Copyright© 2017, School of Accountancy, Arizona State University
True/False
Indicate whether the statement is true or false.
1. Costs can be either direct or indirect, depending upon the cost object.
2. Advertising is a product cost as long as it promotes specific products.
3. If the finished goods inventory decreases between the beginning and the end of a period, then the cost of goods
manufactured for the period is larger than the cost of goods sold
4. Predetermined overhead rates are based on actual cost and activity data.
5. In activity-based costing, a separate activity rate (i.e., predetermined overhead rate) is computed for each activity
cost pool by dividing the estimated overhead cost in the activity cost pool by the total expected activity for the
activity cost pool.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
6. Ethics deals with the moral quality, fitness, or propriety of a course of action that may injure or benefit people. I
can make an ethical decision while taking the exam by:
a.
Relying upon my own efforts in completing this exam
b.
Using only approved resources (i.e. calculator vs cell phones) while taking this exam
c.
Refraining from looking at my neighbor’s exam for answers
d.
All of the above
7. Which of the following statements correctly distinguishes between financial and managerial accounting?
a.
Managerial accounting uses both financial and non-financial measures of performance
b.
Financial accounting is oriented toward the future
c.
Financial accounting is primarily concerned with providing information for internal users
d.
Financial accounting is oriented toward the planning and control aspects of management.
e.
Managerial accounting focuses on the whole organization
8. Product costs differ from period expenses because
a.
period expenses are not considered part of operating expenses for a manufacturing
company
b.
period expenses reduce reported income whereas product costs do not
c.
product costs may appear on the balance sheet as assets
d.
product costs are expenses for manufacturing companies and period expenses are expenses
for service organizations.
ACC241 Review Questions-Exam One
Copyright© 2017, School of Accountancy, Arizona State University
9. Which of the following is not a characteristic of job-order costing?
a.
Wide variety of distinct products
b.
Unit cost is computed by dividing process costs of the period by the units produced in the
period
c.
Unit cost computed by dividing total job costs by units produced on that job
d.
Costs accumulated by job
e.
Typically, the cost of one job is different from that of another job
10. Sunnybrook Orange Groves processes a variety of fresh juices. The company has the following expenses for July:
Depreciation expense on bottling machines
$ 63,000
Glass juice bottles
$ 54,000
Commissions for salespeople
$ 27,000
Salaries of nutrition researchers
$ 89,000
Costs of maintaining website used for customer orders
$ 4,000
Wages of factory workers
$ 75,000
Freshness seals/caps for juice bottles
$ 3,000
Reconfiguring the factory layout
$102,000
Customer help line
$ 2,000
Costs of refrigerated trucks used to deliver juice
$ 17,000
What is the total cost for the production category of the value chain?
a.
$436,000
b.
$ 54,000
c.
$195,000
d.
$293,000
11. Products and their costs flow through a production facility in the following order:
a.
Finished goods, work-in-process, cost of goods sold
b.
Raw materials, work-in-process, finished goods, cost of goods sold
c.
Work-in-process, raw materials, cost of goods sold, finished goods
d.
Raw materials, finished goods, work-in-process, cost of goods sold
Copyright© 2017, School of Accountancy, Arizona State University
12. The following is selected financial data from Nick Manufacturing for the most recent year.
Ending raw materials inventory
$ 19,000
Ending work in process inventory
$ 42,000
Ending finished goods inventory
$ 54,100
Amount of underallocated (underapplied)
manufacturing overhead
$ 3,100
Cost of goods sold for year
$ 81,000
Cost of raw materials purchased during year
$ 45,300
Cost of direct materials requisitioned during year
$ 41,700
Cost of indirect materials requisitioned during
year
$ 7,100
Cost of goods completed during year
$ 110,000
Manufacturing overhead allocated
$ 60,000
Manufacturing overhead % of direct labor cost
125%
What is the beginning finished goods inventory?
a.
$135,100
b.
$ 75,100
c.
$ 25,100
d.
$ 6,100
13. Blanca Corp has the following information:
Additional information for the year is as follows:
Actual overhead $85,000
Compute the unadjusted cost of goods sold. (Blanca uses a normal costing system)
a.
$133,000
b.
$242,000
c.
$252,000
d.
$255,000
Copyright© 2017, School of Accountancy, Arizona State University
14. James Company's costs for the month of August were as follows: direct materials, $27,000; direct labor,
$34,000; selling, $14,000; administrative, $12,000; and manufacturing overhead, $44,000. The beginning
work in process inventory was $16,000 and the ending work in process inventory was $9,000. What was
the cost of goods manufactured for the month?
a.
$105,000
b.
$132,000
c.
$138,000
d.
$112,000
15. Last month Dallas Manufacturing Company had the following operating results:
What was the cost of goods manufactured for the month?
a.
$350,000
b.
$385,000
c.
$377,000
d.
$323,000
16. The actual manufacturing overhead incurred at Jeffry Corporation during January was $73,000, while the
manufacturing overhead applied to Work in Process was $78,000. The company's Cost of Goods Sold
was $349,000 prior to closing out its Manufacturing Overhead account. The company closes out its
Manufacturing Overhead account to Cost of Goods Sold. Which of the following statements is true?
a.
Manufacturing overhead was overapplied by $5,000; Cost of Goods Sold after
closing out the Manufacturing Overhead account is $354,000
b.
Manufacturing overhead was underapplied by $5,000; Cost of Goods Sold after
closing out the Manufacturing Overhead account is $344,000
c.
Manufacturing overhead was underapplied by $5,000; Cost of Goods Sold after
closing out the Manufacturing Overhead account is $354,000
d.
Manufacturing overhead was overapplied by $5,000; Cost of Goods Sold after
closing out the Manufacturing Overhead account is $344,000
17. Dallas, Inc. an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology.
The research and testing costs associated with the new ovens is said to arise from a:
a.
unit-level activity.
b.
batch-level activity
c.
product-level activity
d.
facility-level activity
e.
competitive-level activity
Copyright© 2017, School of Accountancy, Arizona State University
18. Diane Clothing Co.’s accounts reflect the following:
Cost of Goods Manufactured $550,000
Beg. Finished Goods Inventory $300,000
End. Finished Goods Inventory $350,000
Cost of Goods Sold ?
Applied overhead $220,500
Actual overhead $200,000
If Sales were $800,000 and the company closes the over/under applied overhead balance to cost of goods sold, how
much gross profit would the company report (after the overhead adjustment)?
a.
$250,000
b.
$279,500
c.
$300,000
d.
$320,500
19. H.K. Corporation has provided the following data from its activity-based costing system:
Data concerning the company's product P58Z appear below:
According to the activity-based costing system, the unit product cost of product P58Z is closest to:
a.
$113.33 per unit
b.
$58.30 per unit
c.
$123.40 per unit
d.
$118.30 per unit
20. Volume-based (traditional, plant-wide)) cost systems tend to
a.
Under-cost low-volume products and under-cost high-volume products
b.
Under-cost low-volume products and over-cost high-volume products
c.
Over-cost low-volume products and under-cost high-volume products.
d.
Over-cost low-volume products and over-cost high-volume products.
Copyright© 2017, School of Accountancy, Arizona State University
21. Non-value-added activities are:
a.
also called waste activities
b.
activities that neither enhance the customer’s image of the product or service nor provide a
competitive advantage
c.
activities that could be reduced or removed from the process with no ill effect on the end
product or service
d.
all of the above
22. Geiger Construction currently uses traditional costing where overhead is applied based on direct labor hours.
Using traditional costing, the applied overhead rate is $20 per direct labor hour.
They are considering a switch to activity-based costing (ABC). The company controller has come up with
preliminary overhead rates for each of the following activities:
Activity
Allocation Base
Overhead rate
Material delivery and handling
Number of deliveries
$100 per delivery
Inspections
Number of inspections
$75 per inspection
Supervision
Hours of supervisor time
$30 per supervisor hour
Purchasing
Number of purchase orders
$60 per purchase order
One of the company’s current jobs has the following information available:
Direct labor hours ---------------------------------------------
50 hours
Number of deliveries -----------------------------------------
2
Number of inspections ---------------------------------------
3
Hours of supervisor time ------------------------------------
2
Number of purchase orders ---------------------------------
5
Which of the following statements is true when comparing the total overhead allocated (applied) to the job using
traditional (plantwide) versus ABC costing?
a.
ABC costing will yield $215 less in overhead cost being allocated to the job
b.
ABC costing will yield $735 less in overhead cost being allocated to the job.
c.
ABC costing will yield $545 more in overhead cost being allocated to the job.
d.
ABC costing will yield $785 more in overhead cost being allocated to the job.
23. Costs incurred when products and services fail to conform to requirements or satisfy customer needs after being
delivered to customers are:
a.
prevention costs.
b.
appraisal costs.
c.
internal failure costs.
d.
external failure costs.
e.
a different category of quality related costs.
24. The cost of warranty work is an example of a(n):
a.
prevention cost
b.
appraisal cost
c.
internal failure cost
d.
external failure cost
Copyright© 2017, School of Accountancy, Arizona State University
25. Which terms would make the following sentence true? Manufacturing companies that benefit the most
from activity-based costing are those where overhead costs are a _________ percentage of total product
cost and where there is ___________ diversity among the various products that they produce.
a.
low, little
b.
low, considerable
c.
high, little
d.
high, considerable
