BA 202 Managerial Accounting Exam I PRACTICE FOR REVIEW

1. Activity-based costing systems: a. use a single, volume-based cost driver. b. assign overhead to products based on the products' relative usage of direct labor. c. often reveal products that were under- or overcosted by traditional costing systems. d. typically use fewer cost drivers than more traditional costing systems e. have a tendency to distort product costs

2. Which of the following is not an element of competency?

a. To develop appropriate knowledge about a particular subject b. To perform duties in accordance with relevant laws. c. To perform duties in accordance with relevant technical standards. d. To accept a gift for disclosing private company information to a friend. Use the following to answer questions 3-4: Morton Company's manufacturing costs last year were as follows: Direct Materials Direct Labor Manufacturing Overhead 3. Prime cost was: a. $300,000 b. $380,000 c. $700,000 d. $830,000 4. Conversion cost was: a. $400,000 b. $480,000 c. $530,000 d. $830,000 $300,000 400,000 130,000

5. Pat Company uses activity-based costing. The company has two products: A and B. The
annual production and sales of Product A is 8,000 units and of Product B is 2,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows: Estimated Cost $12,000 $16,000 $36,000 Expected Activity Product A Product B 750 250 400 100 2,000 1,000

Activity Cost Pool Pool 1 Pool 2 Pool 3

Total 1,000 500 3,000

The cost per unit of Product A under activity-based costing is closest to: a. $10.67 b. $6.40 c. $6.00 d. $5.73 e. $9.10

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6. Paulson Company uses a predetermined overhead rate based on machine hours to apply
manufacturing overhead to jobs. The company has provided the following budgeted costs: Direct materials Direct labor Advertising expense Rent on factory building Depreciation on factory equipment Indirect materials Sales salaries Insurance on factory equipment $25,000 22,000 15,000 13,500 6,500 10,000 28,000 12,000

Paulson budgeted that 40,000 direct labor hours and 20,000 machine hours would be used during the year. The predetermined overhead rate per machine hour will be: a. $1.60 b. $2.10 c. $1.00 d. $1.05

7. Which of the following is the correct method to calculate a predetermined overhead rate?
a. b. c. d. e. Budgeted total manufacturing cost budgeted amount of cost driver Budgeted manufacturing overhead cost budgeted amount of cost driver Actual overhead cost budgeted amount of cost driver Actual overhead cost budgeted amount of cost driver Actual overhead cost actual amount of cost driver

8. Gabor Inc. is a merchandising company. Last month the company's merchandise purchases
totaled $89,000. The company's beginning merchandise inventory was $13,000 and its ending merchandise inventory was $16,000. What was the company's cost of goods sold for the month? a. $89,000 b. $86,000 c. $118,000 d. $92,000 Use the following to answer questions 9-10: Madtack Company's beginning and ending inventories for the month of November were as follows: Raw Materials Work in Process Finished Goods November 1 $ 67,000 145,000 85,000 November 30 $ 62,000 171,000 78,000

Production data for the month of November is as follows: Direct labor cost $200,000 Actual manufacturing overhead cost 132,000 Raw materials purchases 165,000 Madtack applies manufacturing overhead cost to jobs at the rate of 70% of actual direct labor cost. The company does not close under- or over applied manufacturing overhead to Cost of Goods Sold until the end of the year, December 31st.

9. Madtack Company's cost of goods manufactured for November was:

a. b. c. d. e. $469,000 $477,000 $495,000 $476,000 $484,000
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10. Madtack Company's Cost of Goods Sold for November

a. b. c. d. e. $500,000 $491,000 $476,000 $510,000 $647,000

11. Which of the following statements regarding a JIT system is (are) true? I Materials are purchased and goods are produced only as required. II Unskilled labor works a single task. III A JIT system is characterized by many small purchases of raw materials. a. I only. b. I and II c. I and III d. II and III e. I, II and III

12. Value added activities of a manufacturer would not directly include activities related to:
a. b. c. d. Manufacturing Research and development Legal support Marketing e. All of the above are value added activities of a manufacturer.

13. Which of the following statements is false about the difference between financial and
managerial accounting? a. There are professional organizations governing both Financial Accounting and Managerial Accounting b. Financial Accounting is externally oriented (e.g., banks, investors), and Managerial Accounting is internally oriented. c. Managerial Accounting is future oriented; financial accounting focuses on the past d. None of the above are false

14. An accountant recently debited Work-in-Process Inventory and credited Manufacturing

Overhead. The accountant was: a. Applying manufacturing overhead costs to production b. Recognizing receipt of the factory utilities bill c. Recording a year-end adjustment for under applied overhead d. Recognizing actual overhead during the period e. Recognizing the completion of production

15. Glostenary, Inc. combines all manufacturing overhead into a single cost pool and allocates
this overhead to products by using machine hours. Activity-based costing would likely show that with Glostenary's current procedures, a. all of the company's products are undercosted. b. the company's high-volume products that require relatively little indirect support (e.g.., setup, inspection, design) are undercosted. c. all of the company's products are overcosted. d. the company's high-volume products that require relatively little indirect support (e.g., setup, inspection, design) are overcosted. e. The company's low-volume products that require relatively high indirect support (e.g., setup, inspection, design) are overcosted

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16. Abott Company has two products: X and Y. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Estimated Expected Activity Activity Cost Pool Cost Product X Product Y Total Pool 1 $17,600 800 300 1,100 Pool 2 $12,000 500 200 700 Pool 3 $26,000 800 400 1,200 The pool rate under the activity-based costing system for Pool 3 is closest to: a. $46.33 b. $21.67 c. $65.00 d. $18.53 Use the following to answer questions 17-18: Munos Publishing Company uses a job-order costing system to collect costs related to the manufacture of specialty publications for corporate training.

17. What journal entry would Munos make to record the completion of Job KN668 at a total cost
of $7,600? a. Work in Process Inventory Finished Goods Inventory b. Cost of Goods Sold Work in Process Inventory c. Finished Goods Inventory Work in Process Inventory d. Manufacturing Overhead Finished Goods Inventory presses? $7,600 $7,600 $7,600 $7,600 $ 7,600 $7,600 $7,600 $7,600

18. What journal entry would Munos make to record $9,500 of depreciation on its printing a. Work in Process Inventory
Manufacturing Overhead Maintenance Expense Accumulated Depreciation c. Manufacturing Overhead Accumulated Depreciation d. Manufacturing Overhead Depreciation Expense $9,500 $9,500 $9,500 $9,500 $ 9,500 $9,500 $9,500 $9,500

b.

19. Which of the following objectives of managerial accounting involves the development of a
detailed financial projection to support the decision on whether or not to add another branch office within the next three months? a. Providing information for decision making and planning b. Assisting managers in day to day activities c. Motivating managers toward organization goals d. Measuring performance e. Assessing the organization's current competitive position

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20. Fixed costs are those costs that: a. Change in total directly with changes in volume/activity b. Remain constant on a per-unit basis c. Increase on a per-unit basis as volume/activity increases d. Remain constant in total as volume/activity changes
21. What type of cost exhibits the behavior that follows? Manufacturing Volume/Activity 50,000 units 75,000 units a. b. c. d. e. Variable Cost Fixed cost Semi variable cost Step variable cost Step fixed cost Cost per Unit $1.95 $1.95

22. Howard Manufacturing's overhead at year-end was under applied by $5,800. The year-end
journal entry to record this amount would include: a. A debit to Cost of Goods Sold b. A debit to Manufacturing Overhead c. A debit to Work in Process Inventory d. A credit to Cost of Goods Sold e. A credit to Work in Process Inventory 23. Property taxes and insurance are examples of costs that would be considered: a. Unit level b. Batch level c. Product-sustaining level d. Facility level Use the following to answer question 24: Slippery Company has a job-order cost system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Manufacturing overhead cost was budgeted at $100,000 and direct labor-hours were budgeted at 40,000 hours, for the year. In July, Job #334 was completed at a cost of $5,000 in direct materials and $2,400 in direct labor. The actual direct labor rate is $6 per hour. By the end of the year, actual manufacturing overhead cost was $110,250

24. If Job #334 contained 200 units, the unit cost on the completed job cost sheet would be:
a. b. c. d. $37.00 $42.00 $41.90 $39.50

25. Cost of Goods Sold would not appear on the income statement of: a. The Gap (merchandising company)
b. c. d. e. Texas Instruments (manufacturing company) Sprint Corporation (service company) All of the above companies None of the above companies

26. Which of the following statement(s) is (are) correct regarding overhead application?
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I. Actual overhead rates result in less timely information. II. Predetermined overhead rates result in more timely information. III. Predetermined overhead rates tend to smooth product costs over time. a. III only b. I and II only c. I and III only d. II and III only e. I, II and III Use the following to answer question 27: Esfeld Company is a manufacturer of standard and special pumps for industrial firms. The company uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system: Annual Overhead costs: Indirect wages and salaries Other overhead expenses Total $252,000 $100,000 $352,000

Distribution of resource consumption: Activity Cost Pools Filling Filling Total Standar Special d Orders Orders Indirect wages and salaries 50% 50% 100% Other overhead expenses 60% 40% 100% The amount of activity for the year is as follows: Activity Cost Pool Filling standard orders Filling special orders Activity 1,000 orders 50 special orders

27. To the nearest whole dollar, how much indirect wages and salaries cost would be allocated to
Order # 1279 for 6 standard pump orders and 1 special pump order? a. $2,750 b. $3,276 c. $2,223 d. $4,446 e. $756

28. Drat Company's direct labor is 30 percent of its conversion cost. If the direct materials cost
was $52,500 and the manufacturing overhead cost was $21,000, compute the cost of direct labor: a. $75,000 b. $9,000 c. $30,000 d. $6,300 29. Which of the following deals with highly sensitive information that is critical to the companys success and should not be made available to people or organizations outside the company? a. Objectivity b. Confidentiality c. Integrity d. Efficiency e. Unified behavior

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Use the following data to answer questions 30-32: The following data (in thousands of dollars) have been taken from the accounting records of Karmana Corporation for the just completed year.

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Sales Raw materials inventory, beginning Raw materials inventory, ending Purchases of raw materials Direct labor Manufacturing overhead (actual and applied) Administrative expenses Selling expenses Work in process inventory, beginning Work in process inventory, ending Finished goods inventory, beginning Finished goods inventory, ending

$950 $10 $30 $120 $180 $230 $100 $140 $70 $40 $100 $80

30. The cost of the raw materials used (direct materials) in production during the year (in
thousands of dollars) was: a. $150 b. $100 c. $130 d. $140 31. The cost of goods manufactured for the year (in thousands of dollars) was: a. $570 b. $560 c. $540 d. $600

32. The cost of goods sold for the year (in thousands of dollars) was:
a. b. c. d. $580 $560 $620 $680

33. The following costs were incurred in April: Direct materials Direct labor Manufacturing overhead Selling expenses Administrative expenses $29,000 $24,000 $14,000 $18,000 $18,000

Period expenses during the month totaled: a. $53,000 b. $67,000 c. $38,000 d. $36,000

34. Which of the following employees of a commercial printer/publisher would be classified as

direct labor? a. Book binder b. Plant security guard c. Sales representative d. Plant supervisor e. Payroll supervisor

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Use the following to answer question 35: Haswick Services runs a pre-school facility. The company has determined that the following biweekly revenues and costs occur at different levels of enrollment: Number of Children Enrolled 10 15 16 20 21 a. b. c. d. e. a. b. c. d. e. $100 $125 $175 $300 $400 The growth of e-business Increased global competition The emergence of new industries An increased focus on the customer All of the above factors Total Revenue $3,000 4,500 4,500 4,800 6,300 Total Costs $2,100 2,700 2,800 3,200 3,255

35. The average cost per child when 16 children enroll in the school is:

36. Managerial accounting has changed in recent years because of:

37. The following information relates to October:

Production supervisor's salary: $2,500 Factory assembly workers wages: 250 hours at $8 per hour The journal entry to record the preceding information (assume the "normal" method of overhead allocation is used) is: a. Manufacturing Overhead $4,500 Wages Payable $4,500 b. Wages Payable $4,500 Manufacturing Overhead $4,500 c. Work in Process Inventory $ 4,500 Wages Payable $4,500 d. Wages Payable $4,500 Work in Process Inventory $4,500 e. Work in Process Inventory $2,000 Manufacturing Overhead $2,500 Wages Payable $4,500

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38. Consider the graphs that follow (the horizontal axis represents activity; the vertical axis represents total dollars).

Required: Choose the graph that best represents the cost behavior pattern described below. Equipment leasing costs that are computed at $2 per machine hour worked. The company pays a maximum of $120,000 per month. a. Graph a b. Graph c c. Graph i d. Graph e

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ANSWERS 1. C 2. D 3. C 4. C 5. D 6. B 7. B 8. B 9. E 10. B 11. C 12. C 13. D 14. A 15. D 16. B 17. C 18. C 19. A 20. D 21. A 22. A 23. D 24. B 25. C 26. E 27. B 28. B 29. B 30. B 31. C 32. B 33. D 34. A 35. C 36. E 37. E 38. C

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