True/False (2 points each)
1.Managerial accounting information includes both historical and estimated data.
2. The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost.
3.If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as direct materials cost.
4.For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.
5.A receiving report is prepared when purchased materials are first received by the manufacturing department.
6.In applying the first-in, first-out method of costing inventories, if 8,000 units which are 30% completed are in process at June 1, 28,000 units are completed during June, and 4,000 units were 75% completed at June 30, the number of equivalent units of production for June was 33,400.
7.The relevant activity base for a cost depends upon which base is most closely associated with the cost and the decision-making needs of management.
8.If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000.
9.If fixed costs are $850,000 and the unit contribution margin is $50, profit is zero when 15,000 units are sold.
10.Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.
11. In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.
12.In variable costing, the cost of products manufactured is composed of only those manufacturing costs that increase or decrease as the volume of production rises or falls.
13.In contribution margin analysis, the unit price or unit cost factor is computed as the difference between the actual unit price or unit cost and the planned unit price or unit cost, multiplied by the actual quantity sold.
14.The objectives of budgeting are (1) establishing specific goals for future operations, (2) executing plans to achieve the goals, and (3) periodically comparing actual results with these goals.
15.The flexible budget is, in effect, a series of static budgets for different levels of activity.
Multiple Choice (2 points each)
16. In most business organizations, the chief management accountant is called the:
a. chief accounting officer
c. chairman of the board
d. chief executive officer
17. The following are all product costs except:
a. Direct materials
b. Sales and administrative expenses
c. Direct labor
d. Factory overhead
18. All of the following are ways that managers use managerial information except
a. to evaluate the company’s stock performance
b. to evaluate the performance of a company’s operations
c. to support long-term planning decisions
d. to determine the cost of manufacturing a product
19. Job order costing and process costing are
a. pricing systems.
b. cost accounting systems.
c. cost flow systems.
d. inventory tracking systems.
20. The recording of the jobs completed would include a debit to:
a. Factory Overhead
b. Finished Goods
c. Work in Process
d. Cost of Goods Sold
21. The following budget data are available for Oldest Company:
Estimated direct labor hours 12,000
Estimated direct dollars $90,000
Estimated factory overhead costs $179,000
If factory overhead is to be applied based on direct labor hours, the predetermined overhead rate is
22. Which of the following entities would probably use a process costing system?
a. A custom boat builder
b. A custom furniture manufacturer
c. A one of a kind jewelry creator
d. An oil refinery.
The following unit data were assembled for the assembly process of the Super Co. for the month of June. Direct materials are added at the beginning of the process. Conversion costs are added uniformly over the production process. The company uses the FIFO process.
Beginning work in process 5,000
Units started in September 51,000
Ending work in process 4,000
23. The number of equivalent units produced with respect to direct materials costs is: