Cost Accounting Practice Exam Chapter 1-3

1.The expression of what an organization wishes to accomplish and how it will serve its customers is contained in the __________________________. 2. Anything for which management wants to accumulate or collect costs is known as a ______________________.

3. Costs that cannot be conveniently traced to a cost object are known as __________________ costs. 4. The way in which authority and responsibility are distributed in an organization is _________________________. 5. In a(n) _________ cost system, factory overhead is assigned directly to products and services. 6. If actual overhead is less than applied overhead, factory overhead is said to be ______________. 7. If underapplied or overapplied factory overhead is immaterial, it is charged to _______________________. 8. A performance measure that encompasses a firms long-run average activity is referred to as __________________ capacity. 9. Consider the regression equation y = a + bX. The portion of the equation that represents fixed costs is ________. 10. The costing technique that treats manufacturing overhead as a period cost is referred to as _________________ costing. 11. One major difference between financial and management accounting is that a. financial accounting reports are prepared primarily for users external to the company. b. management accounting is not under the jurisdiction of the Securities and Exchange Commission. c. government regulations do not apply to management accounting. d. all of the above are true. 12. Which of the following statements about management or financial accounting is false? a. Financial accounting must follow GAAP. b. Management accounting is not subject to regulatory reporting standards. c. Both management and financial accounting are subject to mandatory recordkeeping requirements. d. Management accounting should be flexible. 13. Broadly speaking, cost accounting can be defined as a(n) a. external reporting system that is based on activity-based costs. b. system used for providing the government and creditors with information about a company's internal operations. c. internal reporting system that provides product costing and other information used by managers in performing their functions. d. internal reporting system needed by manufacturers to be in compliance with Cost Accounting Standards Board pronouncements.

14. Financial accounting a. is primarily concerned with internal reporting. b. is more concerned with verifiable, historical information than is cost accounting. c. focuses on the parts of the organization rather than the whole. d. is specifically directed at management decision-making needs. 15. A managerial accountant who prepares clear reports and recommendations after analyzing relevant facts is exercising which of the following standards? a. objectivity c. competence b. integrity d. confidentiality 16. The term "relevant range" as used in cost accounting means the range over which a. costs may fluctuate. b. cost relationships are valid. c. production may vary. d. relevant costs are incurred. 17. An example of a fixed cost is a. total indirect material cost. b. total hourly wages. c. cost of electricity. d. straight-line depreciation. 18. When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n) a. increase in the fixed element. b. decrease in the variable element. c. increase in the mixed element. d. decrease in the fixed element. 19. A cost driver a. causes fixed costs to rise because of production changes. b. has a direct cause-effect relationship to a cost. c. can predict the cost behavior of a variable, but not a fixed, cost. d. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume. 20. The final figure in the Schedule of Cost of Goods Manufactured represents the a. cost of goods sold for the period. b. total cost of manufacturing for the period. c. total cost of goods started and completed this period. d. total cost of goods completed for the period. 21. The formula for cost of goods sold for a manufacturer is a. beginning Finished Goods Inventory plus Cost of Goods Manufactured minus ending Finished Goods Inventory. b. beginning Work in Process Inventory plus Cost of Goods Manufactured minus ending Work in Process Inventory. c. direct material plus direct labor plus applied overhead. d. direct material plus direct labor plus overhead incurred plus beginning Work in Process

Inventory. 22. In a normal cost system, which of the following is used? Actual direct materials a. b. c. d.
yes yes yes no

Actual direct labor

no yes yes yes

Actual overhead
yes yes no no

23. Applied overhead consists of which of the following? a. actual activity times predetermined overhead rate b. estimated activity times predetermined overhead rate c. actual activity times actual overhead rate d. estimated activity times actual overhead rate 24. Overapplied overhead will result if a. the plant is operated at less than expected capacity. b. overhead costs incurred were greater than estimated overhead costs. c. overhead costs incurred were less than overhead costs charged to production. d. overhead costs incurred were greater than overhead charged to production. 25. Actual overhead is $98,700 and applied overhead is $93,250. Manufacturing overhead is: a. overapplied by $12,900. b. underapplied by $18,350. c. overapplied by $5,450. d. underapplied by $5,450. 26. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the a. work-in-process account. b. finished goods inventory account. c. Cost of Goods Sold. d. period costs. 27. If a firm uses variable costing, fixed manufacturing overhead will be included a. only on the balance sheet. b. only on the income statement. c. on both the balance sheet and income statement. d. on neither the balance sheet nor income statement. 28. Which of the following is an argument against the use of direct (variable) costing? a. Absorption costing overstates the balance sheet value of inventories. b. Variable factory overhead is a period cost. c. Fixed manufacturing overhead is difficult to allocate properly. d. Fixed manufacturing overhead is necessary for the production of a product.

Brandt Company manufactures wood file cabinets. The following information is available for June 2001: Beginning Raw Material Inventory Work in Process Inventory Finished Goods Inventory
$ 6,000 17,300 21,000

Ending
$ 7,500 11,700 16,300

29. Refer to Brandt Company. Direct labor is $9.60 per hour and overhead for the month was $9,600. Compute total manufacturing costs for June, if there were 1,500 direct labor hours and $21,000 of raw material was purchased. a. $58,500 b. $46,500 c. $43,500 d. $43,100 30. Refer to Brandt Company. Direct labor is paid $9.60 per hour and overhead for the month was $9,600. What are prime costs and conversion costs, respectively if there were 1,500 direct labor hours and $21,000 of raw material was purchased? a. b. c. d. $29,100 and $33,900 $33,900 and $24,000 $33,900 and $29,100 $24,000 and $33,900

31. Refer to Brandt Company. Direct labor is paid $9.60 per hour and overhead for the month was $9,600. If there were 1,500 direct labor hours and $21,000 of raw material purchased, Cost of Goods Manufactured is: a. $49,100. b. $45,000. c. $51,000. d. $49,500.

32. Refer to Brandt Company. Direct labor is paid $9.60 per hour and overhead for the month was $9,600. If there were 1,500 direct labor hours and $21,000 of raw material purchased, how much is Cost of Goods Sold? a. $64,500. b. $59,800. c. $38,800. d. $53,800. 33. Urban Company manufacturers tables. If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $17,000 and $21,000, what was amount of raw material was purchased? a. $76,000 b. $118,000 c. $84,000 d. $101,000 34. Define a variable cost and a fixed cost. What causes changes in these costs? Give two examples of each. 35. What are the primary reasons for using a predetermined overhead rate?

36. List and explain the four alternative measures of capacity. 37. Miller Corporation applies overhead at the rate of 70 percent of direct labor. Miller incurred $450,000 of direct labor during the current year. Miller incurred actual overhead of $367,000. (a) Compute the amount of under- or overapplied overhead for Miller Corporation for the current year (b) Prepare the necessary journal entry to dispose of the under- or overapplied overhead (assuming that the amount is immaterial).