Cost Management A Strategic Emphasis Edward Blocher 8th Edition- Test Bank
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Sample Test
Cost Management: A Strategic Emphasis, 8e (Blocher)
Chapter 3 Basic Cost Management Concepts
1) Since indirect cost cannot be conveniently or economically
traced directly to a cost pool or cost object, the management accountant will:
1. A)
Assign them by means of cost allocation.
2. B)
Assign them where needed.
3. C)
Assign them randomly to even out these costs.
4. D)
Not assign them at all.
Answer: A
Difficulty: 1 Easy
Topic: Cost Assignment—Direct and Indirect Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement
2) All indirect manufacturing costs are commonly combined into a
single cost pool called:
1. A)
Activity cost pools.
2. B)
Value streams.
3. C)
Resources.
4. D)
Overhead.
5. E)
Other manufacturing costs.
Answer: D
Difficulty: 1 Easy
Topic: Cost Assignment—Direct and Indirect Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
3) Variable costs within the relevant range for a firm are
assumed:
1. A)
Not to vary per unit.
2. B)
Not to vary in total.
3. C) To
be nonlinear.
4. D) To
be curvilinear.
Answer: A
Difficulty: 2 Medium
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
4) How will unit (average) cost of manufacturing (materials,
labor and overhead) usually change if the production level rises?
1. A) It
will remain constant.
2. B) It
will increase in direct proportion to the production increase.
3. C) It
will increase, but inversely with the production increase.
4. D) It
will decrease inversely and in direct proportion to the production increases.
5. E) It
will decrease, but not in direct proportion to the production increase.
Answer: E
Difficulty: 2 Medium
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
5) Structural cost drivers are to executional cost drivers as:
1. A)
Long-term is to short-term.
2. B)
Fixed is to variable.
3. C)
Total is to partial.
4. D)
Direct is to indirect.
Answer: A
Difficulty: 1 Easy
Topic: Cost Drivers—Structural and Executional
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Analyze
AACSB: Analytical Thinking
AICPA: FN Measurement; BB Critical Thinking
6) Theoretically, a decision maker would probably be willing to
buy cost management information if:
1. A) It
is accurate.
2. B) It
is consistent with management objectives.
3. C) It
is timely.
4. D)
Its value is equal to or greater than its cost.
Answer: D
Difficulty: 3 Hard
Topic: Costs, Cost Drivers, Cost Objects, and Cost
Assignment
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
7) Any product, service, or organizational unit to which costs
are assigned for some management purpose is a(n):
1. A)
Cost object.
2. B)
Direct cost.
3. C)
Indirect cost.
4. D)
Cost driver.
5. E)
Allocation base.
Answer: A
Difficulty: 1 Easy
Topic: Cost Drivers and Cost Objects
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
8) Which one of the following is not a type of
cost driver?
1. A)
Structural cost driver.
2. B)
Executional cost driver.
3. C)
Volume-Based cost driver.
4. D)
Differential cost driver.
5. E)
Activity-Based cost driver.
Answer: D
Difficulty: 1 Easy
Topic: Cost Drivers and Cost Objects
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
9) The range of the cost driver in which the actual value of the
cost driver is expected to fall is called the:
1. A)
Actual cost range.
2. B)
Driver range.
3. C)
Activity range.
4. D)
Expected cost range.
5. E)
Relevant range.
Answer: E
Difficulty: 1 Easy
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
10) The change in total cost associated with each change in the
quantity of the cost driver is:
1. A)
Average cost.
2. B)
Controllable cost.
3. C)
Variable cost.
4. D)
Unit cost.
Answer: C
Difficulty: 1 Easy
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
11) The additional cost incurred as the cost driver increases by
one unit is:
1. A)
Average cost.
2. B)
Controllable cost.
3. C)
Variable cost.
4. D)
Unit cost.
Answer: C
Difficulty: 1 Easy
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
12) Strategic analysis uses which of the following to help a
firm improve its competitive position through an analysis of product and
production complexity?
1. A)
Differential cost drivers.
2. B)
Discretionary cost drivers.
3. C)
Structural cost drivers.
4. D)
Marginal cost drivers.
Answer: C
Difficulty: 1 Easy
Topic: Cost Drivers—Structural and Executional; Strategy;
Basic Cost Management Concepts
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.; 03-01 Recognize
the strategic role of basic cost management concepts.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
13) Which one of the following would not be
found in a merchandising company?
1. A)
Beginning inventory.
2. B)
Cost of goods sold.
3. C)
Ending inventory.
4. D)
Gross profit.
5. E)
Work-in-process.
Answer: E
Difficulty: 1 Easy
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
14) The cost of goods that were finished and transferred out of
work-in-process during the current period is:
1. A)
Cost of goods sold.
2. B)
Cost of goods available for use.
3. C)
Cost of goods manufactured.
4. D)
Cost of goods available for sale.
5. E)
Cost of goods purchased.
Answer: C
Difficulty: 1 Easy
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
15) Which of the following tend to be non-differential in the
short term since they cannot be changed, but are more likely to be differential
in the long term?
1. A)
Fixed costs.
2. B)
Variable costs.
3. C)
Mixed costs.
4. D)
Semivariable costs.
Answer: A
Difficulty: 1 Easy
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
16) Assume the following information pertaining to Cub Company:
|
|
|
|
|
|
Prime costs |
$ |
195,000 |
|
|
Conversion costs |
|
221,000 |
|
|
Direct materials used |
|
85,000 |
|
|
Beginning work in process |
|
98,000 |
|
|
Ending work in process |
|
81,000 |
|
Direct labor used is calculated to be:
1. A)
$306,000.
2. B)
$26,000.
3. C) $110,000.
4. D)
$84,000.
5. E)
$111,000.
Answer: C
Explanation: $110,000 = $195,000 prime costs − $85,000
direct materials used
Difficulty: 1 Easy
Topic: Cost Assignment—Direct and Indirect Costs; Cost
Concepts for Product and Service Costing
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.; 03-04 Demonstrate
how costs flow through the accounts and prepare and interpret an income
statement for both a manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
17) Assume the following information pertaining to Cub Company:
|
|
|
|
|
|
Prime costs |
$ |
195,000 |
|
|
Conversion costs |
|
221,000 |
|
|
Direct materials used |
|
85,000 |
|
|
Beginning work in process |
|
98,000 |
|
|
Ending work in process |
|
81,000 |
|
Factory overhead is calculated to be:
1. A)
$306,000.
2. B)
$26,000.
3. C)
$110,000.
4. D)
$84,000.
5. E)
$111,000.
Answer: E
Explanation: $111,000 = $221,000 conversion costs − $110,000
(prime costs minus direct materials used)
Difficulty: 2 Medium
Topic: Cost Assignment—Direct and Indirect Costs; Cost
Concepts for Product and Service Costing
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.; 03-04 Demonstrate
how costs flow through the accounts and prepare and interpret an income
statement for both a manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
18) Assume the following information pertaining to Cub Company:
|
|
|
|
|
|
Prime costs |
$ |
195,000 |
|
|
Conversion costs |
|
221,000 |
|
|
Direct materials used |
|
85,000 |
|
|
Beginning work in process |
|
98,000 |
|
|
Ending work in process |
|
81,000 |
|
Total manufacturing cost is calculated to be:
1. A)
$306,000.
2. B)
$26,000.
3. C)
$110,000.
4. D)
$331,000.
5. E)
$111,000.
Answer: A
Explanation: $306,000 = $85,000 + $110,000 + $111,000
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
19) Assume the following information pertaining to Cub Company:
|
|
|
|
|
|
Prime costs |
$ |
195,000 |
|
|
Conversion costs |
|
221,000 |
|
|
Direct materials used |
|
85,000 |
|
|
Beginning work in process |
|
98,000 |
|
|
Ending work in process |
|
81,000 |
|
Cost of goods manufactured is calculated to be:
1. A)
$289,000.
2. B)
$348,000.
3. C)
$314,000.
4. D)
$297,000.
5. E)
$323,000.
Answer: E
Explanation: $323,000 = $98,000 + 306,000 − 81,000
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
20) Assume the following information pertaining to Moonbeam
Company:
|
|
Beginning |
|
Ending |
|
||||||
|
Finished goods inventory |
$ |
130,000 |
|
|
$ |
124,000 |
|
|||
|
Work in process inventory |
|
85,000 |
|
|
|
104,000 |
|
|||
|
Direct materials |
|
117,000 |
|
|
|
130,000 |
|
|||
Costs incurred during the period are as follows:
|
|
|
|
|
|
Total manufacturing costs |
$ |
896,000 |
|
|
Factory overhead |
|
199,000 |
|
|
Direct materials used |
|
156,000 |
|
Materials purchases are calculated to be:
1. A)
$143,000.
2. B)
$156,000.
3. C)
$91,000.
4. D)
$169,000.
5. E)
$140,000.
Answer: D
Explanation: $169,000 = $156,000 + $130,000 − $117,000
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
21) Assume the following information pertaining to Moonbeam
Company:
|
|
Beginning |
|
Ending |
|
||||||
|
Finished goods inventory |
$ |
130,000 |
|
|
$ |
124,000 |
|
|||
|
Work in process inventory |
|
85,000 |
|
|
|
104,000 |
|
|||
|
Direct materials |
|
117,000 |
|
|
|
130,000 |
|
|||
Costs incurred during the period are as follows:
|
|
|
|
|
|
Total manufacturing costs |
$ |
896,000 |
|
|
Factory overhead |
|
199,000 |
|
|
Direct materials used |
|
156,000 |
|
Cost of goods sold is calculated to be:
1. A)
$890,000.
2. B)
$896,000.
3. C) $883,000.
4. D)
$877,000.
5. E)
$870,000.
Answer: C
Explanation: COGM = $85,000 + $896,000 − $104,000 =
$877,000
COGS = $130,000 + $877,000 − $124,000 = $883,000
Difficulty: 3 Hard
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
22) The following information was taken from the accounting
records of Elliott Manufacturing Corp. Unfortunately, some of the data were
destroyed by a computer malfunction.
|
|
|
|
|
|
Sales Revenue |
$ |
58,000 |
|
|
Finished Goods Inventory, Beginning |
|
9,000 |
|
|
Finished Goods Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Sold |
|
? |
|
|
Gross Margin |
|
25,000 |
|
|
Direct Materials Used |
|
10,000 |
|
|
Selling and Administrative Expense |
|
? |
|
|
Operating Income |
|
14,000 |
|
|
Work-in-Process Inventory, Beginning |
|
? |
|
|
Work-in-Process Inventory, Ending |
|
5,000 |
|
|
Direct Labor Used |
|
9,000 |
|
|
Factory Overhead |
|
12,000 |
|
|
Total Manufacturing Cost |
|
? |
|
|
Cost of Goods Manufactured |
|
? |
|
Cost of goods sold is calculated to be:
1. A) $32,000.
2. B)
$30,000.
3. C)
$33,000.
4. D)
$38,000.
5. E)
$27,000.
Answer: C
Explanation: Sales − Gross Margin = $58,000 − $25,000 =
$33,000
Difficulty: 1 Easy
Topic: Income Statement Preparation
Learning Objective: 03-04 Demonstrate how costs flow through
the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
23) The following information was taken from the accounting
records of Elliott Manufacturing Corp. Unfortunately, some of the data were
destroyed by a computer malfunction.
|
|
|
|
|
|
Sales Revenue |
$ |
58,000 |
|
|
Finished Goods Inventory, Beginning |
|
9,000 |
|
|
Finished Goods Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Sold |
|
? |
|
|
Gross Margin |
|
25,000 |
|
|
Direct Materials Used |
|
10,000 |
|
|
Selling and Administrative Expense |
|
? |
|
|
Operating Income |
|
14,000 |
|
|
Work-in-Process Inventory, Beginning |
|
? |
|
|
Work-in-Process Inventory, Ending |
|
5,000 |
|
|
Direct Labor Used |
|
9,000 |
|
|
Factory Overhead |
|
12,000 |
|
|
Total Manufacturing Cost |
|
? |
|
|
Cost of Goods Manufactured |
|
? |
|
Cost of goods manufactured is calculated to be:
1. A)
$32,000.
2. B)
$30,000.
3. C)
$33,000.
4. D)
$38,000.
5. E)
$27,000.
Answer: B
Explanation: $30,000 = $33,000 + $6,000 − $9,000
Difficulty: 2 Medium
Topic: Income Statement Preparation
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
24) The following information was taken from the accounting
records of Elliott Manufacturing Corp. Unfortunately, some of the data were
destroyed by a computer malfunction.
|
|
|
|
|
|
Sales Revenue |
$ |
58,000 |
|
|
Finished Goods Inventory, Beginning |
|
9,000 |
|
|
Finished Goods Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Sold |
|
? |
|
|
Gross Margin |
|
25,000 |
|
|
Direct Materials Used |
|
10,000 |
|
|
Selling and Administrative Expense |
|
? |
|
|
Operating Income |
|
14,000 |
|
|
Work-in-Process Inventory, Beginning |
|
? |
|
|
Work-in-Process Inventory, Ending |
|
5,000 |
|
|
Direct Labor Used |
|
9,000 |
|
|
Factory Overhead |
|
12,000 |
|
|
Total Manufacturing Cost |
|
? |
|
|
Cost of Goods Manufactured |
|
? |
|
Selling and administrative expenses are calculated to be:
1. A)
$4,000.
2. B)
$9,000.
3. C)
$11,000.
4. D)
$12,000.
5. E)
$16,000.
Answer: C
Explanation: $11,000 = Gross margin–operating income =
$25,000 − $14,000
Difficulty: 1 Easy
Topic: Income Statement Preparation
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
25) The following information was taken from the accounting
records of Elliott Manufacturing Corp. Unfortunately, some of the data were
destroyed by a computer malfunction.
|
|
|
|
|
|
Sales Revenue |
$ |
58,000 |
|
|
Finished Goods Inventory, Beginning |
|
9,000 |
|
|
Finished Goods Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Sold |
|
? |
|
|
Gross Margin |
|
25,000 |
|
|
Direct Materials Used |
|
10,000 |
|
|
Selling and Administrative Expense |
|
? |
|
|
Operating Income |
|
14,000 |
|
|
Work-in-Process Inventory, Beginning |
|
? |
|
|
Work-in-Process Inventory, Ending |
|
5,000 |
|
|
Direct Labor Used |
|
9,000 |
|
|
Factory Overhead |
|
12,000 |
|
|
Total Manufacturing Cost |
|
? |
|
|
Cost of Goods Manufactured |
|
? |
|
Work in process inventory, beginning, is calculated to be:
1. A)
$4,000.
2. B)
$9,000.
3. C)
$11,000.
4. D)
$12,000.
5. E)
$16,000.
Answer: A
Explanation: $4,000 = COGM + End WIP − (total
manufacturing cost) = $30,000 + $5,000 − ($10,000 + $9,000 + $12,000)
Difficulty: 2 Medium
Topic: Income Statement Preparation
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
26) The following data pertains to Lam Co.’s manufacturing
operations:
|
Inventories |
4/1 |
|
4/30 |
|
|
||||||
|
Direct Materials |
$ |
18,000 |
|
|
$ |
15,000 |
|
|
|||
|
Work in Process |
|
9,000 |
|
|
|
6,000 |
|
|
|||
|
Finished Goods |
|
27,000 |
|
|
|
36,000 |
|
|
|||
Additional information for the month of April:
|
|
|
|
|
|
Direct materials purchased |
$ |
32,000 |
|
|
Direct labor |
|
30,000 |
|
|
Direct labor rate per hour |
|
10.00 |
|
|
Factor overhead incurred |
|
40,000 |
|
|
Overhead is applied at $12 per direct
labor hour. |
For the month of April, prime cost incurred was:
1. A)
$75,000.
2. B)
$66,000.
3. C)
$65,000.
4. D)
$62,000.
Answer: C
Explanation: $65,000 = Material (($18,000 + $32,000 – $15,000)
= $35,000) plus Direct labor of $30,000
Difficulty: 2 Medium
Topic: Cost Assignment—Direct and Indirect Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
27) The following data pertains to Lam Co.’s manufacturing
operations:
|
Inventories |
4/1 |
|
4/30 |
|
||||||
|
Direct Materials |
$ |
18,000 |
|
|
$ |
15,000 |
|
|||
|
Work in Process |
|
9,000 |
|
|
|
6,000 |
|
|||
|
Finished Goods |
|
27,000 |
|
|
|
36,000 |
|
|||
Additional information for the month of April:
|
|
|
|
|
|
Direct materials purchased |
$ |
32,000 |
|
|
Direct labor |
|
30,000 |
|
|
Direct labor rate per hour |
|
10.00 |
|
|
Factor overhead incurred |
|
40,000 |
|
|
Overhead is applied at $12 per direct
labor hour. |
For the month of April, conversion cost incurred was:
1. A)
$75,000.
2. B)
$66,000.
3. C)
$70,000.
4. D)
$39,000.
Answer: B
Explanation: Labor hours −$30,000/$10.00 = 3,000 hours
Conversion of labor plus applied overhead = $30,000 + (3,000 ×
$12) = $66,000
Difficulty: 1 Easy
Topic: Cost Assignment—Direct and Indirect Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
28) The three attributes of cost information include accuracy,
timeliness, and:
1. A)
reliability.
2. B)
relevance.
3. C)
cost-benefit.
4. D)
understandability.
Answer: C
Difficulty: 1 Easy
Topic: Costs, Cost Drivers, Cost Objects, and Cost
Assignment
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
29) When cost relationships are linear, total variable costs
will vary in proportion to changes in:
1. A)
Direct labor hours.
2. B)
Total material cost.
3. C)
Total overhead cost.
4. D)
Volume of production.
5. E)
Machine hours.
Answer: D
Difficulty: 2 Medium
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
30) The term relevant range as used in cost accounting means the
range over which:
1. A)
Costs may fluctuate.
2. B)
Cost relationships are approximately linear.
3. C)
Production may vary.
4. D)
Relevant costs are incurred.
Answer: B
Difficulty: 2 Medium
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
31) If the volume of production is increased over the level
planned, the cost per unit would be expected to:
1. A)
Decrease for fixed costs and remain unchanged for variable costs.
2. B)
Remain unchanged for fixed costs and increase for variable costs.
3. C)
Decrease for fixed costs and increase for variable costs.
4. D)
Increase for fixed costs and increase for variable costs.
Answer: A
Difficulty: 2 Medium
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
32) When production levels are expected to decline within a
relevant range, what effects would be anticipated with respect to each of the
following?
|
|
Fixed Costs per Unit |
|
Variable Costs per Unit |
|
A) |
increase |
|
no change |
|
B) |
increase |
|
increase |
|
C) |
no change |
|
no change |
|
D) |
no change |
|
increase |
1. A)
Option A
2. B)
Option B
3. C)
Option C
4. D)
Option D
Answer: A
Difficulty: 2 Medium
Topic: Cost Behavior—Variable-Fixed-Unit Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Analyze
AACSB: Analytical Thinking
AICPA: FN Measurement; BB Critical Thinking
33) Which of the following is normally considered to be a
product cost?
1. A)
Insurance on a factory building.
2. B)
Selling expenses.
3. C)
President’s salary.
4. D)
Miscellaneous office expense.
Answer: A
Difficulty: 1 Easy
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-03 Explain the cost concepts used
in product and service costing.
Bloom’s: Understand
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
34) The Gray Company has a staff of five clerks in its general
accounting department. Three clerks who work during the day perform sundry accounting
tasks; the two clerks who work in the evening are responsible for (1)
collecting the cost data for the various jobs in process, (2) verifying
manufacturing material and labor reports, and (3) supplying production reports
to the supervisors by the next morning. The salaries of these two clerks who
work at night should be classified as:
1. A)
Period costs.
2. B)
Direct costs.
3. C)
Product costs.
4. D)
Indirect costs.
Answer: A
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-03 Explain the cost concepts used
in product and service costing.
Bloom’s: Analyze
AACSB: Analytical Thinking
AICPA: FN Measurement; BB Critical Thinking
35) A manufacturer of machinery currently produces equipment for
a single client. The client supplies all required raw material on a no-cost
basis. The manufacturer contracts to complete the desired units from this raw
material. The total production costs incurred by the manufacturer are correctly
identified as:
1. A)
Prime costs.
2. B) Conversion
costs.
3. C)
Variable production costs.
4. D)
Factory overhead.
Answer: B
Difficulty: 2 Medium
Topic: Costs, Cost Drivers, Cost Objects, and Cost
Assignment
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Analyze
AACSB: Analytical Thinking
AICPA: FN Measurement; BB Critical Thinking
36) Certain workers are assigned the task of unpacking
production materials received from suppliers. These workers place the material
in a storage area pending subsequent use in the production process. The labor
cost of such workers is normally classified as:
1. A)
Direct labor.
2. B)
Direct materials.
3. C)
Indirect labor.
4. D)
Indirect materials.
Answer: C
Difficulty: 1 Easy
Topic: Cost Assignment—Direct and Indirect Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Analyze
AACSB: Analytical Thinking
AICPA: FN Measurement; BB Critical Thinking
37) Prime cost and conversion cost share what common element of
total cost?
1. A)
Direct labor.
2. B)
Direct materials.
3. C)
Variable overhead.
4. D)
Fixed overhead.
Answer: A
Difficulty: 1 Easy
Topic: Cost Assignment—Direct and Indirect Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Critical Thinking
38) Conrad, Inc. recently lost a portion of its records in an
office fire. The following information was salvaged from the accounting
records.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
65,000 |
|
|
Work-in-Process Inventory, Beginning |
|
10,500 |
|
|
Work-in-Process Inventory, Ending |
|
9,000 |
|
|
Selling and Administrative Expense |
|
15,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Used |
|
? |
|
|
Factory Overhead Applied |
|
12,000 |
|
|
Operating Income |
|
14,000 |
|
|
Direct Materials Inventory, Beginning |
|
11,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
60,000 |
|
|
Direct labor cost incurred during the
period amounted to 1.5 times the factory overhead. The CFO of Conrad, Inc.
has asked you to recalculate the following accounts and to report to him by
the end of the day. |
What is the amount of direct materials used?
500.
A) $23,500.
501.
B) $28,500.
502.
C) $31,000.
503.
D) $36,000.
Answer: B
Explanation: = (use the WIP account)
= $60,000 + $9,000 − $10,500 − $12,000 − (1.5 × $12,000) =
$28,500
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
39) Conrad, Inc. recently lost a portion of its records in an
office fire. The following information was salvaged from the accounting
records.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
65,000 |
|
|
Work-in-Process Inventory, Beginning |
|
10,500 |
|
|
Work-in-Process Inventory, Ending |
|
9,000 |
|
|
Selling and Administrative Expense |
|
15,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Used |
|
? |
|
|
Factory Overhead Applied |
|
12,000 |
|
|
Operating Income |
|
14,000 |
|
|
Direct Materials Inventory, Beginning |
|
11,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
60,000 |
|
|
Direct labor cost incurred during the
period amounted to 1.5 times the factory overhead. The CFO of Conrad, Inc.
has asked you to recalculate the following accounts and to report to him by
the end of the day. |
What is the amount of direct materials purchased?
500.
A) $23,500.
501.
B) $28,500.
502.
C) $31,000.
503.
D) $36,000.
Answer: A
Explanation: $23,500 = $28,500 − ($11,000 − $6,000)
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
40) Conrad, Inc. recently lost a portion of its records in an
office fire. The following information was salvaged from the accounting
records.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
65,000 |
|
|
Work-in-Process Inventory, Beginning |
|
10,500 |
|
|
Work-in-Process Inventory, Ending |
|
9,000 |
|
|
Selling and Administrative Expense |
|
15,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Used |
|
? |
|
|
Factory Overhead Applied |
|
12,000 |
|
|
Operating Income |
|
14,000 |
|
|
Direct Materials Inventory, Beginning |
|
11,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
60,000 |
|
Direct labor cost incurred during the period amounted to 1.5
times the factory overhead. The CFO of Conrad, Inc. has asked you to
recalculate the following accounts and to report to him by the end of the day.
What is the amount in the finished goods inventory at the
beginning of the year?
500.
A) $10,500.
501.
B) $15,000.
502.
C) $20,000.
503.
D) $25,000.
Answer: C
Explanation: $20,000 = $65,000 + $15,000 – $60,000
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
41) Conrad, Inc. recently lost a portion of its records in an
office fire. The following information was salvaged from the accounting
records.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
65,000 |
|
|
Work-in-Process Inventory, Beginning |
|
10,500 |
|
|
Work-in-Process Inventory, Ending |
|
9,000 |
|
|
Selling and Administrative Expense |
|
15,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Used |
|
? |
|
|
Factory Overhead Applied |
|
12,000 |
|
|
Operating Income |
|
14,000 |
|
|
Direct Materials Inventory, Beginning |
|
11,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
60,000 |
|
Direct labor cost incurred during the period amounted to 1.5
times the factory overhead. The CFO of Conrad, Inc. has asked you to
recalculate the following accounts and to report to him by the end of the day.
What is the amount of total manufacturing cost?
500.
A) $50,500.
501.
B) $52,000.
502.
C) $56,400.
503.
D) $58,500.
Answer: D
Explanation: $58,500 = $28,500 + $18,000 + $12,000, where
labor of $18,000 = 1.5 × $12,000
Difficulty: 3 Hard
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
42) Conrad, Inc. recently lost a portion of its records in an
office fire. The following information was salvaged from the accounting
records.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
65,000 |
|
|
Work-in-Process Inventory, Beginning |
|
10,500 |
|
|
Work-in-Process Inventory, Ending |
|
9,000 |
|
|
Selling and Administrative Expense |
|
15,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Used |
|
? |
|
|
Factory Overhead Applied |
|
12,000 |
|
|
Operating Income |
|
14,000 |
|
|
Direct Materials Inventory, Beginning |
|
11,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
60,000 |
|
Direct labor cost incurred during the period amounted to 1.5
times the factory overhead. The CFO of Conrad, Inc. has asked you to
recalculate the following accounts and to report to him by the end of the day.
What is the amount of net sales?
500.
A) $68,500.
501.
B) $94,000.
502.
C) $72,500.
503.
D) $75,000.
Answer: B
Explanation: $94,000 = $14,000 + $15,000 + $65,000
Where $14,000 = Operating Income; $15,000 = Sell & Admin.
Expenses; and $65,000 = COGS
Difficulty: 2 Medium
Topic: Income Statement Preparation
Learning Objective: 03-04 Demonstrate how costs flow through
the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
43) Tierney Construction, Inc. recently lost a portion of its
financial records in an office theft. The following accounting information
remained in the office files:
|
|
|
|
|
|
Cost of goods sold |
$ |
80,000 |
|
|
Work in process inventory, January 1,
2016 |
|
18,500 |
|
|
Work in process inventory, December 31,
2016 |
|
14,500 |
|
|
Selling and Administrative Expenses |
|
16,000 |
|
|
Net Income |
|
30,000 |
|
|
Factory overhead |
|
20,000 |
|
|
Direct materials inventory, January 1,
2016 |
|
26,000 |
|
|
Direct materials inventory, December
31, 2016 |
|
14,000 |
|
|
Cost of goods manufactured |
|
98,000 |
|
|
Finished goods inventory, January 1,
2016 |
|
31,000 |
|
Direct labor cost incurred during the period amounted to 2.5
times the factory overhead. The CFO of Tierney Construction, Inc. has asked you
to recalculate the following accounts and to report to him by the end of
tomorrow.
What should be the amount of direct materials used?
1. A)
$15,000.
2. B)
$29,000.
3. C)
$20,000.
4. D)
$24,000.
Answer: D
Explanation: $18,500 + X + $50,000 + $20,000 − $14,500 =
$98,000;
Where $50,000 = (2.5 × Overhead); X = $24,000
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
44) Tierney Construction, Inc. recently lost a portion of its
financial records in an office theft. The following accounting information
remained in the office files:
|
|
|
|
|
|
Cost of goods sold |
$ |
80,000 |
|
|
Work in process inventory, January 1,
2016 |
|
18,500 |
|
|
Work in process inventory, December 31,
2016 |
|
14,500 |
|
|
Selling and Administrative Expenses |
|
16,000 |
|
|
Net Income |
|
30,000 |
|
|
Factory overhead |
|
20,000 |
|
|
Direct materials inventory, January 1,
2016 |
|
26,000 |
|
|
Direct materials inventory, December
31, 2016 |
|
14,000 |
|
|
Cost of goods manufactured |
|
98,000 |
|
|
Finished goods inventory, January 1,
2016 |
|
31,000 |
|
Direct labor cost incurred during the period amounted to 2.5
times the factory overhead. The CFO of Tierney Construction, Inc. has asked you
to recalculate the following accounts and to report to him by the end of
tomorrow.
What should be the amount of direct materials purchased?
1. A)
$28,000.
2. B)
$19,000.
3. C)
$15,000.
4. D)
$12,000.
Answer: D
Explanation: $12,000 = $24,000 − ($26,000 − $14,000)
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
45) Tierney Construction, Inc. recently lost a portion of its
financial records in an office theft. The following accounting information
remained in the office files:
|
|
|
|
|
|
Cost of goods sold |
$ |
80,000 |
|
|
Work in process inventory, January 1,
2016 |
|
18,500 |
|
|
Work in process inventory, December 31,
2016 |
|
14,500 |
|
|
Selling and Administrative Expenses |
|
16,000 |
|
|
Net Income |
|
30,000 |
|
|
Factory overhead |
|
20,000 |
|
|
Direct materials inventory, January 1, 2016 |
|
26,000 |
|
|
Direct materials inventory, December
31, 2016 |
|
14,000 |
|
|
Cost of goods manufactured |
|
98,000 |
|
|
Finished goods inventory, January 1,
2016 |
|
31,000 |
|
Direct labor cost incurred during the period amounted to 2.5
times the factory overhead. The CFO of Tierney Construction, Inc. has asked you
to recalculate the following accounts and to report to him by the end of
tomorrow.
What should be the amount in the finished goods inventory at
December 31, 2016?
500.
A) $55,500.
501.
B) $35,000.
502.
C) $43,000.
503.
D) $49,000.
Answer: D
Explanation: $49,000 = ($98,000 + $31,000) − $80,000
Difficulty: 1 Easy
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
46) Tierney Construction, Inc. recently lost a portion of its
financial records in an office theft. The following accounting information
remained in the office files:
|
|
|
|
|
|
Cost of goods sold |
$ |
80,000 |
|
|
Work in process inventory, January 1,
2016 |
|
18,500 |
|
|
Work in process inventory, December 31,
2016 |
|
14,500 |
|
|
Selling and Administrative Expenses |
|
16,000 |
|
|
Net Income |
|
30,000 |
|
|
Factory overhead |
|
20,000 |
|
|
Direct materials inventory, January 1,
2016 |
|
26,000 |
|
|
Direct materials inventory, December
31, 2016 |
|
14,000 |
|
|
Cost of goods manufactured |
|
98,000 |
|
|
Finished goods inventory, January 1,
2016 |
|
31,000 |
|
Direct labor cost incurred during the period amounted to 2.5
times the factory overhead. The CFO of Tierney Construction, Inc. has asked you
to recalculate the following accounts and to report to him by the end of
tomorrow.
What should be the amount of total manufacturing cost?
1. A)
$83,000.
2. B)
$94,000.
3. C)
$104,000.
4. D)
$75,000.
Answer: B
Explanation: Cost of goods manufactured = Beginning
work-in-process + total manufacturing costs – Ending work-in-process.
Using the given data, $98,000 = $18,500 + total manufacturing cost – $14,500.
So, total manufacturing costs = $98,000 – $18,500 + $14,500 = $94,000
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
47) Stephenson Company’s computer system recently crashed,
erasing much of the company’s financial data. The following accounting
information was discovered soon afterwards on the CFO’s back-up computer data.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
380,000 |
|
|
Work-in-Process Inventory, Beginning |
|
30,000 |
|
|
Work-in-Process Inventory, Ending |
|
40,000 |
|
|
Selling and Administrative Expense |
|
50,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Purchased |
|
171,000 |
|
|
Factory Overhead Applied |
|
112,000 |
|
|
Operating Income |
|
22,000 |
|
|
Direct Materials Inventory, Beginning |
|
18,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
340,000 |
|
|
Direct Labor |
|
55,000 |
|
The CFO of Stephenson Company has asked you to recalculate the
following accounts and report to him by week’s end.
What should be the amount of direct materials used?
1. A)
$112,000.
2. B)
$183,000.
3. C)
$189,000.
4. D)
$204,000.
Answer: B
Explanation: $18,000 + $171,000 − $6,000 = $183,000
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
48) Stephenson Company’s computer system recently crashed,
erasing much of the company’s financial data. The following accounting
information was discovered soon afterwards on the CFO’s back-up computer data.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
380,000 |
|
|
Work-in-Process Inventory, Beginning |
|
30,000 |
|
|
Work-in-Process Inventory, Ending |
|
40,000 |
|
|
Selling and Administrative Expense |
|
50,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Purchased |
|
171,000 |
|
|
Factory Overhead Applied |
|
112,000 |
|
|
Operating Income |
|
22,000 |
|
|
Direct Materials Inventory, Beginning |
|
18,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
340,000 |
|
|
Direct Labor |
|
55,000 |
|
The CFO of Stephenson Company has asked you to recalculate the
following accounts and report to him by week’s end.
What should be the amount of direct materials available for use?
1. A)
$112,000.
2. B)
$183,000.
3. C)
$189,000.
4. D)
$204,000.
Answer: C
Explanation: $189,000 = $18,000 + $171,000
Difficulty: 1 Easy
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
49) Stephenson Company’s computer system recently crashed,
erasing much of the company’s financial data. The following accounting
information was discovered soon afterwards on the CFO’s back-up computer data.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
380,000 |
|
|
Work-in-Process Inventory, Beginning |
|
30,000 |
|
|
Work-in-Process Inventory, Ending |
|
40,000 |
|
|
Selling and Administrative Expense |
|
50,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Purchased |
|
171,000 |
|
|
Factory Overhead Applied |
|
112,000 |
|
|
Operating Income |
|
22,000 |
|
|
Direct Materials Inventory, Beginning |
|
18,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
340,000 |
|
|
Direct Labor |
|
55,000 |
|
The CFO of Stephenson Company has asked you to recalculate the
following accounts and report to him by week’s end.
What should be the amount in the finished goods inventory at the
beginning of the year?
1. A)
$15,000.
2. B)
$45,000.
3. C)
$55,000.
4. D)
$61,000.
Answer: C
Explanation: $380,000 + $15,000 − $340,000 = $55,000
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow through
the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
50) Stephenson Company’s computer system recently crashed,
erasing much of the company’s financial data. The following accounting
information was discovered soon afterwards on the CFO’s back-up computer data.
|
|
|
|
|
|
Cost of Goods Sold |
$ |
380,000 |
|
|
Work-in-Process Inventory, Beginning |
|
30,000 |
|
|
Work-in-Process Inventory, Ending |
|
40,000 |
|
|
Selling and Administrative Expense |
|
50,000 |
|
|
Finished Goods Inventory, Ending |
|
15,000 |
|
|
Finished Goods Inventory, Beginning |
|
? |
|
|
Direct Materials Purchased |
|
171,000 |
|
|
Factory Overhead Applied |
|
112,000 |
|
|
Operating Income |
|
22,000 |
|
|
Direct Materials Inventory, Beginning |
|
18,000 |
|
|
Direct Materials Inventory, Ending |
|
6,000 |
|
|
Cost of Goods Manufactured |
|
340,000 |
|
|
Direct Labor |
|
55,000 |
|
The CFO of Stephenson Company has asked you to recalculate the
following accounts and report to him by week’s end.
What should be the amount of total manufacturing cost?
1. A)
$340,000.
2. B)
$350,000.
3. C)
$380,000.
4. D)
$395,000.
Answer: B
Explanation: $350,000 = $183,000 Direct Materials +
$55,000 Direct Labor + $112,000 Overhead
Difficulty: 2 Medium
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
51) If finished goods inventory has increased during the period,
which of the following is always true?
1. A)
Cost of goods sold is less than cost of goods manufactured.
2. B)
Cost of goods sold is more than cost of goods manufactured.
3. C)
Cost of goods manufactured is more than total manufacturing costs.
4. D)
Cost of goods manufactured is less than total manufacturing costs.
Answer: A
Difficulty: 1 Easy
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Analyze
AACSB: Analytical Thinking
AICPA: FN Measurement; BB Critical Thinking
52) Manufacturing firms use which of the following three
inventory accounts?
1. A)
Materials, Work-in-process, Transferred-out.
2. B)
Materials, Work-in-process, Finished goods.
3. C)
Materials, Finished goods, Transferred-out.
4. D)
Work-in-process, Finished goods, Transferred-out.
Answer: B
Difficulty: 1 Easy
Topic: Cost Concepts for Product and Service Costing
Learning Objective: 03-04 Demonstrate how costs flow
through the accounts and prepare and interpret an income statement for both a
manufacturing and a merchandising company.
Bloom’s: Remember
AACSB: Reflective Thinking
AICPA: FN Measurement; BB Industry
53) Barnes Co. incurred the following costs during July:
|
|
|
|
|
|
Conversion costs |
$ |
133,000 |
|
|
Prime costs |
$ |
125,000 |
|
|
Manufacturing overhead |
$ |
75,000 |
|
What was the amount of direct materials used and direct labor
for July?
|
|
Direct materials |
|
Direct labor |
|
||||||
|
A. |
$ |
43,000 |
|
|
$ |
47,000 |
|
|||
|
B. |
$ |
47,000 |
|
|
$ |
43,000 |
|
|||
|
C. |
$ |
58,000 |
|
|
$ |
45,000 |
|
|||
|
D. |
$ |
67,000 |
|
|
$ |
58,000 |
|
|||
1. A)
Option A
2. B)
Option B
3. C)
Option C
4. D)
Option D
Answer: D
Explanation: Only answer (D) has $67,000 + $58,000 =
$125,000;
Alternatively, $133,000 − $75,000 = $58,000 and $125,000 −
$58,000 = $67,000
Difficulty: 2 Medium
Topic: Cost Assignment—Direct and Indirect Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
54) Woodcarving Co. incurred the following costs during May:
|
|
|
|
|
|
Conversion costs |
$ |
460,000 |
|
|
Prime costs |
$ |
390,000 |
|
|
Manufacturing overhead |
$ |
315,000 |
|
What was the amount of direct materials and direct labor used in
May?
|
|
Direct materials |
|
Direct labor |
|
||||||
|
A. |
$ |
100,000 |
|
|
$ |
295,000 |
|
|||
|
B. |
$ |
105,000 |
|
|
$ |
215,000 |
|
|||
|
C. |
$ |
245,000 |
|
|
$ |
145,000 |
|
|||
|
D. |
$ |
70,000 |
|
|
$ |
75,000 |
|
|||
1. A)
Option A
2. B)
Option B
3. C)
Option C
4. D)
Option D
Answer: C
Explanation: Only (C) totals to $390,000 = $245,000 +
$145,000. Labor + $315,000 = $460,000; Labor = $145,000. Materials + $145,000 =
$390,000 = Prime Costs. Materials = $245,000
Difficulty: 2 Medium
Topic: Cost Assignment—Direct and Indirect Costs
Learning Objective: 03-02 Explain the cost driver concepts
at the activity, volume, structural, and executional levels.
Bloom’s: Apply
AACSB: Knowledge Application
AICPA: FN Measurement; BB Critical Thinking
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