Act Exam 1

1. The fixed cost per unit:will increase as activity increases.

will increase as activity decreases and will decrease as activity increases.

will decrease as activity increases.

will remain constant.

will increase as activity decreases.

[The following information applies to the questions displayed below.]Finished goods inventory, January 1, 2011$ 31,000

Finished goods inventory, December 31, 2011$ 25,800

2. If the cost of goods manufactured for the year was $402,000, what was the cost of goods sold for the year?$412,400.

None of these.

$407,200.

$417,600.

$402,000.

3. If the cost of goods sold for the year was $431,000, what was the cost of goods manufactured for the year?$420,600.

$431,000.

$425,800.

$403,900.

None of these.

[The following information applies to the questions displayed below.]

Universal Manufacturing uses a weighted-average process-costing system. All materials are introduced at the start of manufacturing, and conversion costs are incurred evenly throughout the process. The company's beginning and ending work-in-process inventories totaled 13,100 units and 22,800 units, respectively, with the latter units being 2/3 complete at the end of the period. Universal started 35,600 units into production and completed 25,900 units. Manufacturing costs follow.Beginning work in process: Materials, $67,800; conversion cost, $158,000Current costs: Materials, $211,000; conversion cost, $524,000

4. Universal's equivalent-unit cost for materials is:$4.22.

$7.72.

$5.72.

None of these.

$9.32.

5. Universal's equivalent-unit cost for conversion cost is:$19.59.

None of these.

$12.30.

$16.59.

$23.79.

6. Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system?Production setup.

Property taxes.

Shipping.

Quality assurance.

Receiving and inspection.

7. Aglow Company uses a process-cost system for its single product. Material A is added at the beginning of the process; in contrast, material B is added when the units are 50% complete. The firm's ending work-in-process inventory consists of 4,000 units that are 75% complete. Which of the following correctly expresses the equivalent units of production with respect to materials A and B in the ending work-in-process inventory?A, 4,000; B, 4,000.

A, 3,000; B, 3,000.

A, 4,000; B, 3,000.

A, 4,000; B, 0.

A, 3,000; B, 0.

8. A custom-home builder would likely utilize:process costing.

mass customization.

process budgeting.

job-order costing.

joint costing.

9. Airstream builds recreational motor homes. All of the following activities add value to the finished product except:addition of exterior lights.

installation of carpet.

storage of the vehicle in the sales area.

assembly of the frame to the chassis.

final painting and polishing.

10. If a company sells goods that cost $41,000 for $54,800, the firm will:reduce Finished-Goods Inventory by $54,800.

reduce Cost of Goods Sold by $41,000.

report sales revenue on the balance sheet of $54,800.

follow more than one of the above procedures.

reduce Finished-Goods Inventory by $41,000.

11. Which of the following statements about similarities between process costing and job-order costing are true?

I. Both systems assign production costs to units of output.II. Both systems require extensive knowledge of financial accounting.III. The flow of costs through the manufacturing accounts is essentially the same.II and III.

I, II, and III.

I and III.

III only.

I only.

12. Job no. C12 was completed in November at a cost of $50,900, subdivided as follows: direct material, $23,400; direct labor, $11,000; and manufacturing overhead, $16,500. The journal entry to record the completion of the job is:Cost of goods sold50,900

Finished-goods inventory50,900


Work-in-process inventory50,900


Wages payable11,000

Raw-material inventory23,400

Manufacturing overhead16,500


Cost of goods sold50,900



13. Glass Industries reported the following data for the year just ended: sales revenue, $1,750,000; cost of goods sold, $980,000; cost of goods manufactured, $560,000; and selling and administrative expenses, $170,000. Glass' gross margin would be:

$940,000.

$1,020,000.

$380,000.

$1,190,000.

$770,000.

14. Product costs are:expensed when incurred.

treated in the same manner as period costs.

treated in the same manner as advertising costs.

inventoried.

subtracted from cost of goods sold.

15. Equivalent-unit calculations are necessary to allocate manufacturing costs between:cost of goods manufactured and cost of goods sold.

units sold and ending work in process.

units completed and ending work in process.

beginning work in process and units completed.

cost of goods manufactured and beginning work in process.

16. A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm:was accounting for the usage of direct materials.

also recorded a credit to Manufacturing Supplies Inventory.

was accounting for the usage of indirect materials.

also recorded a credit to Raw-Material Inventory.

also recorded a credit to Raw-Material Inventory and was accounting for the usage of direct materials.

17. The following information relates to October:Production supervisor's salary: $3,700Factory maintenance wages: 259 hours at $ 10 per hourThe journal entry to record the preceding information is: Answer D


Wages payable6,290


Wages payable6,290

Wages payable6,290




Wages payable6,290

Wages payable6,290


18.

18. Which of the following activity cost pools and activity measures likely has the lowest degree of correlation?

ABCDE

19. Unit costs in a process-costing system are derived by using:in-process units.

equivalent units.

completed units.

physical units.

20. Which of the following inventories would a discount retailer such as Wal-Mart report as an asset?Finished goods.

All of the other answers are correct.

Work in process.

Merchandise inventory.

Raw materials.

21. Huxtable charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours. The following data pertain to the current year:

Budgeted manufacturing overhead: $480,000Actual manufacturing overhead: $ 440,000Budgeted machine hours: 20,000Actual machine hours: 16,000Overhead applied to production totaled:$ 600,000.

$ 550,000.

$ 384,000.

some other amount.

$ 352,000.

22. Aladin's customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 16,000 calls and incurred costs of $400,000. If 3,430 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the wholesale operation under activity-based costing system should amount to:$85,750.

$0.

$25.

$400,000.

$314,250.

23. The estimates used to calculate the predetermined overhead rate will virtually always:result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

prove to be correct.

result in a year-end balance of zero in the Manufacturing Overhead account.

result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.

24. The accounting records of Reynolds Corporation revealed the following selected costs: Sales commissions, $66,000; plant supervision, $280,000; and administrative expenses, $197,000. Reynolds's period costs total:$477,000.

$263,000.

$197,000.

$543,000.

$346,000.

25. The accounting records of Bronco Company revealed the following information:

Bronco's cost of goods manufactured is:$522,000.

$519,000.

$571,000.

None of the other answers are correct.

$568,000.

26. Activity-based costing systems have a tendency to distort product costs.True

False

27. At the Nassau Advertising Agency, partner and staff compensation cost is a key driver of agency overhead. In light of this fact, which of the following is the correct expression to determine the amount of overhead applied to a particular client job?None of these, because service providers do not apply overhead to jobs.

(Budgeted compensation budgeted overhead) budgeted compensation cost on the job.

(Budgeted overhead budgeted compensation) budgeted compensation cost on the job.

(Budgeted compensation budgeted overhead) actual compensation cost on the job.

(Budgeted overhead budgeted compensation) actual compensation cost on the job.

28. The following tasks are associated with an activity-based costing system:

1 Assignment of cost to products2 Calculation of pool rates3 Identification of cost drivers4 Identification of cost pools

Which of the following choices correctly expresses the proper order of the preceding tasks?4, 3, 2, 1.

2, 4, 1, 3.

4, 2, 1, 3.

3, 4, 2, 1.

1, 2, 3, 4.

29. Michaella, Inc. uses a process-costing system. A newly-hired accountant identified the following procedures that must be performed by the close of business on Friday:

1Calculation of equivalent units2Analysis of physical flows of units3Assignment of costs to completed units and units still in process4Calculation of unit costs

Which of the following choices correctly expresses the proper order of the preceding tasks?1, 4, 3, 2.

1, 2, 3, 4.

2, 1, 3, 4.

1, 2, 4, 3.

2, 1, 4, 3.

30. Serina Manufacturing recently sold goods that cost $35,000 for $45,000 cash. The journal entries to record this transaction would include:a debit to Finished-Goods Inventory for $35,000.

a credit to Profit on Sale for $10,000.

a credit to Work-in-Process Inventory for $35,000.

a debit to Sales Revenue for $45,000.

a credit to Sales Revenue for $45,000.

31. Ohio, Inc., which uses a process-cost accounting system, began operations on January 1 of the current year. The company incurs conversion cost evenly throughout manufacturing. If Ohio started work on 11,100 units during the period and these units were 50% of the way through manufacturing, it would be correct to say that the company has:5,550 completed units.

5,550 in-process units.

11,100 equivalent units of production.

5,550 equivalent units of production.

11,100 physical units in production.

32. The accounting records of Diego Company revealed the following costs, among others:

Costs that would be considered in the calculation of manufacturing overhead total:$442,000.

$186,000.

$171,000.

$149,000.

None of the other answers are correct.

33. Othello Manufacturing incurred $113,000 of direct labor and $13,400 of indirect labor. The proper journal entry to record these events would include a debit to Work-in-Process for:$13,400.

$113,000.

$126,400.

$0 because Work-in-Process should be credited.

$0 because Work-in-Process is not affected.

34. Cosby uses a weighted-average process-costing system. All materials are added at the beginning of the process; conversion costs are incurred evenly throughout production. The company finished 40,000 units during the period and had 15,000 units in progress at year-end, the latter at the 40% stage of completion. Total material costs amounted to $220,000; conversion costs were $414,000.

The cost of goods completed is:$520,000.

$634,000.

None of the answers is correct.

$312,000.

$414,000.

35. [The following information applies to the questions displayed below.]

St. James, Inc., currently uses traditional costing procedures, applying $1,162,400 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow.

ProductPool No.1(Driver: DLH)Pool No.2(Driver: SU)Pool No.3(Driver: PC)

Beta1,700 35 2,750

Zeta3,500 65 810

Pool Cost$364,000 $300,000 $498,400

The overhead cost allocated to Beta by using traditional costing procedures would be closest to:$584,015.

some other amount.

$380,015.

$782,385.

$496,015.

36. Dixie Company, which applies overhead at the rate of 190% of direct material cost, began work on job no. 101 during June. The job was completed in July and sold during August, having accumulated direct material and labor charges of $27,000 and $15,000, respectively. On the basis of this information, the total overhead applied to job no. 101 amounted to:$79,800.

$28,500.

$70,500.

$51,300.

$0.

37. Strong Company applies overhead based on machine hours. At the beginning of 20x1, the company estimated that manufacturing overhead would be $559,000 and machine hours would total 21,500. By 20x1 year-end, actual overhead totaled $587,900, and actual machine hours were 28,900. On the basis of this information, the 20x1 predetermined overhead rate was:$26 per machine hour.

$1.04 per machine hour.

$1.05 per machine hour.

$21 per machine hour.

$22 per machine hour.

38. In an activity-based costing system, direct materials used would typically be classified as a unit-level cost.True

False


Haskins Textile Co. manufactures a variety of fabrics. All materials are introduced at the beginning of production; conversion cost is incurred evenly through manufacturing. The Weaving Department had 2,000 units of work in process on April 1 that were 40% complete as to conversion costs. During April, 11,500 units were completed and on April 30, 3,000 units remained in production, 50% complete with respect to conversion costs.

The equivalent units of direct materials for April total:15,300.

16,500.

11,500.

14,500.

15,700.

40. The equivalent units of conversion for April total:11,500.

13,000.

15,600.

14,800.

13,800.

41. Which of the following statements about material requisitions is false?Material requisitions authorize the transfer of materials from the production floor to the raw materials warehouse.

Material requisitions are often computerized.

Material requisitions contain information that is useful to the cost accounting department.

Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to complete a job.

Material requisitions are a common example of source documents.


Work-in-process inventory, January 1, 2011$ 50,000

Work-in-process inventory, December 31, 2011$ 55,500

Conversion costs during the year$ 422,000

If direct materials used during the year were $142,000, what was cost of goods manufactured?$553,000.

$147,500.

$558,500.

None of these.

$416,500.

43. If the cost of goods manufactured for the year was $574,000, what was the amount of direct materials used during the year? None of these.

$105,500.

$152,000.

$157,500.

$166,500.

44. Baxter Company, which pays a 11% commission to its salespeople, reported sales revenues of $300,000 for the period just ended. If fixed and variable sales expenses totaled $65,000, what would these expenses total at sales of $240,000?$32,000.

None of these.

$52,000.

$26,400.

$58,400.

45. Gilberto adds materials at the beginning of production and incurs conversion cost uniformly throughout manufacturing. Consider the data that follow.Units

Beginning work in process24,400

Started in August69,200

Production completed59,600

Ending work in process, 40% completed34,000

Conversion cost in the beginning work-in-process inventory totaled $203,000, and August conversion cost totaled $306,000. Assuming use of the weighted-average method, which of the following choices correctly depicts the number of equivalent units for materials and the conversion cost per equivalent unit?Equivalent Units:MaterialsConversion CostPer Equivalent Unit

A. 59,600 $5.86

B. 73,200 $ 5.83

C. 73,200 $ 6.95

D. 93,600 $ 5.83

E. 93,600 $ 6.95

BDCEA46. Consider the following statements regarding traditional costing systems:

I. Overhead costs are applied to products on the basis of volume-related measures.II. All manufacturing costs are easily traceable to the goods produced.III. Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements.

Which of the above statements is (are) true?I and III.

III only.

II only.

II and III.

I only.


Riverside Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets to its commercial customers. Company personnel who earn $240,000 typically perform both tasks; other firm-wide overhead is expected to total $70,000. These costs are allocated as follows:BouquetProductionDeliveryOther

Wages and salaries70%20%10%

Other overhead50%30%20%

Riverside anticipates making 23,500 bouquets and 3,000 deliveries in the upcoming year.

The cost of wages and salaries and other overhead that would be charged to each bouquet made is closest to:some other amount.

$10.24.

$8.64.

$13.19.

$14.44.

48. The cost of wages and salaries and other overhead that would be charged to each delivery is closest to:some other amount.

$23.00.

$30.12.

$23.68.

$44.00.

49. Which of the following is true concerning cost drivers for the predetermined overhead rate in a process-costing system?Predetermined overhead rates are not used in a process-costing system.

If direct labor hours is the cost driver, direct labor and manufacturing overhead may be combined into the single element of conversion cost.

If direct material cost is the cost driver, direct labor and direct materials may be combined into the single element of prime cost.

Cost drivers are irrelevant in process-costing systems.

If direct labor cost is the cost driver, direct labor and manufacturing overhead may be combined into the single element of conversion cost.

50. Many traditional costing systems:write off manufacturing overhead as an expense of the current period.

use a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to improve the accuracy of product costing.

trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates.

combine widely varying elements of overhead into a single cost pool.

produce results far superior to those achieved with activity-based costing.

Act Exam 1

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