Questions for Exam 1. The role of managerial accounting information in assisting management is a(n): A) financial-directing role. B) attention-directing role. C) planning and controlling role. D) organizational role. ?2. All of the following organisations would have a need for managerial accounting information except: A. El-Al Airlines B. Walmart C. Macys D. None of the above responses is correct as all of these organisations would usually require managerial accounting information. 3. Which of the following statements is true? A. Service firms have little need for determining the cost of their "products." B. The concept of product costing is relevant only for manufacturing firms. C. The cost of year-end unused services appears on the balance sheet as an inventoriable asset. D. Service companies use cost information for planning and control purposes. 4. Managerial accounting has changed in recent years because of: A) a growing service economy in the United States. B) increased global competition. D) an increased focus on the customer. E) all of the above factors. ?5. The process of managing the various activities in the value chain, along with the associated costs, is commenly known as: A. Activity-based costing. B. Stratigic cost management. C. Total quality management. D. Computer-integrated costing. 6. Which of the following statements represents a similarity between financial and managerial accounting? A) Both are useful in providing information for external users. B) Both are governed by GAAP. C) Both draw upon data from an organization's accounting system. D) Both use similar methods of reporting financial statements. 7. Which of the following typically does not relate to the role of a controller? A. A controller supervises the accounting departments. B. A controller maintains custody of cash and other assets. C. A controller prepares reports required by taxation and governmental authorities. D. A controller normally assumes a narrow role within the organization, often preventing the individual's rise to the firm's top management ranks. 8. Which of the following statements does not relate to the ethical standard of integrity? A. Management accountants have a responsibility to refrain from activities that would prejudice their ability to perform their duties. B. Management accountants have a responsibility to refrain from any activity that would discredit the accounting profession. C. Management accountants have a responsibility to perform duties with a fundamental knowledge of economics. D. Management accountants have a responsibility to communicate both unfavorable and favorable information. 9. Which of the following statements is true? A. The word "cost" has the same meaning in all situations in which it is used. B. Cost data, once classified and recorded for a specific application, can then be used in any application. C. Different cost concepts and classifications are used for different purposes. D. Costs incurred in one year are always meaningful in the following year. 10. Which of the following is not an example of a variable cost? A) Straight-line depreciation on a machine expected to last five years. B) Piece-rate wages paid to manufacturing workers. C) Lumber used to make patio furniture. D) Commissions paid to sales personnel. 11. The fixed costs per unit are $10 when a company makes 10,000 units. What are the per unit fixed costs when 12,500 units are produced? A. $12.00. B. $10.00. C. $ 8.00. D. $ 6.00. Unit Fixed Costs = Total Fixed Costs # of Units = 10 * 10,000 = $8.00 12,500 12. Quality Appliance produces washers and dryers in an assembly-line process. Labour costs incurred during a recent period were: corporate executives, $100,000; assembly line workers, $60,000; security guards, $11,000; and plant supervisor, $18,000. The total of Quality's direct labour cost was: A. $60,000. B. $71,000. C. $89,000. D. $189,000. 13. Which of the following costs is not a component of manufacturing overhead? A. Indirect materials. B. Factory utilities. C. Factory equipment. D. Property taxes on the manufacturing plant. 14. Product costs are: A. Expensed when incurred. B. Inventoried. C. Always variable in nature. D. Always fixed in nature. 15. Kansas Plating Company reported a cost of goods manufactured of $260,000, with the firm's year-end balance sheet revealing work in process and finished goods of $35,000 and $67,000, respectively. If supplemental information disclosed direct materials used in production of $40,000, direct labour of $70,000, and manufacturing overhead of $120,000, the company's beginning work in process must have been: A. $5,000 B. $37,000 C. $65,000 D. $97,000 16. Pumpkin Enterprises began operations on January 1, 19XX, with all of its activities conducted from a single facility. The company's accountant concluded that the year's building depreciation should be allocated as follows: selling activities, 20%; administrative activities, 35%; and manufacturing activities, 45%. If Pumpkin sold 60% of 190 production during that year, what percentage of the depreciation would appear (either directly or indirectly) on the 19XX income statement? A. 27%. B. 45%. C. 55%. D. 82%. 17. Which of the following costs should be ignored when choosing among alternatives? A. Opportunity costs. B. Sunk costs. C. Out-of-pocket costs. D. Differential costs. 18. The completion of production would require a company to: A) Debit Finished-Goods Inventory and Credit Work-in-Process Inventory. B) Debit Work-in-Process Inventory and Credit Finished-Goods Inventory. C) add direct materials, direct labor, and manufacturing overhead to Work-in-Process Inventory. D) add direct materials to Finished-Goods Inventory. ?19. Which of the following statements about manufacturing cost flows is false? A. Direct materials, direct labor, and manufactoring overhead are entered in the work-in-progress inventory account. B. The finished goods inventory account will contain entries that reflect the cost of goods sold during the period. C. When a company sells goods that cost $54,000 for $60,000 the firm will enter $6,000 in an account entitled profit on sale. D. Units are normally transferred from work in process inventory to finished goods inventory. 20. Refer to the following data. Direct material used $150,000 Selling costs $5,000 Indirect labor $7,000 Administrative costs $10,000 Depreciation on factory equiptment $70,000 Direct labor $40,000 Overtime premiums paid $20,000 Indirect materials $45,000 The prime costs are: A. $40,000 B. $150,000 C. $142,000 D. $190,000 Direct material + direct labor = Prime costs ?21. Fixed costs per unit: A. Change in direct proportion to changes in activity level. B. Change as activity varies. C. Remain unchanged as activity level changes. D. A & B Questions 22 and 23 use the following data. Suppose a bakery reports this information in thousands of dollars. $ Beginning materials inventory 4 Ending materials inventory 3 Beginning work in progress inventory 3 Ending work in progress inventory 2 Beginning finished goods inventory 2 Ending finished goods inventory 4 Direct labor 31 Purchases of direct materials 105 Manufactoring overhead 22 22. If the cost of direct materials used is $106, what is the cost of goods manufactured? A. $159 B. 157 C. 160 D. 158 COGM = COGS âBFG + CFG 23. What is the cost of goods sold? A. 159 B. 151 C. 156 D. 158 24. What is the appropriate journal entry if direct materials of $50,000 and indirect materials of 3,000 are sent to the manufacturing plant floor? A. Work in progress control 50,000 Materials control 50,000 B. Work in process control 53,000 Materials control 53,000 C. Manufacturing overhead control 3,000 Materials control 50,000 Work in process control 53,000 D. Work in process control 50,000 Manufacturing overhead control 3,000 Materials control 53,000 25. A manufacturing firm produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order. To accumulate the cost of each order, the company would use a: A. Job-cost sheet. B. Batch sheet. C. Budget sheet. D. Overhead sheet. 26. The assignment of direct labour cost to individual jobs is based on: A. An estimate of the total time spent on the job. B. Actual total payroll cost divided equally among all jobs in process. C. The actual time spent on each job multiplied by the wage rate. D. The estimated time spent on each job multiplied by the wage rate. 27. An accountant recently debited work-in-process inventory and credited manufacturing overhead. The accountant was: A. Applying a predetermined overhead amount to production. B. Recognizing receipt of the factory utilities bill. C. Recording a year-end adjustment for an insignificant amount of underapplied overhead. D. Recognizing actual overhead incurred during the period. 28. Treetops worked on four jobs during its first year of operation: nos. 401, 402, 403. and 404. Nos. 401 and 402 were completed by year-end, and no. 401 was sold at a profit of 40% of cost. A review of job no. 403's cost sheet revealed direct material charges of $20,000 and total manufacturing costs of $25,000. If Treetops applies overhead at 150% of direct labour cost, the overhead applied to job no. 403 must have been: A. $2,000. B. $3,000. C. $3,333. D. $5,000. 29. Brainpower, an advertising agency, applies overhead to jobs based on direct professional labour hours. Overhead was estimated to be $75,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Brainpower incurred actual overhead costs of $80,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was: A. $3,000 overapplied. B. $5,000 underapplied. C. $7,500 overapplied. D. $7,500 underapplied. 30. When underapplied or overapplied manufacturing overhead is prorated, amounts can be assigned to which of the following accounts? A. Raw-Material Inventory, Manufacturing Overhead, and Direct Labor. B. Cost of Goods Sold, Work-in-Process Inventory, and Finished-Goods Inventory. C. Work-in-Process Inventory, Raw-Material Inventory, and Cost of Goods Sold. D. Raw-Material Inventory, Work-in-Process Inventory, and Finished- Goods Inventory (double see #26) 31. An accountant recently debited work-in-process inventory and credited manufacturing overhead. The accountant was: A. Applying a predetermined overhead amount to production. B. Recognizing receipt of the factory utilities bill. C. Recording a year-end adjustment for an insignificant amount of underapplied overhead. D. Recognizing actual overhead incurred during the period. 32. Gratis Company applies overhead based on direct labour hours. At the beginning of the year, the company estimated that manufacturing overhead would be $550,000, direct labour hours would be 100,000, and direct labour cost would be $1,100,000. The company's predetermined overhead rate is: A. $0.18 per direct labour hour. B. $0.50 per direct labour hour. C. $5.50 per direct labour hour. D. $11.00 per direct labour hour. POHR = 550,000/100,000 = $5.50 33. Summit Corporation recently used $75,000 of direct materials and $9,000 of indirect materials in production activities. The journal entries reflecting these transactions would include: A. A debit to Manufacturing Overhead for $9,000. B. A debit to Manufacturing Overhead for $84,000. D. A debit to Work-in-Process Inventory for $84,000. E. A credit to Manufacturing Overhead for $9,000. 34. The salaries of a manufacturing plant's management are said to arise from: A. Unit-level activities. B. Batch-level activities. C. Product-sustaining level activities. D. Facility-level activities. 35. Fidelity Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product no. 457 revealed a traditionally-derived total cost of $683, a newly computed activity-based total cost of $586, and a selling price of $650. Which of the following statements is true? A. All other things being equal, the company should consider a boost in its sales price. B. If product no. 457 is overcosted by traditional accounting procedures, then all of Fidelity's other products may have been undercosted. C. Product no. 457 could be labeled as being undercosted by the finn's traditional costing procedures. D. If product no. 457 is overcosted by traditional accounting procedures, then all of Fidelity's other products must be overcosted as well. 36. Which of the following generally fails to signal the need for a new product-costing system? A. Line managers do not believe reported product costs. B. Complex products have high reported profitability despite the lack of premium prices. C. Overhead rates are high and increasing over time. D. Product-line profit margins are easy to explain. 37. Which of the following is not a non-value-added activity? A. Storage time. B. Waiting time. C. Inspection time. D. Production time. 38. Of the following organizations, activity-based costing cannot be used by: A. Manufacturers. B. Banks. C. Hospitals. D. None of the above, as all are able to use this costing system. 39. Which of the following is the proper sequence of events in an activity based costing system? A. Identification of cost drivers, identification of cost pools, calculation of cost application rates, assignment of cost to products. B. Identification of cost pools, identification of cost drivers, calculation of cost application rates, assignment of cost to products. C. Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of cost application rates. D. Calculation of cost application rates, identification of cost drivers, identification of cost pools, assignment of cost to products. 40. Activity-based costing systems: A. Use a single, volume-based cost driver. B. Assign overhead to products based on the products' relative usage of direct labour. C. Often reveal under- and overcosted products. D. Have a tendency to distort product costs. Use the following information to solve the multiple choice questions 41-43 Escalona company is a wholesale distributer that uses activity based costing for all of its overhead costs. The company has provided the following data concerning ints annual overhead costs and its activity based costing system: Overhead costs Wages and salaries $580,000 Other expenses 200,000 Total 780,000 Distribution of resource consumption: Activity cost pools Filling Customer Orders support Other Total Wages and expenses 40% 50% 10% 100% Other expenses 35% 45% 20% 100% The âotherâ activity cost pool consists of the costs of idle capacity and organization sustaining costs. The amount of activity for the year is as follows: Activity cost pool Activity Filling ordersâ¦â¦â¦â¦â¦â¦.. 1000 orders Customer supportâ¦â¦â¦â¦â¦.30 customers Filling orders Cust support Other Total Wages and salaries 232,000 290,000 58,000 580,000 Other expenses 70,000 90,000 40,000 200,000 Total 302,000 380,000 98,000 780,000 41. What would be the total overhead cost per order according to the activity based costing system? In other words, what would be the overall activity rate for filling orders activity cost pool? (round to nearest cent) A. 273.00 B. 302.00 C. 312.00 D. 292.50 42. 44. (Almost the same) 44. What is the missing number? Work in Process, January 1 100,000 gallons Units started during the year 850,000 gallons Units completed during the year ? Work in Process, December 31 200,000 gallons A. 700,000 B. 750,000 C. 950,000 D. 200,000 Units Completed = OWIP + Units Started â CWIP = 100,000 + 850,000 â 200,000 = 750,000 gallons 50. (almost the same) Which of the following firms will use process costing A. An oil refinery B. A pharmaceutical company C. A paper mill. D. All the above