Cost Section Quiz

1) Which one of the following items would not be considered a manufacturing cost?

2) Manchester Airlines is in the process of preparing a contribution margin income statement that will allow a detailed look at its variable costs and profitability of operations. Which one of the following cost combinations should be used to evaluate the variable cost per flight of the company’s BostonLas Vegas flights?

3) Fowler Co. provides the following summary of its total budgeted production costs at three production levels.

4) Roberta Johnson is the manager of SleepWell Inn, one of a chain of motels located throughout the United States. An example of an operating cost at SleepWell that is semivariable is
 

5) A manufacturing company uses machine hours as the only overhead cost allocation base. The accounting records contain the following information. Estimated Actual Manufacturing overhead costs $200,000 $240,000 Machine hours 40,000 50,000 Using actual costing, the amount of manufacturing overhead costs allocated to jobs is

6)Patterson Corporation expects to incur $70,000 of factory overhead and $60,000 of general and administrative costs next year. Direct labor costs at $5 per hour are expected to total $50,000. If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 20 hours of direct labor?

7)Which of the following is correct concerning a value-adding activity?

8)Lee Manufacturing uses a standard cost system with overhead applied based upon direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included: Direct labor (10,000 hours at $15 per hour) $150,000 Variable overhead $30,000 Fixed overhead $80,000 In May, 6,000 units were produced and the fixed overhead budget variance was $2,000 favorable. Fixed overhead during May was:

9)Kepler Optics makes lenses for telescopes. Because Kepler will only sell lenses of the highest quality, the normal spoilage during a reporting period is 1,000 units. At the beginning of the current reporting period, Kepler had 2,200 units in inventory, and during the period, production was started and completed on 4,000 units. Units in inventory at the end of the current reporting period were 1,500, and the units transferred out were 3,000. During this period, the abnormal spoilage for Kepler’s lens production was:

10)Given the following data for Scurry Company, what is the cost of goods sold?

11)Normal costing systems are said to offer a user several distinct benefits when compared with actual costing systems. Which one of the following is not a benefit associated with normal costing systems?

12)All of the following are benefits of implementing lean resource management techniques except:

13)Rubins Resources uses a process cost system to track manufacturing costs. Rubins likely makes:

14)The method of inventory costing in which direct manufacturing costs and manufacturing overhead costs, both variable and fixed, are considered as inventoriable costs is best described as:

15)Product #71B sells for $75 per unit. Direct materials are $12, direct labor is $10, and variable manufacturing overhead is 80% of direct labor costs per unit. Variable selling and administrative expenses average $5 per unit sold. If fixed manufacturing overhead is $40,000 when fixed selling and administrative expenses total $50,000, determine net income when 7,500 units are produced and sold.

16)When comparing absorption costing with variable costing, the difference in operating income can be explained by the difference between the:

17)All of the following activities would be considered as adding value except:

18 San Jose Inc. uses a weighted-average process costing system. All materials are introduced at the start of manufacturing, and conversion cost is incurred evenly throughout production. The company started 70,000 units during May and had the following work-in-process inventories at the beginning and end of the month. 1-May 30,000 units, 40% complete 31-May 24,000 units, 25% complete Assuming no spoilage or defective units, the total equivalent units used to assign costs for May are:

19) Which of the following is a limitation of a materials requirements planning (MRP) system?

20) In measuring the cost of quality, which one of the following is considered an appraisal cost?

21) Kimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining industry. The following information pertains to operations for the month of May. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000 The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are: Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240. Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160. Using the weighted-average method, the total cost of the units in the ending work-in-process inventory at May 31 is:

22) Based on the following information from MNG Corporation, calculate MNG’s contribution margin. Total revenue $1,000,000 Direct materials $300,000 Direct labor $120,000 Variable manufacturing overhead $100,000 Fixed manufacturing overhead $90,000 Sales commissions $110,000 Fixed selling expense $125,000

23 ) Activity-based costing (ABC) can eliminate cost distortions because ABC:

25) A company began the month with 10,000 units in work-in-process inventory that were 60% complete. During the month, the company transferred 120,000 units to finished goods. At the end of the month, 20,000 units were in work-in-process inventory that were 20% complete. Assuming the company uses the FIFO method, the equivalent units of production during the month equal

26) The following cost information is for a sales volume of 6,300 units: Direct materials per unit $8 Total direct labor $54,000 Fixed manufacturing overhead $30,000 Variable manufacturing overhead 120% of direct labor Fixed selling and administrative costs $50,000 Variable selling and administrative costs $5 per unit Calculate cost of goods sold using variable costing.

27 ) Throughput contribution is defined as sales revenue minus:

28)Which cost is responsible for the difference in total unit costs between full and variable costing income statements?

29)Elite Watches makes three models of wristwatch. Manufacturing information for each model is provided below: Model Direct Materials Cost Direct Labor Hours Bronze $22.50 2 Silver $33.70 2.25 Gold $48.75 3.25 Elite’s direct labor costs are $30 per hour. Elite also allocates overhead based on direct labor hours, with a predetermined rate of $45 per hour. Given these figures, what is the total cost of producing one Gold model watch?

30) Well-implemented just-in-time (JIT) production and purchasing techniques:

31)If a manager is interested in fully accounting for services that support departments provide to each other, which allocation method should be used?

32) Product #92S sells for $50 per unit. Direct materials are $12, direct labor is $6, and variable manufacturing overhead is 60% of direct labor costs. Variable selling and administrative expenses average $8 per unit sold. If fixed manufacturing overhead is $140,000 when fixed selling and administrative expenses total $80,000, determine the total contribution margin when 25,000 units are produced and sold.

33)When comparing absorption costing with variable costing, the difference in operating income can be explained by the difference between the

34) Mill Corporation had the following unit costs for the recently concluded calendar year. Variable Fixed Manufacturing $8.00 $3.00 Nonmanufacturing $2.00 $5.50 Inventory for Mill’s sole product totaled 6,000 units on January 1 and 5,200 units on December 31. When compared to variable costing income, Mill’s absorption costing income is

35) If a manufacturing company uses variable costing to cost inventories, which of the following costs are considered inventoriable costs?

36)A petroleum company acquires crude oil and manufactures it into three intermediate products, differing only in grade. The products are Grade One, Grade Two and Grade Three. No beginning and ending inventories of finished goods or work-in-process existed on November 1. There were no separable costs and the joint production costs for November are shown below. Crude oil acquired and put into production $4,000,000 Direct labor and related costs $2,000,000 Manufacturing overhead $3,000,000 The November output and sales for each grade of products are shown below. Barrels produced 300,000 240,000 120,000 Barrels sold 80,000 120,000 120,000 Price per barrel sold $30 $40 $50 The portion of the company’s joint production costs assigned to Grade Two based on physical output is

37) The primary purpose for allocating common costs to joint products is to determine

38) In a production process where joint products are produced, the primary factor that will distinguish a joint product from a by-product is the

39) Tucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000 gallon drums for $2,000. Processing costs are $3,000 to process the 1,000 gallons of Duo into 800 gallons of Big and 200 gallons of Mini. The selling price is $9 per gallon for Big and $4 per gallon for Mini. Big can be processed further into 600 gallons of Giant if $1,000 of additional processing costs are incurred. Giant can be sold for $17 per gallon. If the net-realizable-value method were used to allocate costs to the joint products, the total cost of producing Giant would be

40) All of the following are likely to be used as a cost allocation base in activity-based costing except the

41) A profitable company with five departments uses plantwide overhead rates for its highly diversified operation. The firm is studying a change to either allocating overhead by using departmental rates or using activity-based costing (ABC). Which one of these two methods will likely result in the use of a greater number of cost allocation bases and more accurate costing results? Greater Number of allocation basis More Accurate costing results

42) Departmental overhead rates are considered to be preferable to plant-wide overhead rates when the

43) A manufacturing company incurred the following costs during the last quarter, related to product development and production. Materials storage $50,000 Product design $180,000 Materials handling and moving $41,000 Direct Material $400,000 Quality inspections $62,000 What amount of costs should be classified as value-added?

44) The management of ROX Company wishes to encourage all other departments to use the legal department, as circumstances warrant. To accomplish this, legal department costs should be

45) Waller Co. uses a weighted-average process-costing system. Material B is added at two different points in the production. 40% of Material B is added when the units are 20% completed, and the remaining 60% of Material B is added when the units are 80% completed. At the end of the quarter, there are 22,000 units in process, all of which are 50% completed. With respect to Material B, the ending units in process represent how many equivalent units?

46) A company uses process costing to manufacture Product X and has the following physical unit flow information available for the month of January. Beginning work-in-process inventory, January 1 32,000 Started in production during January 200,000 Completed production during January 184,000 Ending work-in-process inventory, January 31 48,000 The beginning inventory was 60% complete for direct materials and 30% complete for conversion costs. The ending inventory was 90% complete for direct materials and 60% complete for conversion costs. Using the first-in, first-out method, the equivalent units of production for direct materials are

47) The relevant range refers to the activity levels over which

48) When identifying fixed and variable costs, which one of the following is a typical assumption concerning cost behavior?

49) A review of Plunkett Corporation’s accounting records for last year disclosed the following selected information. Variable costs Direct materials used 56,000 Direct labor 179,100 Manufacturing overhead 154,000 Selling costs 108,400 Fixed costs Manufacturing overhead 267,000 Selling costs 121,000 Administrative costs 235,900 In addition, the company suffered a $27,700 uninsured factory fire loss during the year. What were Plunkett’s product costs and period costs for last year? 

50) Fairchild Company processes raw material into two joint products, A and B. 8,000 gallons of A and 2,000 gallons of B were produced using $20,000 raw material and $30,000 processing costs were incurred. The per gallon selling price is $90 for A and $40 for B. If the sales value at split-off method is used to allocate joint costs to the final products, the per gallon cost (rounded to the nearest cent) of producing A is