Exam 1 Spring 2010

Version #1

Select the best answer for each of the following questions. Mark your answer in the test booklet and on the answer sheet. 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. In a job-order costing system, the amount of overhead cost that has been applied to a job that remains incomplete at the end of a period: A. is deducted on the Income Statement as overapplied overhead. B. is closed to Cost of Goods Sold. C. is transferred to Finished Goods at the end of the period. D. is part of the ending balance of the Work in Process inventory account. 3. Within the relevant range, the difference between variable costs and fixed costs is: A. variable costs per unit fluctuate and fixed costs per unit remain constant. B. variable costs per unit are constant and fixed costs per unit fluctuate. C. both total variable costs and total fixed costs are constant. D. both total variable costs and total fixed costs fluctuate. 4. Consider the following costs incurred in a recent period:

Under the traditional approach, 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

5.

Dorra Corporation manufactures lawnmowers in five work stations. Dorra's weekly demand is 5,000 mowers but Dorra can only produce 4,200. According to the theory of constraints, to increase production output Dorra would benefit the most by concentrating improvement efforts on the: A. first work station. B. last work station. C. largest work station. D. fastest work station. E. slowest work station.

6.

In a job-order costing system, direct labor costs usually are recorded initially with a debit to: A. Manufacturing Overhead. B. Finished Goods inventory. C. Direct Labor Expense. D. Work in Process.

7.

The costs of direct materials are classified as:

A. Choice A B. Choice B C. Choice C D. Choice D 8. 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. 9. Ivory Company uses a job-order costing system. What year-end journal entry could Ivory make to dispose of (close out) $4,150 of overapplied manufacturing overhead cost? A. B. C. D.

10. You are applying the scattergraph method and find that the regression line you have drawn passes through a data point with the following coordinates: 1,000 units and $9,600. The regression line passes through the Y axis at the $600 point. Which of the following is the cost formula that represents the slope of this line? A. Y=$600+$9.00X B. Y=$600+$9.60X C. Y=$9,600+$.06X D. None of these is true. 11. Freeman Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, the company estimated manufacturing overhead would be $150,000 and direct labor-hours would be 10,000. The actual figures for the year were $186,000 for manufacturing overhead and 12,000 direct labor-hours. The cost records for the year will show: A. overapplied overhead of $30,000 B. underapplied overhead of $30,000 C. underapplied overhead of $6,000 D. overapplied overhead of $6,000 12. The following data have been provided by a company for a recent accounting period:

The cost of goods manufactured for the period was: A. $147,000 B. $151,000 C. $153,000 D. $154,000 13. Krouse Corporation reports that at an activity level of 8,100 units, its total variable cost is $509,652 and its total fixed cost is $197,316. What would be the total cost, both fixed and variable, at an activity level of 8,400 units? Assume that this level of activity is within the relevant range. A. $725,844 B. $706,968 C. $720,060 D. $733,152

14. Which of the following companies would be most likely to use a job-order costing system rather than a process costing system? A. soft drink bottler B. shipbuilding C. crude oil refining D. candy making 15. A disadvantage of the high-low method of cost analysis is that: A. it cannot be used when there are a very large number of observations. B. it is too time consuming to apply. C. it uses two extreme data points, which may not be representative of normal conditions. D. it relies totally on the judgment of the person performing the cost analysis. 16. Eddins Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product.

The best estimate of the total variable manufacturing cost per unit is: A. $60.10 B. $38.40 C. $21.70 D. $22.30 17. Shipping expense, including both fixed and variable costs, is $9,000 for 8,000 pounds shipped and $11,250 for 11,000 pounds shipped. Assuming that this activity is within the relevant range, if the company ships 9,000 pounds, its expected shipping expense is closest to: A. $10,125 B. $8,583 C. $9,972 D. $9,750 18. Which of the following accounts is debited when indirect labor is recorded? A. Work in Process B. Salaries and Wages Expense C. Salaries and Wages Payable D. Manufacturing Overhead 19. With the least-squares regression method A. a mixed cost can be separated into its fixed and variable elements B. data from a very large number of observations can be incorporated C. a higher R-squared indicates a better fit and increased confidence in the estimates D. all of the above

20. The Watts Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine-hours in Dept. B. At the beginning of the year, the company made the following estimates:

What predetermined overhead rates would be used in Dept A and Dept B, respectively? A. 50% and $8.00 B. 50% and $5.00 C. $15 and 110% D. 200% and $5.00 21. The following inventory balances relate to Lequin Manufacturing Corporation at the beginning and end of the year:

Lequin's total cost of direct materials used, direct labor and overhead was $543,000. What was Lequin's cost of goods sold? A. $517,000 B. $545,000 C. $569,000 D. $567,000 22. _________________ is an example of a staff position. A. Sales manager for a manufacturer B. President of a merchandising company C. Store manager for Best Buy D. Human resource manager for a community college 23. Job 607 was recently completed. The following data have been recorded on its job cost sheet:

The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $14 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 607 would be: A. $4,107 B. $6,319 C. $3,432 D. $4,863

24. 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 25. Given the cost formula Y = $17,500 + $4X, at what level of activity will total cost be $42,500? A. 10,625 units B. 4,375 units C. 6,250 units D. 5,250 units 26. Last month a 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 27. Contribution margin is the excess of revenues over: A. cost of goods sold. B. manufacturing cost. C. all direct costs. D. all variable costs. 28. Inventories consisting of units of product that are only partially complete are called _______________. A. finished goods B. raw materials C. work in process D. none of these 29. Tempcon, Inc. sells and installs furnaces for $3,000 per furnace. The following cost formula relates to last year's operations at Tempcon: Y = $125,000 + $1,800X If Tempcon sold and installed 500 furnaces last year, what was its total contribution margin last year? A. $475,000 B. $900,000 C. $1,025,000 D. $600,000

30. Green 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

Exam 1 Spring 2010 Key

Version #1

1. A 2. D 3. B 4. D 5. E 6. D 7. D 8. A 9. D 10. A 11. C 12. A 13. A 14. B 15. C 16. A 17. D 18. D 19. D 20. D 21. C 22. D 23. B 24. C 25. C 26. D 27. D 28. C 29. D

30. D

Exam 1 Spring 2010 Summary

Category # of Questions AACSB: Analytic 14 AACSB: Reflective Thinking 16 AICPA BB: Critical Thinking 29 AICPA BB: Industry 1 AICPA FN: Measurement 29 AICPA FN: Reporting 1 Garrison - Chapter 001 3 Garrison - Chapter 002 10 Garrison - Chapter 003 8 Garrison - Chapter 005 9 Learning Objective: 1 7 Learning Objective: 2 4 Learning Objective: 3 11 Learning Objective: 4 7 Learning Objective: 5 7 Learning Objective: 6 2 Learning Objective: 7 1 Learning Objective: 8 2 Level: Easy 13 Level: Hard 2 Level: Medium 15 Source: CMA, adapted 1