Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but is still within the relevant range. In terms of cost per unit of activity, we would expect that:
[removed]A) expense B has increased.
[removed]B) expense B has decreased.
[removed]C) expense A has decreased.
[removed]D) expense A has remained unchanged.
2. Chabud Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 500 units. The costs and percentage completion of these units in beginning inventory were:
A total of 8,100 units were started and 7,300 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 70% complete with respect to materials and 40% complete with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.
The cost per equivalent unit for materials for the month in the first processing department is closest to:
[removed]A) $17.33
[removed]B) $16.72
[removed]C) $18.15
[removed]D) $17.52
Management of Berndt Corporation has asked your help as an intern in preparing some key reports for August. The beginning balance in the raw materials inventory account was $33,000. During the month, the company made raw materials purchases amounting to $62,000. At the end of the month, the balance in the raw materials inventory account was $30,000. Direct labor cost was $46,000 and manufacturing overhead was $74,000. The beginning balance in the work in process account was $13,000 and the ending balance was $19,000. The beginning balance in the finished goods account was $54,000 and the ending balance was $50,000. Sales totaled $270,000. Selling expense was $18,000 and administrative expense was $49,000.
3. The net operating income for August was:
[removed]A) $20,000
[removed]B) $21,000
[removed]C) $83,000
[removed]D) $87,000
4.
A value chain consists of the major subassemblies that add value to a product.
[removed]A) True
[removed]B) False
5.
Which costs will change with a decrease in activity within the relevant range?
[removed]A) Total fixed costs and total variable cost.
[removed]B) Unit variable cost and unit fixed cost.
[removed]C) Unit fixed cost and total fixed cost.
[removed]D) Unit fixed costs and total variable cost.
6.
Shipping expense 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:
[removed]A) $9,972
[removed]B) $8,583
[removed]C) $10,125
[removed]D) $9,750
7.
_________________ is a method of separating a mixed cost into its fixed and variable elements by fitting a regression line that minimizes the sum of the squared errors.
[removed]A) least-square regression method
[removed]B) quick and dirty method
[removed]C) scattergraph method
[removed]D) high-low method
8.
Chabud Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 500 units. The costs and percentage completion of these units in beginning inventory were:
A total of 8,100 units were started and 7,300 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 70% complete with respect to materials and 40% complete with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.
The total cost transferred from the first processing department to the next processing department during the month is closest to:
[removed]A) $301,000
[removed]B) $332,037
[removed]C) $281,846
[removed]D) $309,000
9.
A disadvantage of the high-low method of cost analysis is that:
[removed]A) it relies totally on the judgment of the person performing the cost analysis.
[removed]B) it is too time consuming to apply.
[removed]C) it cannot be used when there are a very large number of observations.
[removed]D) it uses two extreme data points, which may not be representative of normal conditions.
10.
Assume there is no beginning work in process inventory and the ending work in process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is:
[removed]A) the same as the number of units put into production.
[removed]B) less than the number of units put into production.
[removed]C) less than the number of units completed.
[removed]D) the same as the number of units completed.
11.
Chabud Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 500 units. The costs and percentage completion of these units in beginning inventory were:
A total of 8,100 units were started and 7,300 units were transferred to the second processing department during the month. The following costs were incurred in the first processing department during the month:
The ending inventory was 70% complete with respect to materials and 40% complete with respect to conversion costs.
Note: Your answers may differ from those offered below due to rounding error. In all cases, select the answer that is the closest to the answer you computed. To reduce rounding error, carry out all computations to at least three decimal places.
How many units are in ending work in process inventory in the first processing department at the end of the month?
[removed]A) 800
[removed]B) 900
[removed]C) 7,600
[removed]D) 1,300
12.
Discretionary fixed costs:
[removed]A) have a long-term planning horizon, generally encompassing many years.
[removed]B) None of these.
[removed]C) vary directly and proportionately with the level of activity.
[removed]D) are made up of plant, equipment, and basic organizational costs.
13.
Jatry Corporation’s budgeted sales are $300,000, its budgeted variable expenses are $210,000, and its budgeted fixed expenses are $60,000. The company’s break-even in dollar sales is:
[removed]A) $210,000
[removed]B) $200,000
[removed]C) $270,000
[removed]D) $330,000
14.
The three basic elements of manufacturing cost are direct materials, direct labor, and:
[removed]A) manufacturing overhead.
[removed]B) work in process.
[removed]C) cost of goods sold.
[removed]D) cost of goods manufactured.
15.
Marston Enterprises sells three chemicals: petrol, septine, and tridol. Petrol’s unit contribution margin is higher than septine’s which is higher than tridol’s. Which one of the following events is most likely to decrease the company’s overall break-even point?
[removed]A) A decrease in tridol’s selling price.
[removed]B) A change in the relative market demand for the products, with the increase favoring petrol relative to septine and tridol.
[removed]C) The installation of new computer-controlled equipment that reduces variable costs and increases fixed costs.
[removed]D) An increase in the overall market demand for septine.
16.
Forest Corporation has prepared the following budgeted data based on a sales forecast of $3,000,000:
What would be the amount of dollar sales at the break-even point?
[removed]A) $2,000,000
[removed]B) $2,650,000
[removed]C) $1,750,000
[removed]D) $1,125,000
17.
Direct labor is a part of both prime cost and conversion cost.
[removed]A) True
[removed]B) False
18.
An operation costing system is:
[removed]A) identical to a job order costing system except that actual manufacturing overhead costs are traced to units of product.
[removed]B) the same as a job order system except that direct materials costs are accounted for in the same way as in process costing.
[removed]C) identical to a process costing system except that actual manufacturing overhead costs are traced to units of product.
[removed]D) the same as a process costing system except that direct materials costs are accounted for in the same way as in job order costing.
19.
Cost of goods manufactured will usually include:
[removed]A) only direct labor and direct materials costs.
[removed]B) only costs incurred during the current period.
[removed]C) some period costs as well as some product costs.
[removed]D) some costs incurred during the prior period as well as costs incurred during the current period.
20.
The lean thinking model focuses on reducing defects to as close to zero as possible.
[removed]A) True
[removed]B) False
21.
When applying manufacturing overhead to jobs, the formula to calculate the amount is as follows:
[removed]A) Predetermined overhead rate times the actual manufacturing overhead incurred on the particular job.
[removed]B) Predetermined overhead rate times the actual units of allocation base charged to the particular job.
[removed]C) Predetermined overhead rate divided by the actual units of allocation base charged to the particular job.
[removed]D) Predetermined overhead rate divided by the actual manufacturing overhead incurred on the particular job.
22.
Cahin Corporation applies manufacturing overhead on the basis of machine-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $21,060. Actual manufacturing overhead for the year amounted to $13,000 and actual machine-hours were 1,380. The company’s predetermined overhead rate for the year was $16.20 per machine-hour.
The overhead for the year was:
[removed]A) $9,356 underapplied
[removed]B) $9,356 overapplied
[removed]C) $1,296 overapplied
[removed]D) $1,296 underapplied
23.
The Sarbanes-Oxley Act of 2002 was intended to protect the interests of those who invest in publicly traded companies by ensuring that their original investments could be recovered in case of fraud.
[removed]A) True
[removed]B) False
24.
Rossiter Company failed to record a credit sale at the end of the year, although the reduction in finished goods inventories was correctly recorded when the goods were shipped to the customer. Which one of the following statements is correct?
[removed]A) Accounts receivable was not affected, inventory was understated, sales were understated, and cost of goods sold was understated.
[removed]B) Accounts receivable was not affected, inventory was not affected, sales were understated, and cost of goods sold was understated.
[removed]C) Accounts receivable was understated, inventory was not affected, sales were understated, and cost of goods sold was not affected.
[removed]D) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was overstated.
25.
When closing overapplied manufacturing overhead to cost of goods sold, which of the following would be true?
[removed]A) Net income will decrease.
[removed]B) Work in process will decrease.
[removed]C) Cost of goods sold will increase.
[removed]D) Gross margin will increase.
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