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?

           

 A.        $11,181

 B.        $20,125

 C.        $30,000

 D.        $50,319

 

 

 2)  Costs that can be significantly influenced by a particular manager are:

           

 A.        product costs.

 B.        period costs.

 C.        controllable costs.

 D.        administrative costs.

 

 

3)  Generally, joint costs are not relevant in decision making after split-off because:

           

 A.        they do not help increase the sales.

 B.        they increase the sales margin only marginally.

 C.        they do not change regardless of any decision.

 D.        joint costs reflect opportunity costs.

 

 

4)  Hamilton, 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:

           

 A.        a debit to Cost of Goods Sold for $432,000.

 B.        a credit to Finished-Goods Inventory for $432,000.

 C.        a credit to Work-in-Process Inventory for $432,000.

 D.        a credit to Work-in-Process Inventory for $86,000.

 

 

5) Idle time is:

           

 A.        frequently an avoidable cost.

 B.        classified as overhead.

 C.        caused by events such as equipment breakdown and new set-ups of production runs.

 D.        All of the given answers

 

 

6)  If a management accountant is trying to decide whether a cost is relevant to a decision, he or she should consider the cost relevant if:

           

 A.        it is a historical cost precise in nature.

 B.        it is a historical cost that is the same among all alternatives.

 C.        it is an expected future cost that is the same for each alternative.

 D.        it is an expected future cost that is different for each alternative.

 

 

7)   In linear programming, a constraint represents:

           

 A.        the objective function.

 B.        the contribution margin per unit.

 C.        the limitations faced by the firm.

 D.        the break-even level of activity.

 

 

8)  In linear programming, the objective function is typically based on:

           

 A.        the selling price of the products.

 B.        the variable cost of the products

 C.        the full cost of the products.

 D.        the contribution margin of the products.

 

 

9)   Java 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?

           

 A.        Fixed cost

 B.        Variable cost

 C.        Semi-variable cost

 D.        Step-Fixed cost

 

 

10) Linear programming is useful:

           

 A.        when there is only one product.

 B.        when there are many products.

 C.        only when an activity-based costing system is in use.

 D.        when there is only one constraint.

 

 

11)   Manufacturers sometimes sell products at less than full price for a special order. The analysis of such decisions focuses on:

           

 A.        relevant benefits.

 B.        both relevant benefits and relevant costs.

 C.        fixed cost.

 D.        relevant costs.

 

 

12)  Media, 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:

           

 A.        $1,000 underapplied.

 B.        $1,000 overapplied.

 C.        $4,000 underapplied.

 D.        $5,000 overapplied.

 

 

13)  Morrison, 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:

           

 A.        a debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory.

 B.        a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory.

 C.        a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory: Department A.

 D.        D. a debit to Work-in-Process Inventory: Department B and a credit to Work-in-Process Inventory: Department A.

 

 

14)  Opportunity cost is best defined as:

           

 A.        the amount of money that is paid for something.

 B.        the amount of money that is paid for something, considering inflation.

 C.        the highest valued benefit given up in making a choice.

 D.        all of the benefits that are given up in making a choice.

 

 

15)  Oregon 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:

           

 A.        $0 because Work in Process should be credited.

 B.        $0 because Work in Process is not affected

 C.        $117,000.

 D.        $106,000.

 

 

16)    Technical 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.

           

 A.        $138

 B.        $ 90

 C.        $ 66

 D.        $ 55

 

 

17)   The benefits of management accounting information include:

           

 A.        improved decisions.

 B.        more effective planning.

 C.        greater efficiency of operations.

 D.        All of the given answers

 

 

18)  The book value of an asset such as equipment is an example of:

           

 A.        a future cost.

 B.        a differential cost.

 C.        an opportunity cost.

 D.        a sunk cost.

 

 

 19)   Unless overtime and idle time are caused by a particular job, they are treated as:

           

 A.        a part of direct labour expense.

 B.        a part of manufacturing overhead.

 C.        associated with a particular product.

 D.        a part of manufacturing overhead AND associated with a particular product.

 

 

20)  Which of the following is not an advantage of the variable cost pricing formula?

           

 A.        Variable cost analysis is consistent with cost volume profit analysis.

 B.        Variable cost data does not require the allocation of common fixed costs to

 individual product lines.

 C.        Variable costs help managers understand the profit implications of changes in

 price.

 D.        It is cost effective to use because it is required for external reporting.

 

 

21)  Nellibell’s Café 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?

           

 A.        $568.

 B.        $588.

 C.        $448.

 D.        $532.

 

 

22)  Process costing would be used in all of the following industries except: A. petroleum refining

           

 A.        petroleum refining.

 B.        truck tire manufacturing.

 C.        wood pulp production.

 D.        automobile repair.

 

 

23)   Select the correct statement regarding fixed costs.

           

 A.        Because they do not change, fixed costs should be ignored in decision making.

 B.        The fixed cost per unit increases when volume increases

 C.        The fixed cost per unit decreases when volume increases.

 D.        The fixed cost per unit does not change when volume decreases.

 

 

24)        For 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?

           

 A.        Buying increases uncertainty, in particular with respect to timely availability of the component

 B.        Buying surrenders control over the product design and quality

 C.        Employee morale would be affected if a decision to buy means dismissing staff

 D.        All the above

 

 

25)        What term is used to describe factors in a decision problem that cannot be expressed effectively in numerical terms?

           

 A.        qualitative

 B.        quantitative

 C.        sensitive

 D.        uncertain