Quiz over Ch. 2-6
Name___________________________________
1) Which of the following does NOT affect the direct/indirect classification of a cost?
A) the level of budgeted profit for the next year
B) the design of the operation
C) available technology to gather information about the cost
D) the materiality of the cost in question
2) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of
indirect cost for the soccer equipment line is:
A) material used to make the soccer balls
B) plant supervisor
C) shift supervisor for the soccer line
D) labor to shape the leather used to make the soccer ball
3) All of the following are true EXCEPT that indirect costs:
A) are not easily traced to products or services
B) may be included in manufacturing overhead
C) may be included in prime costs
D) vary with the selection of the cost object
4) Which statement is true?
A) A direct cost of one cost object can be an indirect cost of another cost object.
B) All variable costs are direct costs.
C) All fixed costs are direct costs.
D) A direct cost of one cost object cannot be an indirect cost of another cost object.
5) Archambeau Products Company manufactures office furniture. Recently, the company decided to develop
a formal cost accounting system and classify all costs into three categories. Categorize each of the
following items as being appropriate for (1) cost tracing to the finished furniture, (2) cost allocation of an
indirect manufacturing cost to the finished furniture, or (3) as a nonmanufacturing item.
Item
Cost
Tracing
Cost
Allocation
Nonmanufacturing
Carpenter wages
Depreciation - office building
Glue for assembly
Lathe department supervisor
Lathe depreciation
Lathe maintenance
Lathe operator wages
Lumber
Samples for trade shows
Metal brackets for drawers
Factory washroom supplies
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Answer the following questions using the information below:
Pederson Company reported the following:
Manufacturing costs
Units manufactured
Units sold
Beginning inventory
$2,000,000
50,000
47,000 units sold for $75 per unit
0 units
6) What is the amount of gross margin?
A) $5,405,000
B) $3,525,000
C) $1,750,000
D) $1,645,000
7) The cost of inventory reported on the balance sheet may include all of the following EXCEPT:
A) the cost of parts used in the manufacturing process
B) customer-service costs
C) depreciation of the factory equipment
D) wages of the plant supervisor
8) Which of the following formulas determine cost of goods sold in a merchandising entity?
A) Beginning inventory + Purchases + Ending inventory = Cost of goods sold
B) Beginning inventory + Purchases - Ending inventory = Costs of goods sold
C) Beginning inventory - Ending inventory - Purchases = Cost of goods sold
D) Beginning inventory - Purchases + Ending inventory = Cost of goods sold
Answer the following questions using the information below:
Beginning finished goods, 1/1/20X5
Ending finished goods, 12/31/20X5
Cost of goods sold
Sales revenue
Operating expenses
$ 40,000
33,000
250,000
600,000
120,000
9) What is cost of goods manufactured for 20X5?
A) $243,000
B) $350,000
C) $250,000
D) $257,000
Answer the following questions using the information below:
Northenscold Company sells several products. Information of average revenue and costs is as follows:
Selling price per unit
$20.00
Variable costs per unit:
Direct material
$4.00
Direct manufacturing labor
$1.60
Manufacturing overhead
$0.40
Selling costs
$2.00
Annual fixed costs
$96,000
10) The contribution margin per unit is:
A) $6
B) $8
C) $12
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D) $14
Answer the following questions using the information below:
Sherry's Custom Jewelry sells a single product. 700 units were sold resulting in $7,000 of sales revenue, $2,800 of
variable costs, and $1,200 of fixed costs.
11) Breakeven point in units is:
A) 200 units
C) 500 units
B) 300 units
D) None of these answers are correct.
12) The number of units that must be sold to achieve $6,000 of operating income is:
A) 1,000 units
B) 1,166 units
C) 1,200 units
D) None of these answers are correct.
Answer the following questions using the information below:
Assume the following cost information for Fernandez Company:
Selling price
Variable costs
Total fixed costs
Tax rate
$120 per unit
$80 per unit
$80,000
40%
13) What minimum volume of sales dollars is required to earn an aftertax net income of $30,000?
A) $330,000
B) $465,000
C) $390,000
D) $165,000
14) What is the number of units that must be sold to earn an after-tax net income of $42,000?
A) 4,625 units
B) 3,750 units
C) 1,875 units
D) 3,050 units
15) Mount Carmel Company sells only two products, Product A and Product B.
Selling price
Variable cost per unit
Total fixed costs
Product A
$40
$24
Product B
$50
$40
Total
$840,000
Mount Carmel sells two units of Product A for each unit it sells of Product B. Mount Carmel faces a tax
rate of 30%. Mount Carmel desires a net after-tax income of $73,500. The required number of units sold
would be:
A) 45,000 units of Product A and 22,500 units of Product B
B) 43,500 units of Product A and 21,750 units of Product B
C) 21,750 units of Product A and 43,500 units of Product B
D) 22,500 units of Product A and 45,000 units of product B
16) Lobster Liquidators will make $500,000 if the fishing season weather is good, $200,000 if the weather is
fair, and would actually lose $50,000 if the weather is poor during the season. If the weather service gives a
40% probability of good weather, a 25% probability of fair weather, and a 35% probability of poor weather,
what is the expected monetary value for Lobster Liquidators?
A) $232,500
B) $200,000
C) $500,000
D) $267,500
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17) The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual cost
rates rather than budgeted cost rates is called
A) the adjusted allocation rate approach
B) the write-off of cost of goods sold approach
C) the proration approach
D) None of these answers are correct.
Answer the following questions using the information below:
Because the Abernathy Company used a budgeted indirect-cost rate for its manufacturing operations, the amount
allocated ($200,000) was different from the actual amount incurred ($225,000).
Ending balances in the relevant accounts are:
Work-in-Process
$ 10,000
Finished Goods
20,000
Cost of Goods Sold
170,000
18) What is the journal entry used to write off the difference between allocated and actual overhead directly to
cost of goods sold?
A) Manufacturing Overhead Control
225,000
Work-in-Process Control
55,000
Cost of Goods Sold
170,000
B) Manufacturing Overhead Control
200,000
Cost of Goods Sold
25,000
Manufacturing Overhead Allocated
225,000
C) Manufacturing Overhead Allocated
200,000
Cost of Goods Sold
25,000
Manufacturing Overhead Control
225,000
D) Manufacturing Overhead Allocated
200,000
Work-in-Process Control
30,000
Cost of Goods Sold
170,000
19) The use of a single indirect-cost rate is more likely to:
A) undercost high-volume simple products
C) undercost low-volume complex products
B) undercost lower-priced products
D) Both B and C are correct.
20) Design costs are an example of:
A) unit-level costs
C) batch-level costs
B) facility-sustaining costs
D) product-sustaining costs
21) It is usually difficult to find good cause-and-effect relationships between ________ and a cost allocation
base.
A) facility-sustaining costs
B) unit-level costs
C) batch-level costs
D) product-sustaining costs
22) Responsibility centers include all of the following EXCEPT:
A) customers
B) investment
C) revenue
23) A maintenance manager is most likely responsible for a(n):
A) profit center
B) revenue center
C) cost center
D) investment center
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D) cost
24) Controllability may be difficult to pinpoint because of all the following EXCEPT:
A) some costs depend on market conditions
B) the current use of stretch or challenge targets
C) current managers may have inherited inefficiencies of a previous manager
D) few costs are under the sole influence of one manager
25) A primary consideration in assigning a cost to a responsibility center is:
A) whether the cost is direct or indirect
B) where in the organizational structure the cost was incurred
C) who can best control the change in that cost
D) whether the cost is fixed or variable
26) The Japanese use the term kaizen when referring to:
A) continuous improvement
C) scarce resources
B) the sales forecast
D) pro forma financial statements
27) Building in budgetary slack includes:
A) underestimating budgeted costs
B) overestimating budgeted revenues
C) making budgeted targets more easily achievable
D) All of these answers are correct.
28) The cash flow statement does NOT include:
A) cash outflows paid toward raw material purchases
B) cash inflows from the collection of receivables
C) all sales revenues
D) interest paid and received
Answer the following questions using the information below:
The following information pertains to Hepburn Company:
Month
January
February
March
Sales
$60,000
$80,000
$100,000
Purchases
$32,000
$40,000
$56,000
Cash is collected from customers in the following manner:
Month of sale
30%
Month following the sale 70%
· 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
· Labor costs are 20% of sales. Other operating costs are $30,000 per month (including $8,000 of depreciation).
Both of these are paid in the month incurred.
· The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required at the end of the month.
Money can be borrowed in multiples of $1,000.
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29) How much cash will be collected from customers in March?
A) $94,000
B) $100,000
C) $86,000
D) None of these answers are correct.
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30) How much cash will be paid to suppliers in March?
A) $88,000
C) $46,400
B) $56,000
D) None of these answers are correct.
31) Messinger Manufacturing Company had the following account balances for the quarter ending March 31,
unless otherwise noted:
Work-in-process inventory (January 1)
Work-in-process inventory (March 31)
Finished goods inventory (January 1)
Finished goods inventory (March 31)
Direct materials used
Indirect materials used
Direct manufacturing labor
Indirect manufacturing labor
Property taxes on manufacturing plant building
Salespersons' company vehicle costs
Depreciation of manufacturing equipment
Depreciation of office equipment
Miscellaneous plant overhead
Plant utilities
General office expenses
Marketing distribution costs
$ 140,400
171,000
540,000
510,000
378,000
84,000
480,000
186,000
28,800
12,000
264,000
123,600
135,000
92,400
305,400
30,000
Required:
a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare a cost of goods sold schedule for the quarter.
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