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Accounting final exam review

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1.

inventories consisting of units that are only partialllycomplete are calledA. finished goodsB. raw materials

C. work in progressD. none of these

c

2.

managerial accounting:A. has its primary emphasis on the future

B.is required by regulatory bodys such as SECC.focuses on the organization as a whole rather than

segmentsD. all of the above are correct

A

3.

the corporate controller's salary would be considered:A. manufacturing cost

B. product costC.administrative cost

D.selling expense

C

4.

the three basic elements of manufacturing costs aredirect material, direct labor andA.cost of goods manufactured

B.cost of goods soldC. administrative cost

D. manufacturing overhead

D

5.

prime cost consists of direct materials combined with:A.direct labor

B.manufacturing overheadC.indirect materials

D.cost of goods manufactured

A

6.

within relevant range, the difference between variablecost and fixed cost is:

A.variable costs per unit fluxuate and fixed cost perunit stays the same

B.variable cost per unit are constant and fixed cost perunit fluctuate

C. both total variable costs and total fixed costs areconstant

D.both total variable costs and total fixed costs areconstant

B

transportation costs incurred by a manufacturingcompany to ship its product to its customers would be

classified as:



7.

classified as:A. product cost

B. manufacturing overheadC.period costs

D.administrative costs

C

8.

an opportunity cost is:A. the difference between total costs which resultsfrom selecting one alternative instead of another

B.the benefit foregone by selecting one alternativeinstead of another

C.the cost which may be saved by not adopting analternative

D.a cost which may be shifted to the future with little orno effect on current operations

B

9.

an example of a discretionary fixed cost is:A.insurance

B.taxes on real estateC.management training

D.depreciation of buildings and equipment

D

10.

a cost driver is:A.the largest single category of cost in a company

B.a fixed cost that cannot be avoided

C.a factor that causes variations in a costD.an indirect cost that is essential to business

C

11.

a disadvantage of the high low method of cost analysisis that:

A.it cannot be used when there are very large numbersof observances

B. it is too time consuming to applyC.it uses two extreme data points, which may not

represent normal conditionsD.it relies totally on the judgement of the person

performing the cost analysis

C

12.

contribution margin is the excess of revenues over:A.cost of goods soldB.manufacturing cost

C.all direct costD.all variable cost

D

13.

(blank) is a method of seperating a mixed cost into itsfixed and variable elements by fitting a regression line

that minimizes the sum of squared errors:A.quick and dirty methodB.scattergraph method

C.high low methodD.least squares regression method

D



14.

the institute of management accountants' statement ofethical professional practice specifically states,

among other things, that management accountantshave a responsibility to keep information confidential

except when disclosure is authorized or legallyrequired:

A.trueB.false

A

15.

during august the cost of goods manufactured was

73,000. the begining finished goods inventory was15,000 and the ending was 23,000 what was the cost

of goods sold for the month:A.79,000

B.109,000C.67,000D.73,000

C

16.

the manager of the accounting department is knownas the:

A.chief financial officerB.controller

C.accounting department managerD.chief executive officer

B

17.

a cost that is obtained in large chunks and thatincreases or decreases only in response to fairly widechanges in the activity level is known as step-variable

cost:A.TrueB.False

A

18.

expense A is a fixed cost, expense B is a variablecost. during the current year the activity level has

increased but its still within the relevant range. in termsof cost per unit of activity, we would expect that:

A.expense A has remained unchangedB.expense b has decreased C.expense a has decreasedD.expense b has increased

C

19.

the linear equation Y=a+bX is often used to expresscost formulas. in this equation:

A. the b term represents variable cost per unit ofactivity

B.the a term represents variable cost in totalC.the x term represents total cost

D.the y term represents total fixed cost

A

20.

given the cost formula y=12,000+$6X, total cost at anactivity level of 8,000 would be:

A.20,000B.60,000 B



20. B.60,000C.12,000D.48,000

B

21.

given the cost formula Y = $17,500 +$4X at what levelof activity will total cost be 42,500?

A.10,625 unitsB.4,375 unitsC.6,250 unitsD.5,250 units

C

22.

which of the following costs would not be consideredan indirect cost of serviceing a particuliar customer at

a delicatessen:A.the salary of the manager

B.the cost of the tables and chairs used to furnishC.the cost of the bread used to make the sub

sandwhich that is orderedD.the cost of lighting and heating the restaurant

A

23.

usually the wages of the janitorial staff in a factorywould:

A.not be considered as indirect labor but would beincluded in the manufacturing overhead

B.be classified as indirect labor but would not beincluded in manufacturing overhead

C.be classified as indirect labor and included inmanufacturing overhead

D.not be classified as indirect labor and not beincluded in manufacturing overhead

C

24.

if the cost of goods manufactured is greater than thecost of goods sold then:

A.work in progress has decreased during the periodB.finished goods inventory has increased during the

period

C.total manufacturing costs must be greater than thecost of goods manufactured

D.finished goods inventory has decreased during theperiod

B

25.

the inventory of finished goods on hand at the end of aperiod is considered an asset, but inventories of raw

materials and work in process are not consideredassets until production is complete:

A.trueB.false

B

26.

once the break even point is reached:A. the total contribution margin changes from negative

to positiveB.net operating income will increase by the unitcontribution margin for each additional item sold B



contribution margin for each additional item soldC.variable expenses will remain constant in total

D.the contribution margin ratio begins to decrease

27.

which of the following is trueregarding the contributionmargin ratio of a single product company?

A. as fixed expenses decrease, the contributionmargin ratio increases

B.the contribution margin ratio multiplied by thevariable expense per unit equals the contribution

margin per unitC.if sales increase, the dollar increase in net operating

income can be computed by multiplying thecontribution margin ratio by the dollar increase in sales

D.the contribution margin ratio increases as thenumber of units sold increases

c

28.

if company A has a higher degree of operatingleverage than company B, then:

A.company A has higher variable expensesB.company A's profits are more sensitive to

percentage change in salesC.company a is more profitable

D.company A is less risky

b

29.

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 todecrease the companys overall break even point:

A.the installation of a new computer controlledequipment that reduces variable costs and increases

fixed cost.B.a decrease in tridol's selling price

C.an increase in the overall market demand forseptine

D.a change in the relative market demand for theproducts with the increase favoring petrol relative to

septine and tridol.

a

30.

which of the following documents is used to psecify thetype and quantity of materials drawn from the

storeroom, and identifys the job to which the costs ofthe materials should be charged?

A.job cost sheetB.bill of materials

C.materials requisition formD.purchase order

a

31.

choice of allocation base should be based on:A. the relative size of the base

B.the base's relation to direct laborC.the base's activity

D.whether the base actually drives the cost beingallocated

d



allocated

32.

in a job order costing system the journal entry to recordapplication of overhead cost to jobs would be:A.a credit to manufacturing overhead account

B.a credit to work in process accountC.a debit to cost of good sold

D. a debit to manufacturing overhead account.

d

33.

ivory company uses a job order costing system. whatyear end journal entry could ivory make to dispose of4,150 of overapplied manufacturing overhead cost?

finished goods.......4,150A. manufacturing overhead 4,150

cost of goods sold.....................4,150B. manufacturing overhead....................4,150

manufacturing overhead........4,150C. finished goods................................4,150

manufacturing overhead..........4,150D. cost of goods sold...........................4,150

d

34.

when applying manufacturing overhead to jobs, theformula to calculate the amount is as follows:

A.predetermined overhead rate divided by actualmanufacturing overhead incurred on the particular job

B.predetermined overhead rate times the actualmanufacturing overhead incurred on the particular jobC.predetermined overhead rate divided by the actualunits of allocation base charged to the particuliar jobD.predetermined overhead rate times the actual units

of allocation base charged to the particular job

d

35.

if a company applies overhead to jobs on the basis ofa predetermined overhead rate, a credit balance in the

manufacturing overhead account at the end of anyperiod means that:

A.more overhead cost has been charged to jobs thanhas been incurred during the period

B.more overhead cost has been incurred during theperiod than has been charged to jobs

C.the amount of overhead cost charged to jobs isgreater than the estimated cost for the period

D.the amount of overhead cost charged to jobs is lessthan the estimated overhead costs for the period

c

36.

in a process cost system, overhead is allocated todepartments before being applied to units of product.

A.TrueB.False

a

in order to use process costing, the output of aprocessing department should be homogenous.



37.

processing department should be homogenous.

A. TrueB. False

a

38.

in process costing, the same equivalent units figure isused for both materials and conversion costs.

A.TrueB.False

a

39.

the assembly department started the month with59,000 units in its begginning work in process

inventory. an additional 274,000 units were transferredfrom the prior department during the moth to beginprocessing in the assembly department. there were

21,000 units in ending work in process inventory of theassembly department. how many units were

transferred to the next processing department duringthe monthA.333,000B.236,000C.354,000D.312,000

d

40.

the "costs accounted for" portion of the costreconciliation report includes the cost of endinginventory and the cost of units transferred out.

A.trueB.False

a

41.

on a cost-volume-profit graph, the break even point islocated at:A.the origin

B.where the total revenue line interesects the volume

axisC.where the total revenue line intersects the dollar axis

D.where the total revenue line intersects the totalexpenses line

d

42.

forest inc's contribution margin ratio is 45%, and itsfixed monthly expenses are 54,000. assuming that

fixed monthly expenses do not change what is the bestestimate of the company;s net operating income in a

month when sales are 164,000A.21,800

B.110,000C.19,800D.73,800

c

43. a a



44.

for which situations below would an organization bemore likely to use a job-order costing system ofaccumulating product costs rather than process

costing system?A.steel factory processes iron into steel bars

B.a factory that processes sugar and other ingredientsinto black licorice

C.a costume maker that makes specialty costumes forfigure skaters

D.all of the above

c

45.

selling price=85 per unitcurrent sales = 29,700

break even sales=22,500the margin of safety as a percentage is closest to:

A.24%B.33%C.27%D.30%

a

46.

which of the following situations always result inunderapplied overhead:

A.actual overhead is greater than applied overheadB.actual overhead is less than applied overhead

C.estimated overhead is greater than actual overheadD.estimated overhead is less than actual overhead

a

47.

when closing overapplied manufactuing overhead tocost of goods sold, which of the following would be

true?A.works in precess will decreaseB.cost of goods sold will increase

C.net income will decreaseD.gross margin will increase

b

48.

which of the following would a manufacturing companyexpect to experience as it automates its shifts from

variable to fixed expenses?A.lower margin of safety percentageB.a higher contribution margin ratio

C.a steeper total expenses line on its cost-volume-profit graph

D.both A and B above

c

49.

process costing would be appropriate for each of thefollowing except:

A.custom furniture manufacturingB.oil refining

C.grain millingD.newsprint production

a

which of the following accounts is debited when



50.

which of the following accounts is debited whenindirect labor is recorded?

A.work in processB.salaries and wages expenseC.salaries and wages payable

D.manufacturing overhead

D

51.

weber company computes net operating income underboth absorption costing and variable costing. for a

given year the absorption costing net operatingincome was greater than the variable costing net

operating income. this suggests:A. variable manufacturing costs were less than fixed

manufacturing costsB.more units were produced during the year than were

soldC.more units were sold during the year than were

producedD.common costs were greater than variable costs for

the year

b

52.

vraiable selling and administrative expenses are apart of product costs under the variable costing

approach.A.True

B. False

b

53.

net operating income using variable costing wouldexceed net income computed using absorption

costing if:A.units sold exceeds units produced

B.units sold are less than units producedC.units sold are equal to units producedD.the average fixed cost per unit is zero

a

54.

profits move in the same direction as sales whenvariable costing is used if selling prices, the sales mix,

and the cost structure remain the same.

A.TrueB.False

a

55.

the costing method that can be used most easily withbreak even analysis and other cost volume profit

techniques is:A.variable costing

B.absorption costingC.process costingD.job order costing

c

assuming that direct labor is a variable cost, productcosts under variable costing include only:

A.direct materials and direct labor



56.

A.direct materials and direct laborB.direct materials, direct labor and variable

manufacturing overheadC.direct materials, direct labor, variable manufacturing

overhead and variable selling and administrativeexpenses

D.direct materials, variable manufacturing overhead,and variable selling and administrative expenses

a

57.

under the absorption costing method , a company canincrease profits by increasing production rather than

increasing sales.

a. trueb. false

a

58.

since variable costing emphasizes cost by behavior, itworks well with cost volume profit analysis.

a.trueb.false

a

59.

when combining activities in an activity based system,activities should be grouped together at the same

level. for example batch level should not be combinedwith product level.

a. trueb. false

a

60.

purchase order processing is an example of a:A.unit level activity

B.batch level activityC.product level activity

D.organization sustaining activity

c

61.

activity based costing uses a number of activity pools ,each of which is allocated to products on the basis of

direct labor hours.

a. trueb. false

b

62.

overhead allocation based solely on a measure ofvolume such as direct labor hours:

A.is a key aspect of activity based costing modelB.will systematically overcost high volume products

and undercost low volume productsC.will systematically overcost low volume products and

undercost high volume productsD.must be used for external financial reporting

b

in activity based costing, organizational sustainingcost should not be included in product cost for internal



63.

cost should not be included in product cost for internalmanagement reports that are used for decision

making, however companies frequently include them inproduct costs to satisfy external reporting

requirementsa. trueb.false

a

64.

worker recreational facilities is an example of a costthat would be ordinarily considered to be:

A.unit levelB.batch level

C.product levelD.organizational sustaining

d

65.

testing a prototype is an example of:A.unit level

B.batch levelC.product level

D.organizational sustaining

a

66.

in activity based costing, a plantwide overhead rate isused to apply overhead to products.

a.trueb. false

b

67.

duration drivers ordinarily require more effort thantransaction drivers.

a.trueb.false

a

68.

the master budget process usually begins with:A.production budgetB.operating budget

C.sales budgetD.cash budget

c

69.

the concept of responsibibility accounting means that:A. budgetary data should be reviewed and approved

by the budget committee B.budgetary data should be reviewed and approved

by all levels of managementC.an employee's performance should be evaluated

only on those items under his or her controlD. an employee's performance should be evaluated

only by his or her immediate supervisor

c

70.

a self imposed budget or (BLANK) budget is a budgetthat is prepared with the full cooperation of managers

at all levels.A.perpetualB.master

c



B.masterC.participativeD.responsibility

71.

in companies that have "no lay-off policies" the totaldirect labor cost for a budget period is computed bymultiplying the total direct labor hours by the direct

labor wage rate?true.false

b

72.

the cash budget must be prepared before you cancomplete the:

A.production budgetB.budgeted balance sheet

C.raw materials purchases budgetD.schedule of cash disbursements

b

73.

which of the following is not a benefit of budgeting:A.uncovers potential bottlenecks before they occur

B.it coordinates the activities of the entire organizationby integrating the plans and objectives of the various

partsC.it ensures that accounting records comply with

GAAPD.it provides benchmarks for evaluating subsequent

performance

c

74.

there are various budgets within the master budget.one of these buidgets is the production budget. whichof the following best describes the production budget:

A.it details the required direct labor hoursB.it details the raw materials purchases

C.it is calculated based on the sales budget anddesired ending inventory

D.it summarizes the costs of producing units for thebudgeted period

c

75.

one of the distinct advantages of a budget is that it canhelp to uncover potential bottle necks before they

occur:truefalse

a

76.

a flexible budget:A. classifies budget requests by activity and estimates

the benefits arising from each activityB.presents a statement of expectations for a period of

time but does not present a firm commitmentC.presents the plan for only one level of activity and

does not adjust to changes in levels of activityD.presents the plan for a range of activity so that the

d



D.presents the plan for a range of activity so that theplan can be adjusted for changes in activity levels

77.

activity level=7800 machine hoursvariable overhead costs:

supplies=34,320indirect labor= 50,700fixed overhead costs:supervision=10,200

utilities=5,600depreciation= 8,800

total overhead cost = 109,620the company's variable overhead costs are driven by

machine hours what would the total budgetedoverhead cost be for the next month if the activity level

is 7,900 rather than 7,800?A.110,710B.109,620C.110,868

D.111,025.38

b

78.

an unfavorable activity variance for a cost indicatesthat spending was higher than it should have been for

the actual level of activity for the period.truefalse

a

79.

a revenue variance is unfavorable if the actual revenue

is less than what the revenue should have been for theactual level of activity for the period

truefalse

a

80.

a favorable spending variance occurs when the actualcost is less than the amount of that cost in the flexible

budgettruefalse

a

81.

an unfavorable materials quantity variance indicatesthat:

A.actual usage of materials exceeds the standardmaterial allowed for the output

B.standard material allowed for output exceeds theactual usage of material.

C.actual material price exceeds standard priceD.standard material price exceeds actual price

a

82.

the materials price variance should be computed:A.when materials are purchased

B.when materials are used in productionC.based upon the amount of materials used in

production when only a portion of materials purchased a



82. production when only a portion of materials purchasedis actually used

D.based upon the difference between the actualquantity of inputs and the standard quantity allowed for

output times the standard price

a

83.

under a standard cost system, the materials pricevariances are usually the responsibility of the:

A.production managerB.sales manager

C.purchasing managerD.engineering manager

c

84.

a favorable labor rate variance indicates that :A.actual hours exceed standard hoursB.standard hours exceed actual hours

C.the actual rate exceeds the standard rateD.the standard rate exceeds the actual rate

d

85.

if the actual labor hours worked exceed the standardlaor hours allowed what type of variance will occur?

A.favorable labor efficiency varianceB.favorable labor rate variance

C.unfavorable labor efficiency variance D.unfavorable labor rate variance

c

86.

which of the following represents value-added time inthe manufacturing cycle?

A.inspection timeB.queue timeC.move time

D.process time

d

87.

quantity standards indicate how much of an inputshould be used for manufacturing a unit of production

or in providing a unit of service.truefalse

a

88.

management by exception means that a manager'sattention is directed toward those parts of theorganization where things are not proceeding

according to plans.truefalse

a

89.

all cost variances should be considered exceptionsthat require the attention of management.

true false

b



90.

the materials quantity variance is computed based onthe amount of materials purchased during the period.

true false

a

91.

which of the following costs are irrelevant in decisionmaking?

A.avoidable costsB.sunk costs

C.opportunity costsD.fixed costs

b

92.

the opportunity cost of making a component part in afactory with excess capacity for which there is no

alternative use is:A.the variable manufacturing cost of the component

B.the total manufacturing cost of the componentC.the fixed manufacturing cost of the component

D.zero

d

93.

allocated common fixed costs:A.can make a product line appear unprofitable

B.are always incremental costsC.are always relevant in decisions involving dropping

a product lineD.all of the above

a

94.

which product would be selected in a decision thatinvolves the utilization of a constrained resource?

A.the product with the lowest total cost per unitB.the product with the lowest variable cost per unit

C.the product that uses the least amount ofconstrained resource per unit

D.the product with the highest contribution margin perunit

E.the product with the highest contribution margin perunit of the constrained resource

e

95.

in a plant operating at capacity:A.every machine and person in the plant is working at

the maximum possible rateB.only some specific machines or processes are

operating at the maximum rate possibleC.profits are maximized

D.managers should produce those products with thehighest contribution margin in order to deal with the

constrained resource.

b

united industries manufactures a number of productsat its highly automated factory . the products are very

popular, with demand far exceeding the factory's



96.

popular, with demand far exceeding the factory'scapactiy. to maximize profit tmanagement should rank

products based on their:A.gross margin

B.contribution marginC.selling price

D.contribution margin per unit of the constrainedresource

d

97.

a cost that will be incurred regardless of which courseof action a manager takes is relevant to the manager's

decision.truefalse

b

98.

in a decision to drop a segment. the opportunity costof the space occupied by the segment would be theprofit that could be derived from the best alternative

use of the spacetruefalse

a

99.

all other things equal, it is profitable to continueprocessing a joint product after the split off point so

long as the incremental revenue from further

processing exceeds the incremental costs of furtherprocessing.

true false

a

100.

a differential cost is a variable cost.truefalse

a

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