit requires 2 direct labor hours to produce. Standard variable overhead per unit is $1.25 and standard fixed overhead per unit is $1.75. If 330 units were produced this month, what total amount of overhead is applied to the units produced? (Points: 4)
        $990
        $1,980
        $660
        cannot be determined without knowing the actual hours worked

9. Western Company uses a standard cost accounting system. The following overhead costs and production data are available for August:
Standard fixed OH rate per DLH $1
Standard variable OH rate per DLH $4
Budgeted monthly DLHs 40,000
Actual DLHs worked 39,500
Standard DLHs allowed for actual production 39,000
Overall OH variance-favorable $2,000

The total applied manufacturing overhead for August should be _______. (Points: 4)
        $195,000
        $197,000
        $197,500
        $199,500

10. Precious Jewels Corporation produces quality jewelry items for various retailers. For the coming year, it has estimated it will consume 500 ounces of gold. Its carrying costs for a year are $2 per ounce. No safety stock is maintained. If the EOQ is 100 ounces, what is the cost per order? (Points: 4)
        $40
        $20
        $5
        $25

11. Which of the following is not a valid method for determining product cost? (Points: 4)
        arbitrary assignment
        direct measurement
        systematic allocation
        cost-benefit measurement

12. The process of ____ causes the need for cost accounting. (Points: 4)
        conversion
        sales
        controlling
        allocating

13. Which of the following topics is of more concern to management accounting than to cost accounting? (Points: 4)
        generally accepted accounting principles
        inventory valuation
        cost of goods sold valuation
        impact of economic conditions on company operations

14. Cost of Goods Sold is an ______. (Points: 4)
        unexpired product cost
        expired product cost
        unexpired period cost
        expired period cost

15. Which of the following is not a reason to use predetermined overhead rates? (Points: 4)
        to overcome the problems of assigning overhead to diverse types of products
        to compensate for fluctuations in monthly overhead costs
        to provide a means for assigning overhead during the period rather than at the end of the period
        to smooth out the amount of overhead cost assigned to products when monthly production activity differs

16. If there is no "a" value in a linear cost equation, this is an indication that the cost is ______. (Points: 4)
        fixed
        mixed
        variable
        either fixed or mixed

17. An outlier is _______. (Points: 4)
        something that happens outside the organization that does not affect production
        always used in analyzing a mixed cost
        something that happens inside the organization that does not affect production
        never used in analyzing a mixed cost

18. If a company used two overhead accounts (actual overhead and applied overhead), the one that would receive the most debits would be _______. (Points: 4)
        actual overhead
        applied overhead
        both would receive an equal number of debits
        impossible to determine without additional information

19. An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a _______. (Points: 4)
        mixed cost
        predictor
        direct cost
        cost driver

20. In a job order costing system, _______. (Points: 4)
        standards cannot be used
        an average cost per unit within a job cannot be computed
        costs are accumulated by departments and averaged among all jobs
        overhead is typically assigned to jobs on the basis of some cost driver

21. What is the best cost accumulation procedure to use when many batches, each differing as to product specifications, are produced? (Points: 4)
        job order
        process
        actual
        standard

22. Which of the following could not be used in job order costing? (Points: 4)
        standards
        an average cost per unit for all jobs
        normal costing
        overhead allocation based on the job's direct labor hours

23. Which of the following statements about job order cost sheets is true? (Points: 4)
        All job order cost sheets serve as the general ledger control account for Work in Process Inventory.
        Job order cost sheets can serve as subsidiary ledger information for both Work in Process Inventory and Finished Goods Inventory.
        If material requisition forms are used, job order cost sheets do not need to be maintained.
        Job order cost sheets show costs for direct material and direct labor, but not for manufacturing overhead since it is an applied amount.

24. The primary accounting document in a job order costing system is a(n) _______. (Points: 4)
        bill of materials
        job order cost sheet
        employee time sheet
        materials requisition

25. The cost sheets for incomplete jobs at the end of the period comprise the subsidiary ledger for _______. (Points: 4)
        Finished Goods Inventory
        Raw Material Inventory
        Work in Process Inventory
        Supplies Inventory

26. Which is the best cost accumulation procedure to use for continuous mass production of like units? (Points: 4)
        actual
        standard
        job order
        process

27. The primary difference between the FIFO and weighted average methods of process costing is ______. (Points: 4)
        in the treatment of beginning Work in Process Inventory
        in the treatment of current period production costs
        in the treatment of spoiled units
        none of the above

28. When standard costs are used in process costing, _______. (Points: 4)
        variances can be measured during the production period
        total costs rather than current production and current costs are used
        process costing calculations are made simpler
        the weighted average method of calculating EUPs makes computing transferred-out costs easier

29. A continuous loss _______. (Points: 4)
        occurs unevenly throughout a process
        never occurs during the production process
        always occurs at the same place in a production process
        occurs evenly throughout the production process

30. A primary purpose of using a standard cost system is _______. (Points: 4)
        to make things easier for managers in the production facility
        to provide a distinct measure of cost control
        to minimize the cost per unit of production
        b and c are correct

31. In a standard cost system, Work in Process Inventory is ordinarily debited with _______. (Points: 4)
        actual costs of material and labor and a predetermined overhead cost for overhead
        standard costs based on the level of input activity (such as direct labor hours worked)
        standard costs based on production output
        actual costs of material, labor, and overhead

32. A bill of material does not include _______. (Points: 4)
        quantity of component inputs
        price of component inputs
        quality of component inputs
        type of product output

33. When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a _______. (Points: 4)
        combined price-quantity variance
        price variance
        quantity variance
        mix variance

34. A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if _______. (Points: 4)
        the mix of workers used in the production process was more experienced than the normal mix
        the mix of workers used in the production process was less experienced than the normal mix
        workers from another part of the plant were used due to an extra heavy production schedule
        the purchasing agent acquired very high quality material that resulted in less spoilage

35. Joint costs are allocated to joint products to _______. (Points: 4)
        obtain a cost per unit for financial statement purposes
        provide accurate management information on production costs of each type of product
        compute variances from expected costs for each joint product
        allow the use of high-low analysis by the company

36. Joint cost allocation is useful for ______. (Points: 4)
        decision making
        product costing
        control
        evaluating managers' performance

37. Which of the following components of production are allocable as joint costs when a single manufacturing process produces several salable products? (Points: 4)
        direct material, direct labor, and overhead
        direct material and direct labor only
        direct labor and overhead only
        overhead and direct material only

38. By-products are ______. (Points: 4)
        allocated a portion of joint production cost
        not sufficient alone, in terms of sales value, for management to justify undertaking the joint process
        also known as scrap
        the primary reason management undertook the production process

39. Which of the following statements is true regarding by-products or scrap? (Points: 4)
        Process costing is the only method that should result in by-products or scrap
        Job order costing systems will never have by-products or scrap
        Job order costing systems may have instances where by-products or scrap result from the production process
        Process costing will never have by-products or scrap from the production process

40. Which of the following is a false statement about scrap and by-products? (Points: 4)
        Both by-products and scrap are salable
        A by-product has a higher sales value than does scrap
        By-products and scrap are the primary reason that management undertakes the joint process
        Both scrap and by-products are incidental outputs to the joint process

41. The method of pricing by-products/scrap where no value is assigned to these items until they are sold is known as the _______. (Points: 4)
        net realizable value at split-off point method
        sales value at split-off method
        realized value approach
        approximated net realizable value at split-off method

42. According to CVP analysis, a company could never incur a loss that exceeded its total ______. (Points: 4)
        variable costs
        fixed costs
        costs
        contribution margin

43. Cost-volume-profit analysis is a technique available to management to understand better the interrelationships of several factors that affect a firm's profit. As with many such techniques, the accountant oversimplifies the real world by making assumptions. Which of the following is not a major assumption underlying CVP analysis? (Points: 4)
        All costs incurred by a firm can be separated into their fixed and variable components.
        The product selling price per unit is constant at all volume levels.
        Operating efficiency and employee productivity are constant at all volume levels.
        For multi-product situations, the sales mix can vary at all volume levels.

44. In CVP analysis, linear functions are assumed for _______. (Points: 4)
        contribution margin per unit
        fixed cost per unit
        total costs per unit
        all of the above

45. At the break-even point, fixed costs are always _______. (Points: 4)
        less than the contribution margin
        equal to the contribution margin
        more than the contribution margin
        more than the variable cost

46. A firm's break-even point in dollars can be found in one calculation using which of the following formulas? (Points: 4)
        FC/CM per unit
        VC/CM
        FC/CM ratio
        VC/CM ratio

47. Most ____ are relevant to decisions to acquire capacity, but not to short-run decisions involving the use of that capacity. (Points: 4)
        sunk costs
        incremental costs
        fixed costs
        prime costs

48. The potential rental value of space used for production activities ______. (Points: 4)
        is a variable cost of production
        represents an opportunity cost of production
        is an unavoidable cost
        is a sunk cost of production

49. Which of the following qualitative factors favors the buy choice in a make or buy decision for a part? (Points: 4)
        maintaining a long-term relationship with suppliers
        quality control is critical
        utilization of idle capacity
        part is critical to product

50. The ____ prohibits companies from pricing products at different amounts unless these differences reflect differences in the cost to manufacture, sell, or distribute the products. (Points: 4)
        Internal Revenue Service
        Governmental Accounting Office
        Sherman Antitrust Act
        Robinson-Patman Act

51. Measuring the firm's performance against established objectives is part of which of the following functions? (Points: 4)
        Planning
        Controlling
        Organizing
        Staffing

52. External factors that cause the achievement of company goals are the ______. (Points: 4)
        annual budget
        industry price and cost structure
        talents possessed by its managers
        board of directors

53. Which of the following statements is true? (Points: 4)
        All organizations have the same set of budgets.
        All organizations are required to budget.
        Budgets are a quantitative expression of an organization's goals and objectives.
        Budgets should never be used to evaluate performance.

54. The master budget is a static budget because it _______. (Points: 4)
        is geared to only one level of production and sales
        never changes from one year to the next
        covers a preset period of time
        always contains the same operating and financial budgets.

55. The master budget usually includes _______. (Points: 4)
        an operating budget
        a capital budget
        pro forma financial statements
        all of the above

56. The material purchases budget tells a manager all of the following except the _______. (Points: 4)
        quantity of material to be purchased each period
        quantity of material to be consumed each period
        cost of material to be purchased each period
        cash payment for material each period

57. Of the following budgets, which one is least likely to be determined by the dictates of top management? (Points: 4)
        sales
        material usage
        revenues
        general and administrative

58. A purchases budget is _______. (Points: 4)
        not affected by the firm's policy of granting credit to customers
        the same thing as a production budget
        needed only if a firm does not pay for its merchandise in the same period as it is purchased
        affected by a firm's inventory policy only if the firm purchases on credit

59. Depreciation on the production equipment would appear in which of the following budgets? (Points: 4)
        cash budget
        production budget
        selling and administrative expense budget
        manufacturing overhead budget

60. Reducing inventory to the lowest possible levels is a major focus of ______. (Points: 4)
        JIT
        push inventory systems
        EOQ
        ABC

61. When JIT is implemented, which of the following changes in the accounting system would not be expected? (Points: 4)
        fewer cost allocations
        elimination of standard costs
        combining labor and overhead into one product cost category
        combing raw material and materials in work-in-process into one product cost category

62. The JIT philosophy does not focus on _______. (Points: 4)
        standardizing parts used in products
        eliminating waste in the production process
        finding the absolute lowest price for purchased parts
        improving quality of output

63. With JIT manufacturing, which of the following costs would be considered a direct product cost? (Points: 4)
        insurance on the plant
        repair parts for machinery
        janitors' salaries
        salary of the plant supervisor

64. Which of the following statements is not true? (Points: 4)
        JIT manufacturing strives for zero inventories.
        JIT manufacturing strives for zero defects.
        JIT manufacturing uses manufacturing cells.
        JIT manufacturing utilizes long lead time and few deliveries.

65. The JIT environment has caused a reassessment of product costing techniques. Which of the following statements is true with respect to this reassessment? (Points: 4)
        Traditional cost allocations based on direct labor are being questioned and criticized.
        The federal government, through the SEC, is responsible for the reassessment.
        The reassessment is caused by the replacement of machine hours with labor hours.
        None of the above is true.

66. Which of the following areas offers an opportunity to eliminate waste? (Points: 4)
        raw material and labor
        space and production time
        recordkeeping and working capital
        all of the above

67. Using a single performance evaluation criterion for an investment center ______. (Points: 4)
        is most effective because a manager can concentrate on a single goal
        can result in manipulation of the performance measure
        allows multinational investment centers' performances to be equitably compared
        is only appropriate if the criterion is non-monetary

68. Division A's investment in a new project will raise the overall organization's return on investment if _______. (Points: 4)
        the return on investment on the new project exceeds the target return of the overall organization
        the return on investment on the new project exceeds the return on investment of Division A
        the return on investment on the new project exceeds the overall organization's return on investment
        Division A's return on investment exceeds the return on investment of the overall organization

69. A primary purpose of a balanced scorecard is to give _______. (Points: 4)
        managers a way to judge past performance
        stockholders a way to judge current performance
        managers a way to forecast future performance
        stockholders a way to tie strategy to profitability

70. In a balanced scorecard, measurements should be directly linked to _______. (Points: 4)
        organizational strategy and values
        the cost management system
        current organizational profitability
        activity-based management concepts