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Question 1: (3 points)

______________ is an example of a line position.

Human resources manager for a community college

Controller for a merchandising company

Chief financial officer of a merchandising company

Store manager for Best Buy


Question 2: (3 points)

Which of the following is a weakness of the quick-and-dirty scattergraph method of analyzing mixed cost?

(a) It is impossible to determine variable cost per unit.

(b) Only two data points are used and the rest are ignored in drawing the scattergraph.

(c) Different people will have different answers even though they are analyzing the same set of data.

(d) Both B and C above


Question 3: (3 points)

Elliott Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead
to jobs. The company manufactures tools to customer specifications. The following data pertain to Job 1501:

What is the total manufacturing cost recorded on Job 1501?

$9,600

$8,800

$11,100

$10,300

Question 4: (3 points)

Haala Inc. is a merchandising company. Last month the company's cost of goods sold was $68,000. The
company's beginning merchandise inventory was $11,000 and its ending merchandise inventory was $17,000.
What was the total amount of the company's merchandise purchases for the month?

$62,000
$96,000

$68,000

$74,000
Question 5: (3 points)

In the preparation of the schedule of Cost of Goods Manufactured, the accountant incorrectly included as part of
manufacturing overhead the rental expense on the firm's retail facilities. This inclusion would:

overstate the cost of goods sold on the income statement.

overstate period expenses on the income statement.

have no effect on the cost of goods manufactured.

understate the cost of goods manufactured.


Question 6: (3 points)

Managerial accounting is not governed by generally accepted accounting principles (GAAP).

True

False
Question 7: (3 points)

Wright Company has observed that at an activity level of 5,000 units the cost for maintenance is $6,500, and at
10,000 units the cost for maintenance is $9,000. Using the high-low method, the cost formula for maintenance is:

$4,000 plus $.50 per unit

$1.30 per unit

$.90 per unit

$3,000 plus $.60 per unit

Question 8: (3 points)

A is a fixed cost; B is a variable cost. During the current year the level of activity has decreased but is still within
the relevant range. We would expect that:

The cost per unit of A has decreased.

The cost per unit of A has remained unchanged.

The cost per unit of B has decreased.

The cost per unit of B has remained unchanged.


Question 9: (3 points)

A consulting company would like to develop a method of predicting its total costs in a period. The following past
costs have been recorded by the company in two periods:
The best estimate of the cost formula for the company (where X is the number of client-hours) is:

Y = $42,000 + $95 X

Y = $51,500 – $95 X

Y = $46,500 + $85 X

Y = $46,500 – $85 X
Question 10: (3 points)

The cost of the cushions that are used to manufacture sofas is best described as a:

manufacturing overhead cost.

variable cost.

period cost.

conversion cost.

Question 11: (3 points)

Direct costs:

can be easily traced to a particular cost object.

are incurred due to a specific decision.

are incurred to benefit a particular accounting period.


are the variable costs of producing a product.

Question 12: (3 points)

Mcclean Corporation reported the following data for the month of October:

Inventories: Beginning Ending


Raw materials $31,000 $37,000
Work in process $17,000 $24,000
Finished goods $55,500 $50,600

Additional information:
Raw materials purchases $71,000
Direct labor cost $44,000
Manufacturing overhead cost $61,000
Selling expense $18,500
Administrative expense $43,200

The cost of goods manufactured for October was:

$169,800

$142,500

$163,000

$187,600

Question 13: (3 points)

(Appendix 5A) Gaumer Corporation's recent utility costs are listed below:

Management believes that utility cost is a mixed cost that depends on machine-hours.

Using the least-squares regression method, the estimate of the fixed component of utility cost per month is
closest to:

$20,834

$20,449
$6,314

$6,059
Question 14: (3 points)

The following accounts are from last year's books of Sharp Manufacturing:

Sharp uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. What is the
amount of direct materials used for the year?

$77,000

$82,000

$66,000

$84,000
Question 15: (3 points)

The cost of goods sold of a manufacturing company equals beginning finished goods inventory + cost of goods
manufactured – ending finished goods inventory.
True

False
Question 16: (3 points)

Cobra Mining Company spent $200 million five years ago to develop underground mining and milling operations
in a remote area of a western state. Metals prices have since declined precipitously and the company is
considering abandoning the operation. The term that would best describe the $200 million expenditure when
considering the abandonment decision is:

opportunity cost.

variable cost.

sunk cost.

differential cost.
Question 17: (3 points)

Corporate governance is the legal framework that allows managers to control and direct lower-level workers on
the job.

True

False
Question 18: (3 points)

At a volume of 20,000 direct labor hours, Tirso Company incurs $50,000 in factory overhead costs, including
$10,000 in fixed costs. Assuming that this activity is within the relevant range, if volume increases to 25,000 direct
labor hours, Tirso Company would expect to incur total factory overhead costs of:

$60,000

$72,500

$62,500

$50,000

Question 19: (3 points)

At a volume of 20,000 direct labor hours, Tirso Company incurs $50,000 in factory overhead costs, including
$10,000 in fixed costs. Assuming that this activity is within the relevant range, if volume increases to 25,000 direct
labor hours, Tirso Company would expect to incur total factory overhead costs of:

$62,500

$60,000

$72,500

$50,000
Question 20: (3 points)

Which of the following is NOT one of the three major customer value propositions discussed in the text?

customer intimacy

discount pricing

product leadership

operational excellence
Question 21: (3 points)

Prime costs consist of:

direct materials and the variable portion of manufacturing overhead.

direct labor and indirect labor.

direct labor and direct materials.

indirect labor and the fixed portion of manufacturing overhead.

Question 22: (3 points)

Gabrio Inc. is a merchandising company. Last month the company's merchandise purchases totaled $87,000. The
company's beginning merchandise inventory was $19,000 and its ending merchandise inventory was $11,000.
What was the company's cost of goods sold for the month?

$95,000
$79,000

$87,000

$117,000
Question 23: (3 points)

The distinction between indirect and direct costs depends on:

whether a cost can be easily traced to the cost object under consideration.

whether a cost differs between alternatives.

whether a cost is variable or fixed.

whether a cost is a product or a period cost.


Question 24: (3 points)

A strategy requires effective use of Six Sigma improvement techniques.

True

False

Question 25: (3 points)

Inspection costs at one of Ratulowski Corporation's factories are listed below:


Management believes that inspection cost is a mixed cost that depends on units produced.

Using the high-low method, the estimate of the fixed component of inspection cost per month is closest to:

$10,344

$10,176

$10,441

$3,852

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