Grambo-461PracticeTest _1chapters_1-4 Multiple Choice Identify

					Grambo-461PracticeTest #1chapters_1-4

Multiple Choice
Identify the choice that best completes the statement or answers the question.

____    1. _______________ is devoted to providing information for external users.
           a. Management accounting
           b. Financial accounting
           c. Internal accounting
           d. Cost accounting
____    2. Financial accounting information is used for
           a. investment decisions.
           b. regulatory measures.
           c. stewardship evaluation.
           d. all of these.
____    3. Which of the following is NOT part of the financial accounting information system?
           a. filing reports with the SEC
           b. reporting a large contingent liability to current and potential shareholders
           c. determining the future cashflows of a proposed flexible manufacturing system
           d. preparing GAAP financial statements
____    4. Which of the following is NOT provided by cost accountants?
           a. cost information in accordance with GAAP
           b. cost information about processes and activities
           c. financial information for external users
           d. cost information about products, customers, and services
____    5. The primary objective of the cost management information system is to provide
           a. stockholders and potential investors with useful information for decision making.
           b. banks and other creditors with information useful in making credit decisions.
           c. management with information useful for planning and control of operations.
           d. the Internal Revenue Service with information about taxable income.
____    6. The cost management information system is concerned with
           a. reporting financial information according to GAAP.
           b. providing cost information that is used in planning, control, and decision-making.
           c. reporting to external users.
           d. providing financial information to investors.
____    7. Cost management is the branch of accounting concerned with reporting to
           a. internal managers.
           b. stockholders.
           c. the government.
           d. bankers.
____    8. Which of the following activities is associated with the cost management information system?
           a. preparing reports for division managers
           b. preparing reports for the IRS
           c. preparing reports for the SEC
           d. preparing financial statements that conform to GAAP
____    9. Which of the following activities is NOT associated with the financial accounting information system?
           a. reporting on the cost of quality
           b. reporting to the SEC
           c. preparing reports for the IRS
           d. preparing a statement of cash flows
____ 10.   Which of the following is a cost management subsystem designed to assign costs to individual products and
           services and other objects, as specified by management
           a. financial accounting information system
           b. operational control system
           c. cost accounting information system
           d. all of the above
____ 11.   Which of the following cost management tools supports the firm's concentration on the delivery of value to
           the customer?
           a. service industry growth
           b. global competition
           c. preparing an earnings report for the SEC
           d. value-chain analysis
____ 12.   A(n) ________________ is a computerized information system that strives to input data once and make it
           available to people across the company for different purposes
           a. cost management information system
           b. enterprise resource planning system
           c. internal accounting system
           d. financial accounting system
____ 13.   Which of the following is NOT an advance in information technology that affects firms?
           a. computer integrated applications
           b. GAAP reporting
           c. emergence of electronic commerce
           d. availability of tools such as OLAP and DSS
____ 14.   The increased importance of costing our activities in the value chain and determining the cost of different
           suppliers and customers has led to the emergence of
           a. OLAP.
           b. EDI and supply chain management.
           c. CAM.
           d. theory of constraints.
____ 15.   Which of the following activities is NOT significant to the advancement of information technology?
           a. enterprise resource planning software
           b. emergence of electronic commerce
           c. theory of constraints
           d. decision support systems
____ 16.   Automation of the manufacturing environment is associated with increases in
           a. inventory.
           b. productive capacity.
           c. processing time.
           d. none of these.
____ 17.   Which of the following approaches have led to advancements in the manufacturing environment?
           a. theory of constraints
           b. computer-integrated manufacturing
           c. JIT manufacturing
           d. all of these
____ 18.   In JIT manufacturing, each operation produces
           a. only what is necessary for the succeeding operations.
           b. all that it can to offset fixed costs.
           c. a fixed percentage in excess of orders to ensure adequate quality stock.
           d. all that it can in order to build inventories.
____ 19.   Competitive advantage is established by providing
           a. more customer products than competitors.
           b. better quality than competitors.
           c. greater customer value for less cost than competitors.
           d. greater efficiencies than competitors.
____ 20.   A critical measure of efficiency is
           a. the cost of activity.
           b. a T-test.
           c. customer satisfaction.
           d. employee job satisfaction.
____ 21.   The internal auditor performs a
           a. line function.
           b. staff function.
           c. production function.
           d. marketing function.
____ 22.   Which of the following positions would most likely be a staff manager?
           a. manager of a Sears store
           b. president
           c. manager of a clothing division
           d. controller
____ 23.   Which of the following job positions is a line function?
           a. financial vice president
           b. controller
           c. production supervisor
           d. treasurer
____ 24.   Which of the following job positions is a staff position?
           a. controller
           b. production vice president
           c. production supervisor
           d. assembly foreman
____ 25.   The chief accounting officer of an organization is the
           a. vice president of finance.
           b. internal auditor.
           c. treasurer.
           d. controller.
____ 26.   Analyzing cost overruns to determine their cause is an example of
           a. planning.
           b. control.
           c. decision making.
           d. both a and c.
____ 27.   The setting of objectives and the identification of methods to achieve those objectives is called
           a. planning.
           b. controlling.
           c. performance evaluation.
           d. decision making.
____ 28.   Developing a company strategy for responding to anticipated new markets is an example of
           a. planning.
           b. control.
           c. decision making.
           d. all of these.
____ 29.   Evaluating the performance of a segment of the company is an example of
           a. planning.
           b. control.
           c. internal auditing.
           d. both a and c.
____ 30.   Managers are considering outsourcing subcomponents of production. Data is collected about the costs of
           making the subcomponent. Different bids are sought about the purchase of the subcomponents. Which
           managerial activity is applicable in this situation?
           a. control
           b. continuous improvement
           c. planning
           d. decision making
____ 31.   Determining the bid your company should submit on a construction contract is an example of
           a. planning.
           b. control.
           c. decision making.
           d. both a and b.
____ 32.   Which of the following have been found to be TRUE?
           a. Firms that emphasize ethics outperform firms that don't emphasize ethics.
           b. Those corporations that mention ethics in their management reports have lower than
                average performance.
           c. Companies with a strong code of ethics and sense of integrity and honor will have trouble
                competing over the long run.
           d. All of these.
____ 33.   Altering dates of shipping documents of next January's sales to record them as sales in the current year would
           be a violation of which standard of ethical conduct for management accountants?
           a. competence
           b. integrity
           c. credibility
           d. all of these
____ 34.   In resolving an ethical conflict, it is inappropriate to discuss the problem with the immediate supervisor
           because of a violation of which standard of ethical conduct for management accountants?
           a. competence
           b. confidentiality
           c. credibility
           d. This action is not in violation of the code of conduct.
____ 35.   In resolving an ethical conflict, which of the following would NEVER be appropriate?
           a. discussing the matter with the chief executive officer
           b. discussing the matter with an external member of the board of directors
           c. taking the matter to the press where there is no legal requirement
           d. resigning from the position because of a conflict
____ 36.   Disclosing all information, unfavorable as well as favorable, that could influence an intended user’s
           understanding of reports, would relate to what section of the IMA Code of Conduct?
           a. competence
           b. independence
           c. integrity
           d. credibility
____ 37.   The Standards of Ethical professional Practice of the Institute of management Accountants addresses all of the
           following EXCEPT
           a. competence
           b. confidentiality
           c. strategic cost management
           d. integrity
____ 38.   In an accounting information system, which of the following is NOT a transformation process?
           a. collecting data
           b. analyzing data
           c. performance reports
           d. summarizing data
____ 39.   The overall objective of accounting information systems is to
           a. provide information to users.
           b. manage the organization.
           c. prepare financial reports.
           d. report to the government.
____ 40.   Which of the following is NOT an objective of the operational control system?
           a. increasing value to customers
           b. increasing profit by providing value
           c. Increasing post purchase costs
           d. all of these
____ 41.   Traceability is a function of
           a. an indirect relationship to the cost object.
           b. distortion.
           c. a causal relationship.
           d. none of these.
____ 42.   Which cost assignment method would likely assign the cost of maintenance for machines in a department that
           does cutting when the cutting activity is the cost object?
           a. driver tracing
           b. direct tracing
           c. allocation
           d. arbitration
____ 43.   The direct costs of operating a university computer center would NOT include
           a. rent paid for computers.
           b. a fair share of university utilities.
           c. paper used by the center.
           d. computer consultants' salaries.
____ 44.   What is a disadvantage of assigning costs evenly over all cost objects?
           a. not all costs will be assigned
           b. total costs will be distorted
           c. costs may be distorted by consumption patterns of other cost objects
           d. none of these
____ 45.   The insurance paid on the factory is
           a. a direct cost if the cost object is the factory.
           b. an indirect cost if the cost object is the product produced.
           c. could be either a direct cost or an indirect cost, depending on the cost object.
           d. all of these.
____ 46. If physical observation can NOT be used to identify the exact amount of resources consumed by a cost object,
         the next best approach is
         a. driver tracing.
         b. allocation.
         c. estimation.
         d. none of these.
____ 47. Services differ from tangible products in which of the following dimensions?
         a. intangibility
         b. inseparability
         c. perishability
         d. all of these
____ 48. An example of a service, rather than a tangible product, would be
         a. radios.
         b. cloths.
         c. trucks.
         d. medical exams.
____ 49. Which of the following is a service organization?
         a. grocery store
         b. department store
         c. cattle ranch
         d. CPA firm
____ 50. Product value-chain costs assist managers in meeting which of the following objectives?
         a. product mix decisions
         b. tactical profitability analysis
         c. external financial reporting
         d. strategic design decisions
____ 51. Which of the following costs would NOT be included in operating product costs?
         a. research and development
         b. production
         c. marketing
         d. all of these
____ 52. Which of the following costs would be included in traditional product costs used for external reporting?
         a. research and development
         b. production
         c. marketing
         d. all of these
____ 53. Which of the following costs is NOT a product cost?
         a. rent on an office building
         b. indirect labor
         c. repairs on manufacturing equipment
         d. steel used in inventory items produced
____ 54. Which of the following costs is a period cost for a manufacturing company?
         a. controller's salary
         b. wages of machine operators
         c. insurance on factory equipment
         d. fringe benefits for factory employees
____ 55. If the total warehousing cost for the year amounts to $350,000, and 40 percent of the warehousing activity is
         associated with finished goods and 60 percent with direct materials, how much of the cost would be charged
         as a product cost?
           a. $70,000
           b. $140,000
           c. $210,000
           d. $350,000
____ 56.   Wages paid to a janitor in the factory would be classified as
           a. direct labor.
           b. direct janitor salaries.
           c. supervisor salaries.
           d. factory overhead.
____ 57.   All of the following costs are included in factory overhead EXCEPT
           a. factory supplies.
           b. indirect labor.
           c. plant foreman's salary.
           d. direct labor.
____ 58.   Selling and administrative costs are classified as
           a. product costs.
           b. conversion costs.
           c. period costs.
           d. factory overhead.
____ 59.   Which of the following costs is NOT a period cost?
           a. steel used in steel railings
           b. receptionist's salary
           c. depreciation on sales staffs' cars
           d. sales commission
____ 60.   An example of a nonproduction cost is
           a. wages paid to assembly-line employees.
           b. manufacturing supplies.
           c. insurance on manufacturing facilities.
           d. the treasurer's salary.
____ 61.   Prime product costs include
           a. only factory overhead.
           b. only direct labor.
           c. direct labor and factory overhead.
           d. direct materials and direct labor.
____ 62.   Which of the following would NOT be included in the conversion cost of an automobile?
           a. steel
           b. assembly worker wages
           c. depreciation on machinery
           d. washers used inassembly

           Figure 2-11

           Information from the records of the Cain Corporation for August 2011 was as follows:

                  Sales                                                       $1,230,000
                  Selling and administrative expenses                            210,000
                  Direct materials used                                          264,000
                  Direct labor                                                   300,000
                  Factory overhead *                                             405,000
           *variable overhead is $205,000, fixed overhead is $200,000

                                                                                Inventories
                                                                    August 1, 2011     August 31, 2011
           Direct materials                                           $36,000               $42,000
           Work in process                                             75,000                84,000
           Finished goods                                              69,000                57,000

____ 63. Refer to Figure 2-11. The conversion cost is
         a. $960,000
         b. $1,179,000
         c. $705,000
         d. $564,000
____ 64. Refer to Figure 2-11. The prime costs are
         a. $210,000
         b. $264,000
         c. $300,000
         d. $564,000
____ 65. Refer to Figure 2-11. The total product cost is
         a. $1,179,000
         b. $ 969,000
         c. $ 615,000
         d. $ 764,000

           Figure     2-12

           Information from the records of the Scully Company for July 2011 was as follows:

                       Sales                                                 $307,500
                       Selling and administrative expenses                     52,500
                       Direct materials used                                   66,000
                       Direct labor                                            75,000
                       Variable factory overhead                               50,000
                       Factory overhead                                        51,250


                                                                                    Inventories
                                                                          July 1, 2011    July 31, 2011
           Direct materials                                                 $ 8,000           $10,500
           Work in process                                                   18,750            21,000
           Finished goods                                                    17,250            14,250

           Scully Corporation produced 20,000 units.

____ 66. Refer to Figure 2-12. The prime costs per unit for July were
         a. $ 20.00
         b. $ 14.7375
         c. $ 8.8125
         d. $ 7.05
____ 67. Refer to Figure 2-12. What is the total product cost per unit?
         a. $14.7375
         b. $12.1125
         c. $12.175
         d. $12.2375
____ 68. Cost of goods sold equals cost of goods manufactured
         a. when finished goods inventories remain constant.
         b. when work-in-process inventories remain constant.
         c. plus beginning work-in-process inventory minus ending work-in-process inventory.
         d. when materials inventories remain constant.
____ 69. The following information has been provided:

                               Cost of goods manufactured                            $75
                               Work in process
                                  Beginning                                           12
                                  Ending                                              14
                               Direct labor                                           40
                               Materials placed in production                         15
                               Factory overhead                                        ?

           What is the amount of factory overhead?
           a. $20
           b. $22
           c. $14
           d. $55

           Figure 2-15

           Information from the records of the Tyler Enterprises for March 2011 is as follows:

                              Sales                                              $41,000
                              Direct labor                                        10,000
                              Selling and administrative expenses                  7,000
                              Direct materials purchases                           6,000
                              Factory overhead                                    13,500


                                                                     Inventories
                                                           March 1, 2011 March 31, 2011
                              Direct materials               $1,200             $1,400
                              Work in process                 2,500              2,800
                              Finished goods                  2,300              1,900

____ 70. Refer to Figure 2-15. What is the gross margin (profit)?
         a. $11,500
         b. $11,600
         c. $ 4,500
         d. $ 4,600
____ 71. Which of the following items would NOT appear on an income statement of a service organization?
         a. selling expenses
         b. cost of goods sold
           c. administrative expenses
           d. gross margin
____ 72.   Which of the following would be associated with a functional-based cost accounting information system?
           a. setup costs assigned to products using the number of setups as the driver
           b. purchasing costs assigned to products using number of direct labor hours as the activity
               driver
           c. customer service costs assigned to products using the number of complaints as the activity
               driver
           d. materials handling costs assigned to products using the number of moves as the activity
               driver
____ 73.   In a functional-based management system, one is NOT likely to find
           a. unit- and non-unit-based cost drivers.
           b. maximization of individual unit performance.
           c. narrow and rigid product costing.
           d. allocation intensive cost assignment.
____ 74.   In a cost management system, the process view does NOT include
           a. resources.
           b. activities.
           c. driver analysis.
           d. performance analysis.
____ 75.   In a cost management system, the cost view does NOT include
           a. resources.
           b. activities.
           c. driver analysis.
           d. products and customers.
____ 76.   In an activity-based management system, one is NOT likely to find
           a. tracing of costs to activities.
           b. only unit-based drivers.
           c. broad flexible product costing.
           d. systemwide performance maximization.
____ 77.   Which of the following is a trait of a functional-based cost management system?
           a. unit-based drivers
           b. tracing intensive
           c. use of both financial and nonfinancial measures of performance
           d. detailed activity information
____ 78.   Which of the following is a trait of an activity-based cost management system?
           a. allocation-intensive
           b. narrow and rigid product costing
           c. non-unit-based drivers
           d. focus on managing costs
____ 79.   The optimal level in the trade-off between measurement and error costs is when
           a. measurement costs are greater than error costs.
           b. measurement costs are less than error costs.
           c. measurement costs equal error costs.
           d. the total of measurement costs and error costs are maximized.
____ 80.   As the volume of activity increases within the relevant range, the variable cost per unit
           a. decreases.
           b. decreases at first, then increases.
           c. remains the same.
           d. increases.
____ 81.   The direct material cost is $10,000 when 2,000 units are produced. What is the direct material cost for 2,500
           units produced?
           a. $10,000
           b. $ 8,000
           c. $15,000
           d. $12,500
____ 82.   A steep slope in the variable cost line indicates a
           a. low variable cost per unit.
           b. high influence of activity on total variable costs.
           c. low influence of activity on total variable costs.
           d. large amount of fixed costs.
____ 83.   Which of the following statements is TRUE about relevant range?
           a. When costs reach a level above the relevant range, they are considered appropriate for
               analysis.
           b. Linear estimates of an economist's curvilinear cost function is only valid within the
               relevant range.
           c. When costs reach a level below the relevant range, they are considered appropriate for
               analysis.
           d. The nonlinear relevant range is ignored, and only those costs outside of this range may be
               considered.
____ 84.   Mixed costs, by definition, contain both
           a. product and period costs.
           b. fixed and variable costs.
           c. direct and indirect costs.
           d. controllable and noncontrollable costs.
____ 85.   _______________ are costs incurred that provide long-term activity capacity, usually as the result of strategic
           planning.
           a. Discretionary fixed expenses
           b. Committed fixed expenses
           c. Mixed costs
           d. Step-variable costs
____ 86.   When a firm acquires the resources needed to perform an activity, it is obtaining
           a. practical capacity.
           b. resource usage.
           c. activity capacity.
           d. unused capacity.
____ 87.   The activity-based resource usage model improves managerial control and decision making such as
           a. the best way to use excess activity capacity in the system.
           b. maximization of individual unit performance.
           c. increasing the allocation of costs.
           d. focusing on managing costs rather than activities.
____ 88.   Salaries paid to shift supervisors are an example of a
           a. step-variable cost.
           b. step-fixed cost.
           c. variable cost.
           d. mixed cost.

           Figure 3-2
           A company usually processes 20,000 orders at a total cost of $300,000. During the year, only 16,000 orders
           were processed.

____ 89. Refer to Figure 3-2. What is the cost of resource usage?
         a. $300,000
         b. $240,000
         c. $30
         d. $60,000
____ 90. In the formula Y = F + VX, VX refers to the
         a. total variable costs.
         b. intercept.
         c. dependent variable.
         d. independent variable.
____ 91. In the formula Y = F + VX, F refers to the
         a. slope.
         b. intercept.
         c. dependent variable.
         d. independent variable.
____ 92. Total costs may be computed as follows:
         a. Fixed costs + (Variable costs per unit  Unit volume)
         b. (Fixed costs per unit  Unit volume) + Variable costs
         c. Fixed costs per unit + (Variable costs per unit  Unit volume)
         d. (Fixed costs per unit  Unit volume) + Variable costs per unit
____ 93. Assume the following information:

              Volume            Total Cost
              80 units           $1,200
              88 units           $1,300
              96 units           $1,400

         What is the variable cost per unit?
         a. $15.00
         b. $14.78
         c. $13.75
         d. $12.50
____ 94. Advantages of the method of least squares over the high-low method include all of the following EXCEPT
         a. a statistical method is used to mathematically derive the cost function.
         b. only two points are used to develop the cost function.
         c. the squared differences between actual observations and the line (cost function) are
             minimized.
         d. all the observations have an effect on the cost function.
____ 95. Weaknesses of the high-low method include all of the following EXCEPT
         a. only two observations are used to develop the cost function.
         b. the high and low activity levels may not be representative.
         c. the method does not detect if the cost behavior is nonlinear.
         d. the method is relatively complex and difficult to apply.
____ 96. The following information was taken from a computer printout generated with the least-squares method for
         use in estimating overhead costs:
            Slope                                               45
            Intercept                                        5,700
            Correlation coefficient                            .72
            Activity variable                   Direct labor hours

         The cost formula is
         a. Overhead = $5,700 - $45X
         b. Overhead = $5,700 + $45X
         c. Overhead = $5,700 + ($45  0.72)
         d. Overhead = $5,700  0.72
____ 97. In the method of least squares, the deviation is the difference between the
         a. predicted and estimated costs.
         b. predicted and average costs.
         c. average and actual costs.
         d. predicted and actual costs.

            Figure 3-7

            The following computer printout estimated overhead costs using regression:

                                               t for H(0)                                       Std. error
            Parameter                           Estimate       Parameter = 0         Pr > t    of parameter
            Intercept                            100.41           4.81              0.0003         20.88
            DLH                                   14.05           6.78              0.0001          2.07

            R Square (R2)                                                 0.80
            Standard Error (Se)                                          25.03
            Observations                                                    17


            Please find the following statistical table

            degrees      90%          95%          99%         degrees      90%        95%     99%
            of                                                 of
            freedom                                            freedom
            1            6.314        12.708       63.657      11           1.796      2.201   3.106
            2            2.920        4.303        9.925       12           1.782      2.179   3.055
            3            2.353        3.182        5.841       13           1.771      2.160   3.055
            4            2.132        2.776        4.604       14           1.761      2.145   3.012
            5            2.015        2.571        4.032       15           1.753      2.131   2.947
            6            1.943        2.447        3.707       16           1.746      2.120   2.921
            7            1.895        2.365        3.499       17           1.740      2.110   2.898
            8            1.860        2.306        3.355       18           1.734      2.101   2.878
            9            1.833        2.262        3.250       19           1.729      2.093   2.861
            10           1.812        2.228        3.169       20           1.725      2.086   2.845

            During the last accounting period 10,000 DLH were worked.

____ 98. Refer to Figure 3-7. What is the model?
         a. Overhead = 100.41 + 14.05 DLH
          b. Overhead = 4.81 + 6.78 DLH
          c. Overhead = 14.05 + 100.41 DLH
          d. DLH = 4.81 + 6.78 Overhead
____ 99. Refer to Figure 3-7. The hypothesis tests of the cost parameters indicate(s) that
          a. the slope is significantly different from zero.
          b. the intercept is significantly different from zero.
          c. both the slope and intercept are not significant.
          d. both the slope and intercept are significant.
____ 100. A managerial accountant has determined the following relationships between overhead and several possible
          bases:

            Basis                                         Correlation with Total Overhead
            Direct labor hours                                         0.842
            Direct labor dollars                                       0.279
            Machine hours                                             -0.837
            Employee minutes in coffee breaks                         -0.243

          The best basis for overhead application is
          a. direct labor hours.
          b. coffee breaks.
          c. direct labor dollars.
          d. machine hours.
____ 101. The appropriate range for the coefficient of correlation (r) is
          a. 0  r  1.
          b. -%  r  +%.
          c. -1  r  1.
          d. -1  r  +%.
____ 102. The confidence interval for the predicted value of Y
          a. is constructed by multiplying the t-statistic times the standard error.
          b. is a measure of the likelihood that the prediction interval will not contain the actual cost.
          c. can only be computed with 95 percent confidence.
          d. all of these.

            Figure 3-8

            The following computer printout estimated overhead costs using multiple regression:

                                                               t for H(0)                        Std. error
            Parameter                        Estimate        Parameter = 0          Pr > t      of parameter
            Intercept                         1000                1.96             0.0250         510.204
            Setup hours                          25              81.96             0.0001           0.305
            # of parts                         100                9.50             0.0001          10.527

            R Square (R2)                                  0.94
            Standard Error (Se)                           75.00
            Observations                                   160


            During the year the company used 1,000 setup hours and 500 parts.
____ 103. Refer to Figure 3-8. The model being measured is
          a. Overhead = 1,000 + 25(Setup hours) + 100(# of parts)
          b. Overhead = 510 + 0.305(Setup hours) + 10.527(# of parts)
          c. Overhead = 0.98 + 40.98(Setup hours) + 4.865(# of parts)
          d. Overhead = 1,000 + 25(Setup hours)

            Figure 3-9
            Abboud Company is planning to introduce a new product with an 80 percent learning rate for production for
            batches of 1,000 units. The variable labor costs are $30 per unit for the first 1,000-unit batch. Each batch
            requires 100 hours. There are $10,000 in fixed costs not subject to learning.

____ 104. Refer to Figure 3-9. What is the batch unit time (labor hours) to produce 2,000 units based on the cumulative
          average time learning curve?
          a. 100 hours
          b. 80 hours
          c. 20 hours
          d. 60 hours
____ 105. Refer to Figure 3-9. What is the cumulative average time per batch using the incremental unit-time learning
          curve for 2,000 units?
          a. 180
          b. 100
          c. 90
          d. 80
____ 106. The learning curve that decreases by a constant percentage each time the cumulative quantity doubles is
          known as the
          a. cumulative average-time model.
          b. cumulative total-time model.
          c. incremental unit-time model.
          d. decremental average-time model.
____ 107. If an automobile manufacturer changes from skilled labor to computer-controlled assembly procedures, the
          past data
          a. are useful in predicting future costs.
          b. are of little or no value in predicting future costs.
          c. are representative of future costs.
          d. should be used without adjustments to predict future costs.
____ 108. The overhead rates of the traditional functional-based product costing use
          a. non-unit-based activity drivers.
          b. unit-based activity drivers.
          c. process costing.
          d. job order costing.
____ 109. If unit-based product costing is used, which of the following would be traced directly to the product?
          a. setup costs
          b. direct labor
          c. maintenance of machinery
          d. inspection costs
____ 110. In a department that is drilling holes in materials, which activity base is likely to be most appropriate for
          assigning overhead costs?
          a. units produced
          b. direct labor hours
          c. machine hours
          d. number of batches
____ 111. The following information pertains to Black Corporation for 2011:

            Estimated total overhead costs for 2011                                                 $37,500
            Estimated direct labor costs for 2011                                                    25,000
            Actual direct labor costs                                                                22,500
            Actual overhead costs                                                                    36,000
            Activity base                                                                 Direct labor costs

          What is the predetermined overhead rate for Black Corporation for 2011?
          a. 150%
          b. 66.7%
          c. 160%
          d. 62.5%
____ 112. Carlson Company uses a predetermined rate to apply overhead. At the beginning of the year, Carlson
          estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual
          overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were
          11,000.

            What is the predetermined overhead rate per machine hour for Carlson?
            a. $ 6.08
            b. $ 5.85
            c. $24.00
            d. $22.66

            Figure 4-4

            Erickson Company made the following predictions for 2011:

            Factory overhead costs                                                               $300,000
            Direct labor hours                                                                50,000 hours
            Machine hours                                                                    100,000 hours

            Job A2 (which was started and completed in May) used 3,000 direct labor hours, 2,000 machine hours, and
            $57,000 of prime costs.

____ 113. Refer to Figure 4-4. If factory overhead is applied based on machine hours, the cost of Job A2 for the
          Erickson Company is
          a. $69,000.
          b. $75,000.
          c. $63,000.
          d. $66,000.
____ 114. Material amounts of underapplied or overapplied overhead should be
          a. treated as an adjustment to cost of goods sold.
          b. treated as an adjustment to work in process.
          c. allocated to direct materials, work in process, and finished goods.
          d. allocated to work in process, finished goods, and cost of goods sold.
____ 115. Account balances are as follows:

            Manufacturing overhead                                              $240,000 underapplied
           Work in process                                                      100,000
           Finished goods                                                       300,000
           Cost of goods sold                                                   800,000

           If underapplied or overapplied overhead is material and is allocated to Work in Process, Finished Goods, and
           Cost of Goods Sold (based on ending account balances), Cost of Goods Sold after adjustment would have a
           balance of
           a. $1,440,000.
           b. $ 640,000.
           c. $1,040,000.
           d. $ 960,000.

           Figure 4-5

           The Hampshire Company produces 9 volt batteries and AAA batteries. The Hampshire Company uses a
           plantwide rate to apply overhead based on direct labor hours. The following data is given:
           Actual overhead                          $325,000
           Estimated Overhead                       $350,000
           Estimated activity:
                   9 volt battery                   100,000 direct labor
                                                    hours
                       AAA battery                  400,000 direct labor
                                                    hours
           Actual activity:
                       9 volt battery               125,000 direct labor
                                                    hours
                       AAA battery                  400,000 direct labor
                                                    hours
           Units produced:
                        9 volt battery              500,000
                        AAA battery                 250,000

____ 116. Refer to Figure 4-5. How much was overhead over/underapplied?
          a. $25,000
          b. $17,500
          c. $42,500
          d. none of these
____ 117. Refer to Figure 4-5. If the accounts had the following balances, how much will cost of goods sold be
          adjusted?
                               raw materials inventory          $200,000
                               work in process inventory        $100,000
                               finished goods inventory         $200,000
                               cost of goods sold               $500,000

           a.   debit $12,500
           b.   debit $21,250
           c.   credit $26,562.50
           d.   none of these
           Figure 4-7

           The Ogunquit Company uses a predetermined overhead rate. The following accounts have these unadjusted
           balances:
                         Raw Materials          $20,000
                         Work in Process        $40,000
                         Finished Goods         $10,000
                         Cost of Goods Sold     $50,000

____ 118. Refer to Figure 4-7. If overhead is underapplied by $12,000 and considered immaterial, the journal entry
          would be
          a. Cost of Goods Sold         $12,000
                             Manufacturing overhead           $12,000
          b. Manufacturing Overhead $12,000
                             Cost of Goods Sold                  $12,000
          c. Raw Materials                $2,000
             Work in Process             $4,000
             Finished goods               $1,000
             Cost of Goods Sold         $5,000
                              Manufacturing Overhead        $12,000
          d. Manufacturing Overhead         $12,000
                                Raw Materials                    $2,000
                                Work in Process                 $4,000
                                Finished goods                   $1,000
                                Cost of Goods Sold             $5,000
          e. Manufacturing Overhead         $12,000
                              Work in Process                   $4,800
                                Finished goods                   $1,200
                                Cost of Goods Sold             $6,000

____ 119. Refer to Figure 4-7. If Manufacturing overhead was $12,000 overapplied and considered material, what is the
          journal entry?
          a. Cost of Goods Sold                $12,000
                         Manufacturing Overhead                $12,000

           b. Manufacturing Overhead        $12,000
                         Cost of Goods Sold                          $12,000

           c. Manufacturing Overhead        $12,000
                          Raw Materials                                $2,000
                          Work in Process                             $4,000
                          Finished Goods                               $1,000
                          Cost of Goods Sold                         $5,000

           d. Raw Materials                    $2,000
              Work in process                  $4,000
              Finished Goods                    $1,000
              Cost of Goods Sold              $5,000
                           Manufacturing Overhead                 $12,000

           e. Manufacturing Overhead            $12,000
                             Work in Process                         $4,800
                             Finished Goods                            $1,200
                             Cost of Goods Sold                     $6,000
____ 120. The proportion of an overhead activity consumed by a product is the
          a. overhead ratio.
          b. consumption ratio.
          c. quick ratio.
          d. fixed ratio.

            Figure 4-8

            Zipp Company manufactures two products (X and Y). The overhead costs ($84,000) have been divided into
            three cost pools that use the following activity drivers:

            Product                          Number of Setups       Machine Hours           Packing Orders
            X                                       10                     500                    75
            Y                                       10                   2,000                   175

            Cost per pool                          $9,000               $60,000                $15,000

____ 121. Refer to Figure 4-8. What is the allocation rate per setup using activity-based costing?
          a. $ 900
          b. $ 450
          c. $9,000
          d. $2,100
____ 122. A possible solution to overcome distortions caused by unit level rates is
          a. assign costs by multiplying activity rates times the amount of activity consumed.
          b. calculate individual rates for each activity with activity drivers.
          c. increase the number of rates used that reflect the diverse activity and nonunit overhead
             drivers.
          d. all of these.

            Figure 4-10

            The Emmanuele Company has collected the following data for use in calculating product costs:

            Activity Data: (expected and actual)
                                                         mops           brooms          total
                            units produced               50,000         250,000         300,000
                            prime costs                  $200,000       $750,000        $950,000
                            direct labor hours           10,000         40,000          50,000
                            machine hours                20,000         10,000          30,000
                            number of setups             25             75              100
                            inspection hours             1,200          2,800           4,000
                            number of moves              140            210             350

            Departmental Data: (expected and actual)
                                  molding                    assembly               total
            direct labor hours
             mops                    5,000                 5,000                10,000
             brooms                  5,000               35,000                 40,000
             total                 10,000                40,000                 50,000
           machine hours
             mops                  17,000                  3,000                20,000
             brooms                  3,000                 7,000                10,000
             total                 20,000                10,000                 30,000
           overhead costs
             machining             $120,000              $ 30,000               $150,000
             moving materials         40,000                30,000                70,000
             setting up               70,000                10,000                80,000
             inspecting products      20,000                30,000                50,000
             total                   250,000             $100,000               $350,000

____ 123. Refer to Figure 4-10. What is the unit product cost for mops if a plantwide rate is used?
          a. $11.00
          b. $ 4.00
          c. $ 5.40
          d. $ 4.12
____ 124. Refer to Figure 4-10. What are the consumption ratios for mops and brooms respectively for the inspection
          of products activity?
          a. .3; .7
          b. .2; .8
          c. .4; .6
          d. .67; .33
____ 125. Refer to Figure 4-10. What is the consumption ratio for the plantwide activity rate?
          a. .25; .75
          b. .71; .29
          c. .2; .8
          d. .8; .2
____ 126. Refer to Figure 4-10. What are the consumption ratios for mops for the departments on the basis of the
          departmental drivers (molding;assembly)?
          a. .33; .87
          b. .85; .125
          c. .33; .25
          d. .85; .5
____ 127. An activity-based costing system uses which of the following procedures?
          a. Overhead costs are traced to departments, then costs are traced to products.
          b. Overhead costs are traced to activities, then costs are traced to products.
          c. Overhead costs are traced directly to products.
          d. All overhead costs are expensed as incurred.
____ 128. Activity-based costing assigns cost to cost objects by first tracing costs to
          a. products and then tracing costs to cost objects.
          b. departments and then tracing costs to products.
          c. activities and then tracing costs to cost objects.
          d. customers and then tracing costs to products.
____ 129. _____________ are nonfinancial and financial data that describe individual activities.
          a. Activity dictionaries
          b. Activity attributes
          c. Concatenated keys
          d. ABC inventories
____ 130. _____________ aids management in achieving objectives such as product or customer costing, continuous
          improvement and environmental management.
          a. Activity driver
          b. Concatenated key
          c. Primary key
          d. Activity classification
____ 131. Which of the following quantities is an example of an activity driver in activity-based costing?
          a. number of setups
          b. number of orders placed
          c. number of machine hours
          d. all of these

           Figure 4-11

           Yang Manufacturing Company manufactures two products (A and B). The overhead costs ($58,000) have
           been divided into three cost pools that use the following activity drivers:

                                                             Number of Labor
                Product           Number of Orders            Transactions             Labor Hours
                   A                      15                         50                    500
                   B                      10                        150                   2,000

           Cost per pool               $10,000                    $8,000                 $40,000

____ 132. Refer to Figure 4-11. What is the allocation rate per order using ABC?
          a. $10,000
          b. $2,320
          c. $400
          d. $58,000
____ 133. Refer to Figure 4-11. Using functional-based costing, what is the amount of overhead cost to be assigned to
          Product B using labor hours as the allocation base?
          a. $58,000
          b. $43,500
          c. $11,600
          d. $46,400

           Figure 4-13

           The Xiang plant has two categories of overhead: maintenance and inspection.
           Costs expected for these categories for the coming year are as follows:

           Maintenance                                                                               $50,000
           Inspection                                                                                 75,000

           The plant currently applies overhead using direct labor hours and expected capacity of 50,000 direct labor
           hours. The following data have been assembled for use in developing a bid for a proposed job:

           Direct materials                                                                            $500
            Direct labor                                                                               $2,000
            Machine hours                                                                                 500
            Number of inspections                                                                           4
            Direct labor hours                                                                            800

            Total expected machine hours for all jobs during the year is 25,000, and the total expected number of
            inspections is 1,500.

____ 134. Refer to Figure 4-13. Using activity-based costing and the appropriate activity drivers, the total cost of the
          potential job would be
          a. $1,200.
          b. $1,800.
          c. $3,700.
          d. $3,875.

            Figure 4-14

            Spear Manufacturing has four categories of overhead. The four categories and expected overhead costs for
            each category for next year are as follows:

            Maintenance                                                                              $180,000
            Materials handling                                                                         27,000
            Setups                                                                                     24,000
            Inspection                                                                                 90,000

            Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours.
            20,000 direct labor hours are budgeted for next year.

            The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this
            job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 15
            percent. Estimates for the proposed job are as follows:

            Direct materials                                                                           $3,000
            Direct labor (600 hours)                                                                   $9,000
            Number of material moves                                                                        4
            Number of inspections                                                                           6
            Number of setups                                                                                8
            Number of machine hours                                                                        80

            In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity
            driver, direct labor hours. The plant manager has heard of a new way of applying overhead that uses cost
            pools and activity drivers. Expected activity for the four activity drivers that would be used are:

            Machine hours                                                                               5,000
            Material moves                                                                                600
            Setups                                                                                        200
            Quality inspections                                                                         1,000

____ 135. Refer to Figure 4-14. If the number of inspections is used to assign inspection costs, the amount of inspection
          costs allocated to the proposed job would be
          a. $2,700.
           b. $    990.
           c. $    900.
           d. $    540.

           Figure 4-15

           Quint Manufacturing uses an activity-based costing system. The company produces Model 1 and Model 2.
           Information relating to the two products is as follows:

                                                                                 Model 1        Model 2
           Units produced                                                         24,000         30,000
           Machine hours                                                           7,500          8,500
           Direct labor hours                                                      8,000         12,000
           Material handling (number of moves)                                     4,000          6,000
           Setups                                                                  5,000          7,000

           The following costs are reported:

           Material handling                                                                    $ 40,000
           Labor-related overhead                                                                120,000
           Setups                                                                                 60,000

____ 136. Refer to Figure 4-15. Setup costs assigned to Model 2 are
          a. $36,000.
          b. $35,000.
          c. $28,000.
          d. $25,000.

           Figure 4-16

           Newman Company recently installed an activity-based relational database. Using the information contained in
           the activity relational table, the following pool rates were computed:

           $400 per purchase order
           $24 per machine hour, Process 1
           $30 per machine hour, Process 2
           $80 per engineering hour

           Two products are produced by Special Products: X and Y. The plant has two manufacturing processes,
           Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product X
           goes through Process 1 while Product Y goes through Process 2. The product relational table for Special
           Products is as follows:

           Product X:
           Activity Driver # and Name                                                   Activity Usage
                 1     Units                                                               200,000
                 2     Purchase orders                                                         250
                 3     Machine hours                                                        80,000
                 4     Engineering hours                                                     1,250
            Product Y:
            Activity Driver # and Name                                                      Activity Usage
                  1     Units                                                                   25,000
                  2     Purchase orders                                                            125
                  3     Machine hours                                                           10,000
                  4     Engineering hours                                                        1,500

____ 137. Refer to Figure 4-16. What is the unit cost of Product X?
          a. $9.42
          b. $504.00
          c. $10.60
          d. $7.52

            Figure 4-17

            Moss Corporation has the following activities: creating bills of materials (BOM), studying manufacturing
            capabilities, improving manufacturing processes, training employees, and designing tooling. The general
            ledger accounts reveal the following expenditures for manufacturing engineering:

            Salaries                                                                                 $ 75,000
            Equipment                                                                                  40,000
            Supplies                                                                                   10,000
              Total                                                                                 $125,000

            The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of
            the equipment's time is used for improving processes and 65 percent is used for designing tools. The salaries
            are for two engineers. One is paid $50,000, while the other earns $25,000. The $50,000 engineer spends 40
            percent of his time training employees in new processes and 60 percent of his time on improving processes.
            The remaining engineer spends equal time on all activities. Supplies are consumed in the following
            proportions:

            Creating BOMs                                                                               25%
            Studying capabilities                                                                       10%
            Improving processes                                                                         20%
            Training employees                                                                          25%
            Designing tooling                                                                           20%

____ 138. Refer to Figure 4-17. What is the cost assigned to the creating BOMs activity?
          a. $31,250
          b. $7,500
          c. $43,750
          d. $125,000
____ 139. If activity-based costing is used, materials handling would be classified as a
          a. unit-level activity.
          b. batch-level activity.
          c. product-level activity.
          d. facility-level activity.
____ 140. If activity-based costing is used, modifications made by engineering to the product design of several products
          would be classified as a
          a. unit-level activity.
          b. batch-level activity.
          c. product-level activity.
          d. facility-level activity.
____ 141. Which of the following quantities is an example of an activity driver in activity-based costing?
          a. number of direct labor hours
          b. number of labor transactions
          c. number of machine hours
          d. all of these

            Figure 4-19

            Owens Corporation produces specially machined parts. The parts are produced in batches in one continuous
            manufacturing process. Each part is custom produced and requires special engineering design activity (based
            on customer specifications). Once the design is completed, the equipment can be set up for batch production.
            Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances
            allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting.
            In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing
            space. Costs have been assigned to each activity using direct tracing and resource drivers:

            Engineering                                                                               $1,000,000
            Setups                                                                                       900,000
            Machining                                                                                  2,000,000
            Inspection                                                                                   800,000
            Providing space                                                                              250,000
            Providing utilities                                                                          180,000

            Activity drivers for each activity have been identified and their practical capacities listed:

            Machine hours                                                                                    25,000
            Setups                                                                                              200
            Engineering hours                                                                                 5,000
            Inspection hours                                                                                  2,500

            The costs of facility-level activities are assigned using machine hours.

____ 142. Refer to Figure 4-19. What is (are) the unit-level activity(ies)?
          a. engineering
          b. setups
          c. inspecting
          d. machining
____ 143. Refer to 4-19. What is (are) the facility-level activity(ies)?
          a. providing utilities
          b. providing space
          c. inspecting
          d. both a and b

            Figure 4-20
            Owens Corporation produces specially machined parts. The parts are produced in batches in one continuous
            manufacturing process. Each part is custom produced and requires special engineering design activity (based
            on customer specifications). Once the design is completed, the equipment can be set up for batch production.
            Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances
            allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting.
            Costs have been assigned to each activity using direct tracing and resource drivers:

            Activity            Expected Cost       Activity Driver         Activity Capacity
            Engineering         $1,000,000          engineering hours       5,000 hours
            Setups              $ 900,000           setups                  200 setups
            Machining           $2,000,000          machine hours           25,000 machine hours
            Inspection          $ 800,000           inspection hours        2,500 inspection hours

            Owens produces two models: Model X and Model Y. The following table shows how the two products
            consume activity.

                                            Model X                         Model Y
            Units completed                 300,000                         200,000
            Engineering hours               1,000                           4,000
            Setups                          80                              120
            Machine hours                   20,000                          5,000
            Inspection hours                1,500                           1,000

____ 144. Refer to Figure 4-20. How much overhead is assigned to Model X using the 4 activity drivers?
          a. $560,000
          b. $2,060,000
          c. $2,640,000
          d. $2,820,000
____ 145. Refer to Figure 4-20. Determine the engineering costs assigned to model X using the two most expensive
          activities for cost pools. The costs of the two relatively inexpensive activities are allocated to the two most
          expensive activities in proportion to their costs. (Round to two decimal places.)The engineering cost assigned
          to model X would be
          a. $313,330
          b. $566,666.67
          c. $1,566,666.67
          d. $2,819,930
____ 146. Refer to Figure 4-20. What are the global consumption ratios of X and Y respectively? (round to two decimal
          places)
          a. 0.20; 0.80
          b. 0.42; 0.58
          c. 0.56; 0.44
          d. 0.84; 0.16

            Figure 4-21

            Jones Manufacturing uses an activity-based costing system. The company produces Model X and Model Y.
            Information relating to the two products is as follows:

                                                                                   Model X           Model Y
            Units produced                                                          24,000            30,000
           Machine hours                                                              7,500           8,500
           Direct labor hours                                                         8,000          12,000
           Material handling (number of moves)                                        4,000           6,000
           Setups                                                                     5,000           7,000
           Purchase orders                                                               30              40
           Inspections                                                               10,000          14,000
           Product line variations                                                        8              12

           The following overhead costs are reported for the following activities of the production process:

           Material handling                                                                        $ 40,000
           Labor-related overhead                                                                    120,000
           Setups                                                                                     60,000
           Product design                                                                            100,000
           Batch inspections                                                                         120,000
           Central purchasing                                                                         70,000

           Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table
           below:

           Activity      Cost     Driver Pool    Model X Model X Model Y      Model Y Total
                         Pool            Rate    Activity Cost    Activity    Cost
           Material       $40,000 10,000      $4    4,000 $16,000       6,000 $24,000   $40,000
           handling
           Labor         $120,000   20,000      $6      8,000    $48,000       12,000    $72,000   $120,000
           related
           overhead
           Setups         $60,000   12,000       $5     5,000    $25,000        7,000    $35,000    $60,000
           Product       $100,000       20   $5,000         8    $40,000           12    $60,000   $100,000
           design
           Batch         $120,000   24,000      $5     10,000    $50,000       14,000    $70,000   $120,000
           inspections
           Central        $70,000       70   $1,000        30    $30,000           40    $40,000    $70,000
           purchasing
           total                                                $209,000                $301,000   $510,000

           Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most
           expensive activities for cost assignment.

____ 147. Refer to Figure 4-21. Under this new approach, what is the new pool rate for batch inspection costs?
          a. 0
          b. $5
          c. $10.625
          d. $15.525
____ 148. _______________ is (are) the collected data sets that are organized and interrelated for use by an
          organization's ABC information system.
          a. Activity driver
          b. Cost objective
          c. Activity-based costing database
          d. Both a and c
____ 149. A(n)_______________ is a grouping of logically related information.
          a. data set
          b. activity driver
          c. cost objective
          d. both a and c
____ 150. In an approximately relevant ABC system
          a. all activities still are separated into pools; they are allocated on estimated activity levels.
          b. only the most expensive activities are allocated using appropriate cause-and-effect drivers.
          c. cost pools are limited to only two cost pools.
          d. none of these.

				
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