1. A clothing manufacturer incurred the following factory maintenance costs: 2,100 units produced with maintenance cost of $61,500, and 750 units produced with maintenance cost of $41,250. How much of the maintenance cost is made up of fixed cost?
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ÿA. ÿÿÿÿÿ ÿ$11,181
ÿB. ÿÿÿÿÿ ÿ$20,125
ÿC. ÿÿÿÿÿ ÿ$30,000
ÿD. ÿÿÿÿÿ ÿ$50,319
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ÿ2) ÿCosts that can be significantly influenced by a particular manager are:
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ÿA. ÿÿÿÿÿ ÿproduct costs.
ÿB. ÿÿÿÿÿ ÿperiod costs.
ÿC. ÿÿÿÿÿ ÿcontrollable costs.
ÿD. ÿÿÿÿÿ ÿadministrative costs.
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3) ÿGenerally, joint costs are not relevant in decision making after split-off because:
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ÿA. ÿÿÿÿÿ ÿthey do not help increase the sales.
ÿB. ÿÿÿÿÿ ÿthey increase the sales margin only marginally.
ÿC. ÿÿÿÿÿ ÿthey do not change regardless of any decision.
ÿD. ÿÿÿÿÿ ÿjoint costs reflect opportunity costs.
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4) ÿHamilton, which uses a process-costing system, had a balance in its Work-in-Process account of $68,000 on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Hamilton should make a journal entry on December 31 that includes:
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ÿA. ÿÿÿÿÿ ÿa debit to Cost of Goods Sold for $432,000.
ÿB. ÿÿÿÿÿ ÿa credit to Finished-Goods Inventory for $432,000.
ÿC. ÿÿÿÿÿ ÿa credit to Work-in-Process Inventory for $432,000.
ÿD. ÿÿÿÿÿ ÿa credit to Work-in-Process Inventory for $86,000.
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5)ÿIdle time is:
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ÿA. ÿÿÿÿÿ ÿfrequently an avoidable cost.
ÿB. ÿÿÿÿÿ ÿclassified as overhead.
ÿC. ÿÿÿÿÿ ÿcaused by events such as equipment breakdown and new set-ups of production runs.
ÿD. ÿÿÿÿÿ ÿAll of the given answers
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6) ÿIf a management accountant is trying to decide whether a cost is relevant to a decision, he or she should consider the cost relevant if:
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ÿA. ÿÿÿÿÿ ÿit is a historical cost precise in nature.
ÿB. ÿÿÿÿÿ ÿit is a historical cost that is the same among all alternatives.
ÿC. ÿÿÿÿÿ ÿit is an expected future cost that is the same for each alternative.
ÿD. ÿÿÿÿÿ ÿit is an expected future cost that is different for each alternative.
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7) ÿÿIn linear programming, a constraint represents:
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ÿA. ÿÿÿÿÿ ÿthe objective function.
ÿB. ÿÿÿÿÿ ÿthe contribution margin per unit.
ÿC. ÿÿÿÿÿ ÿthe limitations faced by the firm.
ÿD. ÿÿÿÿÿ ÿthe break-even level of activity.
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8) ÿIn linear programming, the objective function is typically based on:
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ÿA. ÿÿÿÿÿ ÿthe selling price of the products.
ÿB. ÿÿÿÿÿ ÿthe variable cost of the products
ÿC. ÿÿÿÿÿ ÿthe full cost of the products.
ÿD. ÿÿÿÿÿ ÿthe contribution margin of the products.
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9)ÿ ÿJava Joe’s operates a chain of coffee shops. The company pays rent of $12,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $2,000 per month, and all other employees are paid on an hourly basis. Java Joe?s cost is which kind of cost?
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ÿA. ÿÿÿÿÿ ÿFixed cost
ÿB. ÿÿÿÿÿ ÿVariable cost
ÿC. ÿÿÿÿÿ ÿSemi-variable cost
ÿD. ÿÿÿÿÿ ÿStep-Fixed cost
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10)ÿLinear programming is useful:
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ÿA. ÿÿÿÿÿ ÿwhen there is only one product.
ÿB. ÿÿÿÿÿ ÿwhen there are many products.
ÿC. ÿÿÿÿÿ ÿonly when an activity-based costing system is in use.
ÿD. ÿÿÿÿÿ ÿwhen there is only one constraint.
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11)ÿ ÿManufacturers sometimes sell products at less than full price for a special order. The analysis of such decisions focuses on:
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ÿA. ÿÿÿÿÿ ÿrelevant benefits.
ÿB. ÿÿÿÿÿ ÿboth relevant benefits and relevant costs.
ÿC. ÿÿÿÿÿ ÿfixed cost.
ÿD. ÿÿÿÿÿ ÿrelevant costs.
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12) ÿMedia, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm’s overhead was:
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ÿA. ÿÿÿÿÿ ÿ$1,000 underapplied.
ÿB. ÿÿÿÿÿ ÿ$1,000 overapplied.
ÿC. ÿÿÿÿÿ ÿ$4,000 underapplied.
ÿD. ÿÿÿÿÿ ÿ$5,000 overapplied.
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13) ÿMorrison, Inc., which uses a process-cost accounting system, passes completed production from Department A to Department B for further manufacturing. The journal entry to record completed production in Department A requires:
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ÿA. ÿÿÿÿÿ ÿa debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory.
ÿB. ÿÿÿÿÿ ÿa debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory.
ÿC. ÿÿÿÿÿ ÿa debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory: Department A.
ÿD. ÿÿÿÿÿ ÿD. a debit to Work-in-Process Inventory: Department B and a credit to Work-in-Process Inventory: Department A.
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14) ÿOpportunity cost is best defined as:
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ÿA. ÿÿÿÿÿ ÿthe amount of money that is paid for something.
ÿB. ÿÿÿÿÿ ÿthe amount of money that is paid for something, considering inflation.
ÿC. ÿÿÿÿÿ ÿthe highest valued benefit given up in making a choice.
ÿD. ÿÿÿÿÿ ÿall of the benefits that are given up in making a choice.
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15) ÿOregon Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper journal entry to record these events would include a debit to Work in Process for:
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ÿA. ÿÿÿÿÿ ÿ$0 because Work in Process should be credited.
ÿB. ÿÿÿÿÿ ÿ$0 because Work in Process is not affected
ÿC. ÿÿÿÿÿ ÿ$117,000.
ÿD. ÿÿÿÿÿ ÿ$106,000.
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16)ÿ ÿÿTechnical Engineering presently leases a copying machine on a monthly basis. The lease agreement requires a fixed fee each month in addition to a charge per copy. Technical Engineering made 2 400 copies and paid a total of $162 in rent in September and in October they paid $195 for 3 500 copies. Determine Technical?s monthly fixed fee.
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ÿA. ÿÿÿÿÿ ÿ$138
ÿB. ÿÿÿÿÿ ÿ$ 90
ÿC. ÿÿÿÿÿ ÿ$ 66
ÿD. ÿÿÿÿÿ ÿ$ 55
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17)ÿ ÿThe benefits of management accounting information include:
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ÿA. ÿÿÿÿÿ ÿimproved decisions.
ÿB. ÿÿÿÿÿ ÿmore effective planning.
ÿC. ÿÿÿÿÿ ÿgreater efficiency of operations.
ÿD. ÿÿÿÿÿ ÿAll of the given answers
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18) ÿThe book value of an asset such as equipment is an example of:
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ÿA. ÿÿÿÿÿ ÿa future cost.
ÿB. ÿÿÿÿÿ ÿa differential cost.
ÿC. ÿÿÿÿÿ ÿan opportunity cost.
ÿD. ÿÿÿÿÿ ÿa sunk cost.
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ÿ19)ÿ ÿUnless overtime and idle time are caused by a particular job, they are treated as:
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ÿA. ÿÿÿÿÿ ÿa part of direct labour expense.
ÿB. ÿÿÿÿÿ ÿa part of manufacturing overhead.
ÿC. ÿÿÿÿÿ ÿassociated particular product.
ÿD. ÿÿÿÿÿ ÿa part of manufacturing overhead AND associated particular product.
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20) ÿWhich of the following is not an advantage of the variable cost pricing formula?
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ÿA. ÿÿÿÿÿ ÿVariable cost analysis is consistent with cost volume profit analysis.
ÿB. ÿÿÿÿÿ ÿVariable cost data does not require the allocation of common fixed costs to
ÿindividual product lines.
ÿC. ÿÿÿÿÿ ÿVariable costs help managers understand the profit implications of changes in
ÿprice.
ÿD. ÿÿÿÿÿ ÿIt is cost effective to use because it is required for external reporting.
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21) ÿNellibell’s Caf bakes croissants that are sold to local restaurants and grocery stores in the Columbia, South Carolina area. When 600 croissants are baked, the average cost is $0.70. When 720 croissants are baked, the average cost is $0.65. What is the total cost when 670 croissants are baked?
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ÿA. ÿÿÿÿÿ ÿ$568.
ÿB. ÿÿÿÿÿ ÿ$588.
ÿC. ÿÿÿÿÿ ÿ$448.
ÿD. ÿÿÿÿÿ ÿ$532.
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22) ÿProcess costing would be used in all of the following industries except: A. petroleum refining
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ÿA. ÿÿÿÿÿ ÿpetroleum refining.
ÿB. ÿÿÿÿÿ ÿtruck tire manufacturing.
ÿC. ÿÿÿÿÿ ÿwood pulp production.
ÿD. ÿÿÿÿÿ ÿautomobile repair.
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23)ÿ ÿSelect the correct statement regarding fixed costs.
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ÿA. ÿÿÿÿÿ ÿBecause they do not change, fixed costs should be ignored in decision making.
ÿB. ÿÿÿÿÿ ÿThe fixed cost per unit increases when volume increases
ÿC. ÿÿÿÿÿ ÿThe fixed cost per unit decreases when volume increases.
ÿD. ÿÿÿÿÿ ÿThe fixed cost per unit does not change when volume decreases.
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24)ÿ ÿÿÿÿ ÿFor a firm that currently makes particular component, which of the following are qualitative factors that would be considered following a quantitative analysis in favour of buying?
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ÿA. ÿÿÿÿÿ ÿBuying increases uncertainty, in particular with respect to timely availability of the component
ÿB. ÿÿÿÿÿ ÿBuying surrenders control over the product design and quality
ÿC. ÿÿÿÿÿ ÿEmployee morale would be affected if a decision to buy means dismissing staff
ÿD. ÿÿÿÿÿ ÿAll the above
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25)ÿ ÿÿÿÿ ÿWhat term is used to describe factors in a decision problem that cannot be expressed effectively in numerical terms?
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ÿA. ÿÿÿÿÿ ÿqualitative
ÿB. ÿÿÿÿÿ ÿquantitative
ÿC. ÿÿÿÿÿ ÿsensitive
ÿD. ÿÿÿÿÿ ÿuncertain
