ACC 349 FINAL EXAM 2016 JULY

ACC 349 FINAL EXAM

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1) What is the best way to handle manufacturing overhead costs in order to get the most
timely job cost information?

The company should add actual manufacturing overhead costs to jobs as soon as the
overhead costs are incurred.
The company should determine an allocation rate as soon as the actual costs are known,
and then apply manufacturing overhead to jobs.
The company should apply overhead using an estimated rate throughout the year. D. The
company should account for only the direct production costs.

2) At the end of the year, manufacturing overhead has been overapplied. What occurred to
create this situation?

The company incurred more manufacturing overhead costs than the manufacturing
overhead assigned to jobs
The actual manufacturing overhead costs were less than the manufacturing overhead
assigned to jobs
The company incurred more total job costs than the amount budgeted for the job
Estimated manufacturing overhead was less than actual manufacturing overhead costs

3) Luca Company overapplied manufacturing overhead during 2006. Which one of the
following is part of the year end entry to dispose of the overapplied amount assuming the
amount is material

A decrease to work in process inventory

A decrease to applied overhead
An increase to finished goods
An increase to cost of goods sold
4) Which of the following would be accounted for using a job order cost system?

The production of textbooks

The production of town homes
The pasteurization of milk
The production of cans of spinach

5) Which one of the following is NEVER part of recording the issuance of raw materials in a
job order cost system?

Debit Manufacturing Overhead

Debit Finished Goods Inventory
Debit Work in Process Inventory
Credit Raw Materials Inventory

Finished Goods Inventory is debited when goods are transferred from work in process to
finished goods, not when raw materials are issued for a job.

What is unique about the flow of costs in a job order cost system?

It involves accumulating material, labor, and manufacturing overhead costs as they are
incurred in order to determine the job cost
Each job is costed separately in a Work in Process subsidiary ledger
Job costs cannot be measured until all overhead costs are determined
There are no costs remaining in Work in Process at year end

7) Which one of the following costs would be included in manufacturing overhead of a lawn
mower manufacturer?

The cost of the fuel lines that run from the motor to the gas tank
The cost of the wheels
Depreciation on the testing equipment
The wages earned by motor assemblers

Depreciation on testing equipment would be included in manufacturing overhead because it

is indirectly associated with the finished product.

8) What broad functions do the management of an organization perform?

Planning, directing, and controlling

Directing, manufacturing, and controlling
Planning, directing, and selling
Planning, manufacturing, and controlling

9) Which of the following represents the correct order in which inventories are reported on a
manufacturers balance sheet?

Work in process, finished goods raw materials

Raw materials, work in process, finished goods
Finished goods, work in process, raw materials
Work in process, raw materials, finished goods

10) In traditional costing systems, overhead is generally applied based on

machine hours
direct labor
direct material dollars
units of production

11) An activity that has a direct cause-effect relationship with the resources consumed is
a(n)

overhead rate
product activity
cost driver
cost pool

12) A well-designed activity-based costing system starts with

computing the activity-based overhead rate

analyzing the activities performed to manufacture a product
identifying the activity-cost pools
assigning manufacturing overhead costs for each activity cost pool to products
ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

13) Which of the following factors would suggest a switch to activity-based costing?

Overhead costs constitute a significant portion of total costs

Production managers use data provided by the existing system.
Product lines similar in volume and manufacturing complexity
The manufacturing process has been stable

14) All of the following statements are correct EXCEPT that

the objective of installing ABC in service firms is different than it is in a manufacturing firm
the general approach to identifying activities and activity cost pools is the same in a service
company as in a manufacturing company
activity-based costing has been widely adopted in service industries
a larger proportion of overhead costs are company-wide costs in service industries

15) What sometimes makes implementation of activity-based costing difficult in service

industries is

identifying activities, activity cost plus, and cost drivers

attempting to reduce or eliminate nonvalue-added activities
the labeling of activities as value-added
that a larger proportion of overhead costs are company-wide costs

16) One of Astro Companys activity cost pools is machine setups, with estimated overhead
of $150,000. Astro produces sparklers (400 setups) and lighters (600 setups). How much of
the machine setup cost pool should be assigned to sparklers?

$60,000
$90,000
$150,000
$75,000

17) Poodle Company manufactures two products, Mini A and Maxi B. Poodles overhead
costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting,
$600,000. Information on the two products is:

Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Mini A using activity-based costing is

$1,536,000
$1,664,000
$1,920,000
$1,200,000

18) Poodle Company manufactures two products, Mini A and Maxi B. Poodles overhead
costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting,
$600,000. Information on the two products is:

Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Maxi B using activity-based costing is

$1,536,000
$1,664,000
$2,000,000
$1,280,000

19) Seran Company has contacted Truckel Inc. with an offer to sell it 5,000 of the wickets for
$18 each. If Truckel makes the wickets, variable costs are $11 per unit. Fixed costs are $12
per unit; however, $5 per unit is avoidable. Should Truckel make or buy the wickets?

Buy; savings = $10,000

Make; savings = $20,000
Make; savings = $10,000
Buy; savings = $25,000

20) Rosen, Inc. has 10,000 obsolete calculators, which are carried in inventory at a cost of
$20,000. If the calculators are scrapped, they can be sold for $1.10 each (for parts). If they
are repackaged, at a cost of $15,000, they could be sold to toy stores for $2.50 per unit.
What alternative should be chosen, and why?

Repackage; revenue is $5,000 greater than cost

Scrap; incremental loss is $9,000
Repackage; receive profit of $10,000
Scrap; profit is $1,000 greater

21) The cost to produce Part A was $10 per unit in 2005. During 2006, it has increased to
$11 per unit. In 2006, Supplier Company has offered to supply Part A for $9 per unit. For the
make-or-buy decision
incremental costs are $1 per unit
net relevant costs are $1 per unit
differential costs are $2 per unit
incremental revenues are $2 per unit

22) Hartley, Inc. has one product with a selling price per unit of $200, the unit variable cost
is $75, and the total monthly fixed costs are $300,000. How much is Hartleys contribution
margin ratio?

37.5%
150%
266.6%
62.5%.

Which statement describes a fixed cost?

The amount per unit varies depending on the activity level

It varies in total at every level of activity
It remains the same per unit regardless of activity level
Its total varies proportionally to the level of activity

24) Disneys variable costs are 30% of sales. The company is contemplating an advertising
campaign that will cost $22,000. If sales are expected to increase $40,000, by how much
will the companys net income increase?

$28,000
$18,000
$6,000
$12,000

25) Variable costing

is required under GAAP

is used for external reporting purposes
is also known as full costing
treats fixed manufacturing overhead as a period cost

26) Which cost is NOT charged to the product under variable costing?

Direct labor
Direct materials
Fixed manufacturing overhead
Variable manufacturing overhead

27) Orbach Company sells its product for $40 per unit. During 2005, it produced 60,000
units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct
materials $10, direct labor $6, and variable overhead $2. Fixed costs are: $480,000
manufacturing overhead, and $60,000 selling and administrative expenses. The per unit
manufacturing cost under absorption costing is

$18
$16
$27
$26

28) Which of the following is NOT considered an advantage of using standard costs?

Standard costs can be useful in setting prices for finished goods

Standard costs can reduce clerical costs
Standard costs can make employees cost-conscious.
Standard costs can be used as a means of finding fault with performance

29) The difference between a budget and a standard is that

a budget expresses managements plans, while a standard reflects what actually happened
standards are excluded from the cost accounting system, whereas budgets are generally
incorporated into the cost accounting system
a budget expresses a total amount while a standard expresses a unit amount
a budget expresses what costs were, while a standard expresses what costs should be

30) If a company is concerned with the potential negative effects of establishing standards,
they should

offer wage incentives to those meeting standards

set tight standards in order to motivate people
not employ any standards
set loose standards that are easy to fulfill

31) The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month,
11,200 gallons of direct materials that actually cost $42,400 were used to produce 6,000
units of product. The direct materials quantity variance for last month was
$2,400 favorable
$5,600 unfavorable
$3,200 unfavorable
$3,200 favorable

32) The standard number of hours that should have been worked for the output attained is
8,000 direct labor hours and the actual number of direct labor hours worked was 8,400. If
the direct labor price variance was $8,400 unfavorable, and the standard rate of pay was
$18 per direct labor hour, what was the actual rate of pay for direct labor?

$15 per direct labor hour

$18 per direct labor hour
$19 per direct labor hour
$17 per direct labor hour

33) The total variance is $10,000. The total materials variance is $4,000. The total labor
variance is twice the total overhead variance. What is the total overhead variance?

$2,000
$4,000
$3,000
$1,000

34) Manufacturing overhead costs are applied to work in process on the basis of

standard hours allowed

actual overhead costs incurred
ratio of actual variable to fixed costs
actual hours worked

35) The overhead volume variance relates only to

variable overhead costs

both variable and fixed overhead costs
all manufacturing costs
fixed overhead costs

36) If the standard hours allowed are less than the standard hours at normal capacity

the overhead volume variance will be unfavorable

the overhead controllable variance will be favorable
variable overhead costs will be overapplied
variable overhead costs will be underapplied

37) Gottberg Mugs is planning to sell 2,000 mugs and produce 2,200 mugs during April.
Each mug requires 2 pounds of resin and a half hour of direct labor. Resin costs $1 per
pound and employees of the company are paid $12.50 per hour. Manufacturing overhead is
applied at a rate of 120% of direct labor costs. Gottberg has 2,000 pounds of resin in
beginning inventory and wants to have 2,400 pounds in ending inventory. How much is the
total amount of budgeted direct labor for April?

$12,500
$25,000
$27,500
$13,750
ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

38) Lewis Hats is planning to sell 600 straw hats. Each hat requires a half pound of straw
and a quarter hour of direct labor. Straw costs $0.20 per pound and employees of the
company are paid $22 per hour. Lewis has 80 pounds of straw and 40 hats in beginning
inventory and wants to have 50 pounds of straw and 60 hats in ending inventory. How many
units should Lewis Hats produce in April?

600
580
630
620

39) At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets. Barry
estimates it will sell 35,000 units during the first quarter of 2004 with a 10% increase in
sales each quarter. Barrys policy is to maintain an ending inventory equal to 25% of the
next quarters sales. Each widget costs $1 and is sold for $1.50. How much is budgeted
sales revenue for the third quarter of 2004?

$57,525
$63,525
$42,350
$63,000
40) In most cases, prices are set by the

customers
largest competitor
selling company
competitive market

41) A company must price its product to cover its costs and earn a reasonable profit in

all cases
its early years
the long run
the short run

42) The cost-plus pricing approachs major advantage is

it considers customer demand

that sales volume has no effect on per unit costs
it is simple to compute
it can be used to determine a products target cost

43) What does cost accounting measure, record, and report

Future costs
Product costs
Managerial accounting decisions
Manufacturing processes

44) Why is factory overhead applied to products and jobs by manufacturing companies?

Because indirect costs are easy to trace to products and jobs

It provides a more accurate cost of the job or products being processed
Total actual overhead costs can never be accurately determined for production
It allows managers more timely determination of product costs during the manufacturing
process

45) In a job order cost accounting system, the Work in Process account is

a period cost
a control account
closed at year end
an expense
46) Managerial accounting

is governed by generally accepted accounting principles

places emphasis on special-purpose information

is concerned with costing products

pertains to the entity as a whole and is highly aggregated

47) A well-designed activity-based costing system starts with

computing the activity-based overhead rate

assigning manufacturing overhead costs for each activity cost pool to products
identifying the activity-cost pools
analyzing the activities performed to manufacture a product

48) Which of the following is a value-added activity?

Machinery repair
Inventory storage
Engineering design
Inspections
ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

49) Which of the following is a nonvalue-added activity?

Machining
Inspection
Engineering design
Packaging

50) Each of the following is a limitation of activity-based costing EXCEPT

It is more complex than traditional costing

More cost pools are used
It can be expensive to use
Some arbitrary allocations continue
51) Ace Company sells office chairs with a selling price of $25 and a contribution margin per
unit of $15. It takes 3 machine hours to produce one chair. How much is the contribution
margin per unit of limited resource?

$3.33
$45
$10
$5

52) Walton, Inc. is unsure of whether to sell its product assembled or unassembled. The unit
cost of the unassembled product is $16, while the cost of assembling each unit is estimated
at $17. Unassembled units can be sold for $55, while assembled units could be sold for $71
per unit. What decision should Walton make?

Sell before assembly; the company will save $15 per unit
Process further; the company will save $1 per unit
Process further; the company will save $16 per unit
Sell before assembly; the company will save $1 per unit

53) Which cost is charged to the product under variable costing?

Fixed manufacturing overhead

Variable manufacturing overhead
Fixed administrative expenses
Variable administrative expenses

54) Which of the following statements is FALSE?

A standard is a unit amount

A standard cost is more accurate than a budgeted cost
The standard cost of a product is equivalent to the budgeted cost per unit of product
In concept, standards and budgets are essentially the same

55) If standard costs are incorporated into the accounting system

it can eliminate the need for the budgeting process

it may simplify the costing of inventories and reduce clerical costs
approval of the stockholders is required
the accounting system will produce information which is less relevant than the historical cost
accounting system

56) A standard cost is

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM

the average cost in an industry

a cost which is paid for a group of similar products
the historical cost of producing a product last year
a predetermined cost

57) The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in
producing 2,400 units, the actual direct labor cost was $51,200 for 4,000 direct labor hours
worked, the total direct labor variance is

$6,400 favorable
$6,400 unfavorable
$1,920 unfavorable
$4,000 unfavorable

58) If the standard hours allowed are less than the standard hours at normal capacity, the
volume variance

will be favorable
will be greater than the controllable variance
cannot be calculated
will be unfavorable

59) Which of the following statements is FALSE?

The costs that cause the overhead volume variance are usually controllable costs
The overhead volume variance is favorable if standard hours allowed for output is greater
than the standard hours at normal capacity
The overhead volume variance indicates whether plant facilities were used efficiently during
the period
The overhead volume variance relates solely to fixed costs

60) Looker Hats is planning to sell 600 felt hats, and 700 will be produced during June.
Each hat requires a half yard of felt and a quarter hour of direct labor. Felt costs $3.00 per
yard and employees of the company are paid $20 per hour. How much is the total amount of
budgeted direct labor for June?
$48,000
$3,500
$3,000
$2,400

61) In cost-plus pricing, the markup percentage is computed by dividing the desired ROI per
unit by the

total cost per unit

total manufacturing cost per unit
fixed cost per unit
variable cost per unit

62) Which would be an appropriate cost driver for the ordering and receiving activity cost
pool?

Purchase orders
Inspections
Machine setups
Machine hours

63) The first step in activity-based costing is to

identify the cost driver that has a strong correlation to the activity cost pool
compute the activity-based overhead rate per cost driver
assign manufacturing overhead costs for each activity cost pool to product
identify and classify the major activities involved in the manufacture of specific products

64) Which one of the following is required in order for an activity base to be useful in cost
behavior analysis?

The activity should always be based on the number of units produced

There should be a correlation between changes in the level of activity and changes in costs.
The activity should always be a fixed amount
The activity level should be an approved GAAP activity base

65) Which cost is NOT charged to the product under absorption costing?

Fixed administrative expenses

Variable manufacturing overhead
Direct labor
Direct materials
66) A company developed the following per-unit standards for its product: 2 pounds of direct
materials at $6 per pound. Last month, 2,000 pounds of direct materials were purchased for
$11,400. The direct materials price variance for last month was

$600 unfavorable
$11,400 favorable
$300 favorable
$600 favorable

67) The standard rate of pay is $5 per direct labor hour. If the actual direct labor payroll was
$19,600 for 4,000 direct labor hours worked, the direct labor price (rate) variance is

$500 favorable
$400 unfavorable
$500 unfavorable
$400 favorable

68) Wacos Widgets plans to sell 22,000 widgets during May, 19,000 units in June, and
20,000 during July. Waco keeps 10% of the next months sales as ending inventory. How
many units should Waco produce during June?

19,000
18,900
19,100
21,000

69) In cost-plus pricing, the target selling price is computed as

variable cost per unit + fixed manufacturing cost per unit + desired ROI per unit
variable cost per unit + desired ROI per unit
total unit cost + desired ROI per unit
fixed cost per unit + desired ROI per unit

70) Which one of the following is an important feature of a job order cost system?

Each must be completed before a new product order is accepted

Each job uses similar processes to produce
Each consists of features which distinguish it from the next
Each job has characteristics similar to the next

71) Which of the following represents the two basic types of cost accounting systems?
Job order and process cost systems
Job order and batch systems
Job order and job accumulation systems
Process cost and batch systems

72) Which one of the following is indirect labor considered?

Product cost
Period cost
Nonmanufacturing cost
Raw material cost

73) Which of the following is an element of manufacturing overhead?

Factory workers wages

Plant managers salary
Components used in calculators during production
Flour used in manufactured cake mixes

74) Which of the following is NOT typical of traditional costing systems?

Use of a single predetermined overhead rate

Assumption of correlation between direct labor and incurrence of overhead cost
Use of direct labor hours or direct labor cost to assign overhead
Use of multiple cost drivers to allocate overhead

75) Max Company uses 10,000 units of Part A in producing its products. A supplier offers to
make Part A for $7. Max Company has relevant costs of $8 a unit to manufacture Part A. If
there is excess capacity, the opportunity cost of buying Part A from the supplier is

$80,000
$70,000
$0
$10,000

76) H55 Company sells two products, beer and wine. Beer has a 10 percent profit margin
and wine has a 12 percent profit margin. Beer has a 27 percent contribution margin and
wine has a 25 percent contribution margin. If other factors are equal, which product should
H55 push to customers?

It should sell an equal quantity of both

Selling either results in the same additional income for the COMPANY
Beer
Wine

77) During December, the capital budget indicates a $280,000 purchase of equipment. The
ending November cash balance is budgeted to be $40,000. Cash receipts are $840,000,
and cash disbursements are $610,000 during December. The company wants to maintain a
minimum cash balance of $20,000. What is the minimum cash loan that must be planned to
be borrowed from the bank during December?

$0
$50,000
$10,000
$30,000

78) Prices are set by the competitive market when

a product is not easily distinguished from competing products

a company can effectively differentiate its product from others
there are no other producers capable of manufacturing a similar item
the product is specially made for a customer

79) The standards and rules that are recognized as a general guide for financial reporting
are called __________.

standards of financial reporting

generally accepted accounting principles
generally accepted accounting standards
operating guidelines

80) Hess, Inc. sells a single product with a contribution margin of $12 per unit and fixed
costs of $74,400 and sales for the current year of $100,000. How much is Hesss break
even point?

2,133 units
6,200 units
$25,600
4,600 units

81) In what situations will a static budget be most effective in evaluating a managers
effectiveness?
The company has no fixed costs.
The planned activity levels match actual activity levels.
The company has substantial variable costs.
The company has substantial fixed costs.

82) The primary purpose of the statement of cash flows is to __________.

facilitate banking relationships

provide information about the cash receipts and cash payments during a period
prove that revenues exceed expenses if there is a net income
provide information about the investing and financing activities during a period

83) The category that is generally considered to be the best measure of a companys ability
to
continue as a going concern is
A. cash flows from operating activities.
B. cash flows from investing activities.
C. cash flows from financing activities.
D. usually different from year to year.

84) Of the items below, the one that appears first on the statement of cash flows is
A. noncash investing and financing activities.
B. net increase (decrease) in cash.
C. cash at the end of the period.
D. cash at the beginning of the period.

85) Which of the following transactions does not affect cash during a period?
A. Write-off of an uncollectible account
B. Collection of an accounts receivable
C. Sale of treasury stock
D. Exercise of the call option on bonds payable

86) One of Lara Dole Companys activity cost pools is machine setups, with estimated
overhead of $300,000. Dole produces flares (400 setups) and health packs (600 setups).
How much of the machine setup cost pool should be assigned to flares?

$0.
$120,000.
$150,000.
$180,000
87) As compared to a high-volume product, a low-volume product
A. usually requires less special handling.
B. is usually responsible for more overhead costs per unit.
C. requires relatively fewer machine setups.
D. requires use of direct labor hours as the primary cost driver to ensure proper allocation

of overhead

ACC 349 FINAL EXAM 2016 JULY ACC 349 FINAL EXAM