Deck 4: Cost Management Systems and Activity-Based Costing

Question 1

The change from traditional costing to activity- based costing may reveal that:

A) low volume products are overcosted
B) both high and low volume products are undercosted
C) high volume products are overcosted
D) both high and low volume products are overcosted

Answer 1

C

Question 2

Baylor Corporation had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}&\text { Traceable }&\text { Physical Flow of }\\\text { Activities }&\text { Costs }&\text { DriverUnits }\\\hline\text { Account inquiry (hours) } & \$ 8,000 & 500 \text { hours } \\\text { Account billing(lines) } & 5,600 & 200,000 \text { lines } \\\text { Account verification (accounts) } & 3,000 & 2,000 \text { accounts } \\\text { Correspondence (letters) } & 1,000 & 200 \text { letters }\end{array}$ The above activities are used by departments A and B as follows: $\begin{array}{llll}&A&B\\\text { Account inquiry (hours) } & 50 \text { hours } & 80 \text { hours } \\\text { Account billing (lines) } & 25,000 \text { lines } & 20,000 \text { lines } \\\text { Account verification (accounts) } & 200 \text { contracts } & 100 \text { contracts } \\\text { Correspondence (letters) } & 20 \text { letters } & 100 \text { letters }\end{array}$ The account inquiry cost assigned to Department A is:

A) $20,800
B) $800
C) $1,280
D) $8,000

Answer 2

$800

Question 3

Rams Manufacturing Company purchased $34,000 of direct materials and incurred $9,600 of direct labor costs during the year. Indirect labor amounted to $1,000 while indirect materials totaled $1,200. Other operating expenses pertaining to the factory included utilities of $1,280, maintenance of $1,840, supplies of $720, depreciation of $6,040, and property taxes of $1,160. The only inventory was $5,000 of finished goods at year end. The cost of goods sold is:

A) $51,840
B) $61,840
C) $38,600
D) $56,840

Answer 3

A

Question 4

The first step of an activity- based costing study determines all of the following except:

A) cost per unit of activity
B) resources
C) project scope
D) key activities

Question 5

Aloha Manufacturing Co. has two departments: Cooking and Bottling. For the period just ended, Aloha's costs were: direct materials, $140,000; direct labor, $80,000; and indirect manufacturing, $100,000. Costs assigned to the Cooking department were: direct materials, 20%; direct labor, 90%. Indirect costs are assigned in the same proportion as direct labor cost. The total cost incurred in the Bottling department is:

A) $162,000
B) $100,000
C) $190,000
D) $320,000

Question 6

is a name for a system that first accumulates overhead costs for each of the activities of an organization, and then assigns the costs of activities to the products, services, or other cost objects that caused that activity.

A) Transaction- based accounting
B) Transaction costing
C) Cost- driver accounting
D) Activity- based costing

Question 7

A manufacturing firm typically has inventory account(s).

A) no
B) three
C) two
D) one

Question 8

The second step in designing and implementing an activity- based costing system includes:

A) developing a process map
B) interpreting activity- based information
C) identifying cost objectives
D) collecting relevant cost data

Question 9

Andy Taylor Corporation has gathered the following information: $$\begin{array} { l l } \text { Sales } & \$ 38,400 \\\text { Direct materials used } & 7,340 \\\text { Direct labor } & 3,040 \\\text { Fixed: } & \\\text { Factory overhead } & 2,480 \\\text { Selling expenses } & 840 \\\text { Administrative expenses } & 1,720 \\& \\\text { Variable: } & \\\text { Factory overhead } & 12,470 \\\text { Selling expenses } & 1,580 \\\text { Administrative expenses } & 1,230\end{array}$$ There were no beginning or ending inventories. The total period costs are:

A) $12,000
B) $5,370
C) $8,200
D) $6,840

Question 10

A is not an example of a cost objective.

A) territory
B) department
C) product
D) All of these answers are correct.

Question 11

are considered conversion costs.

A) Direct labor and factory overhead
B) Direct labor and direct materials
C) Direct materials and indirect labor
D) Factory overhead and indirect materials

Question 12

would appear on an income statement of both a retailer and a manufacturer.

A) Administrative expenses
B) Direct materials
C) Factory burden
D) Ending finished goods inventory

Question 13

County Bank had the following activities, traceable costs, and physical flow of driver units: $$\begin{array} { l l l } & \text { Traceable } & \text { Physical Flow of } \\\text { Activities } & \text { Costs } & \text { Driver Units } \\\hline\text { Open new accounts } & \$ 90,000 & 1,000 \text { accounts } \\\text { Process deposits } & 36,000 & 400,000 \text { dep osits } \\\text { Process withdrawals } & 30,000 & 200,000 \text { withdrawals } \\\text { Process loan applications } & 36,000 & 900 \text { applications }\end{array}$$ The above activities are used by North County branch and South County branch: $$\begin{array} { l l l } & \text { North } & \text { South } \\\text { New accounts } & 200 & 400 \\\text { Deposits } & 40,000 & 20,000 \\\text { With drawals } & 15,000 & 18,000 \\\text { Loan applications } & 100 & 160\end{array}$$ The cost per driver unit for the new account activity is:

A) $0.15
B) $0.09
C) $90.00
D) $40.00

Question 14

is not a primary purpose of a cost management system.

A) Providing cost information for operational control
B) Providing aggregate measures of inventory value and cost of goods sold
C) Providing cost information for strategic management decisions
D) All of these answers are correct.

Question 15

County Bank had the following activities, traceable costs, and physical flow of driver units: $$\begin{array} { l l l } & \text { Traceable } & \text { Physic al Flow of } \\\text { Activities } & \text { Costs } & \text { Driver Units } \\\text { Open new acc ounts } & \$ 50,000 & 1,000 \text { accounts } \\\text { Process deposits } & 36,000 & 400,000 \text { deposits } \\\text { Process with draw als } & 15,000 & 200,000 \text { withdrawals } \\\text { Process loan applications } & 27,000 & 900 \text { applications }\end{array}$$ The above activities are used by North County branch and South County branch: $$\begin{array} { l l l } & \text { North } & \text { South } \\\text { New accounts } & 200 & 400 \\\text { Deposits } & 40,000 & 20,000 \\\text { Withdrawals } & 15,000 & 18,000 \\\text { Loan applications } & 100 & 160\end{array}$$ The deposit cost assigned to the South County branch is:

A) $36,000
B) $3,600
C) $5,400
D) $1,800

Question 16

A period cost:

A) is shown on the balance sheet
B) is identified with goods produced or purchased for resale
C) is expensed as incurred
D) is accumulated in work in process

Question 17

is an example of the external financial reporting purpose of the cost management systems.

A) The cost of a manufacturing process
B) The amount of inventory which should appear on the balance sheet
C) The product mix to optimize profitability
D) All of these answers are correct.

Question 18

Where a specific product is the cost object, the hourly wages of assembly workers who work on only that product would be classified as a(n):

A) indirect, fixed cost
B) direct, variable cost
C) direct, fixed cost
D) indirect, variable cost

Question 19

The Tweety Company has gathered the following information: $\begin{array}{ll}\text { Sales } & \$ 88,000 \\\text { Direct materials used } & 23,900 \\\text { Direct labor } & 15,200\\\text { Fixed: }\\\text { Factory overhead } & 9,400 \\\text { Selling expenses } & 4,500 \\\text { Administrative expenses } & 7,700\\\text { Variable: }\\\text { Factory overhead } & 9,300 \\\text { Selling expenses } & 8,400 \\\text { Administrative expenses } & 1,600\end{array}$ There were no beginning or ending inventories. The total period cost is:

A) $13,900
B) $39,100
C) $18,700
D) $22,200

Question 20

The following information was extracted from the accounting records of Jabbar Manufacturing Company: $\begin{array}{ll}\text { Dir ect materials purchased } & \$ 80,000 \\\text { Direct materials used } & 59,000 \\\text { Direct manuf acturing labor costs } & 10,000 \\\text { Indir ect manufacturing lab or costs } & 12,000 \\\text { Sales salaries } & 14,000 \\\text { Other factory expenses } & 22,000 \\\text { Selling and administrative expens es } & 20,000\end{array}$ The prime cost is:

A) $80,000
B) $79,000
C) $69,000
D) $102,000

Question 21

Rainbow Company manufactures paint in two processes: Mixing and Heating. Total costs incurred in the mixing and cooking departments are as follows: $\begin{array}{lll}&\text { Direct Materials }&\text { Direct labor }\\\text { Mixing } & \$ 60,000 & \$ 80,000 \\\text { Heating } & \$ 40,000 & \$ 70,000\end{array}$ Indirect manufacturing costs were $100,000 for the Mixing department and $200,000 for the Heating department. Rainbow Company manufactures two products, Superior Paint and Deluxe Paint. Costs are allocated to these products in the following proportions: $\begin{array}{lllll}&\text { Mixing }&&\text { Heating }\\&DM&DL&DM&DL\\\text { Sup erior } & \mathbf{4 0} \% & \mathbf{7 0} \% & \mathbf{5 0} \% & \mathbf{4 0} \% \\\text { Deluxe } & \mathbf{6 0} \% & \mathbf{3 0} \% & \mathbf{5 0} \% & \mathbf{6 0} \%\end{array}$ Indirect cost is allocated in proportion to the direct labor costs with each department. The Heating department cost allocated to Superior is:

A) $310,000
B) $128,000
C) $48,000
D) $20,000

Question 22

is an example of the operational purpose of the cost management system.

A) The amount of inventory which should appear on the balance sheet
B) The cost of a manufacturing process
C) The product mix to optimize profitability
D) All of these answers are correct.

Question 23

One of the important differences between traditional and activity- based costing systems is:

A) the types of costs allocated
B) the accuracy of the costs
C) the extent of allocation
D) All of these answers are correct.

Question 24

The William Wallace Company has gathered the following information for the year ended December 31, 20X0: $\begin{array}{ll}\text { Sales } & \$ 67,000 \\\text { Direct materials used } & 12,900 \\\text { Direct labor } & 5,200\\\text { Fixed: }\\\text { Factory overhead } & 6,400 \\\text { Selling expenses } & 5,300 \\\text { Administrative expenses } & 3,700\\\text { Variable: } & \\\text { Factory overhead } & 3,300 \\\text { Selling expenses } & 9,700 \\\text { Administrative expenses } & 2,300\end{array}$ There were no beginning or ending inventories. Gross margin is:

A) $39,200
B) $27,800
C) $31,600
D) $49,700

Question 25

is not true.

A) That cost is another term for expense
B) That costs are frequently measured by the monetary units that must be paid for goods and services
C) That a cost may be defined as a sacrifice or consumption of resources for a particular purpose
D) All of these answers are correct.

Question 26

The Sylvester Company has gathered the following information: $\begin{array}{ll}\text { Sales } & \$ 67,000 \\\text { Direct materials used } & 10,900 \\\text { Direct labor } & 3,200\\\text { Fixed: }\\\text { Factory overhead }&5,400\\\text { Selling expenses } & 2,300 \\\text { Administrative expenses } & 1,700\end{array}$ $\begin{array}{lr}\text { Variable: }\\\text { Factory overhead } & 2,300 \\\text { Selling expenses } & 5,700 \\\text { Administrative expenses } & 8,300\end{array}$ There were no beginning or ending inventories. The total product costs are:

A) $39,800
B) $19,600
C) $21,800
D) $14,100

Question 27

Cost of goods manufactured is computed as:

A) Direct materials + direct labor + indirect manufacturing
B) Direct materials + indirect materials
C) Direct labor + indirect labor
D) Direct labor + direct materials

Question 28

is the part of the accounting system that measures costs for the purposes of management decision making and financial reporting.

A) Cost accounting
B) Cost accumulation
C) Cost determination
D) Cost summary

Question 29

is the process of measuring products, services, and activities against the best levels of performance.

A) Benchmarking
B) Continuous improvement
C) Activity- based costing
D) Value- adding

Question 30

County Bank had the following activities, traceable costs, and physical flow of driver units: $$\begin{array} { l l l } & \text { Traceable } & \text { Physical Flow of } \\\text { Activities } & \text { Costs } & \text { Driver Units } \\\text { Open new accounts } & \$ 90,000 & 1,000 \text { accounts } \\\text { Process dep osits } & 36,000 & 400,000 \text { deposits } \\\text { Process withdrawals } & 30,000 & 200,000 \text { withdrawals } \\\text { Process loan applications } & 36,000 & 900 \text { applications }\end{array}$$ The above activities are used by North County branch and South County branch: $$\begin{array} { l l l } & \text { North } & \text { South } \\\text { New accounts } & 200 & 400 \\\text { Deposits } & 40,000 & 20,000 \\\text { Withdrawals } & 15,000 & 18,000 \\\text { Loan applications } & 100 & 160\end{array}$$ The cost per driver unit for the deposit activity is:

A) $0.15
B) $40.00
C) $90.00
D) $0.09

Question 31

All of the following are period costs except:

A) store supplies expense
B) advertising expense
C) depreciation on office equipment
D) indirect materials

Question 32

Youngblood Corporation had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}&\text { Traceable }&\text { Physical Flow of }\\\text { Activities }&\text { Costs }&\text { DriverUnits }\\\hline\text { Account inquiry (hours) } & \$ 8,000 & 500 \text { hours } \\\text { Account billing (lines) } & 5,600 & 200,000 \text { lines } \\\text { Account verification (accounts)} & 3,000 & 2,000\text { accounts }\\\text { Correspondence (letters) } & 2,000 & 200 \text { letters }\end{array}$ The above activities are used by departments A and B as follows: $\begin{array}{lll}&A&B\\\text { Account inquiry (hours) } & 50 \quad \text { hours } & 80 \text { hours } \\\text { Account billing (lines) } & 25,000 \text { lines } & 20,000 \text { lines } \\\text { Account verification (accounts) } & 200 \text { contracts } & 100 \text { contracts } \\\text { Correspondence (letters) } & 20 \quad \text { letters } & 100 \text { letters }\end{array}$ The cost per driver unit for the correspondence activity is:

A) $10.00
B) $1.50
C) $16.00
D) $0.028

Question 33

need aggregate rather than detailed cost information.

A) External users
B) Internal users
C) Both internal and external users
D) Neither internal nor external users

Question 34

The following information was extracted from the accounting records of Chamberlain Manufacturing Company: $\begin{array}{ll}\text { Direct materials purch ased } & \$ 80,000 \\\text { Direct material s used } & 76,000 \\\text { Direct manufacturing lab or costs } & 10,000 \\\text { Indirect manufacturing lab or costs } & 12,000\\\text { Sales sal aries } & 14,000 \\\text { Other factory expens es } & 22,000 \\\text { Selling and administrative expenses } & 20,000\end{array}$ The cost of goods manufactured is:

A) $154,000
B) $162,000
C) $120,000
D) $128,000

Question 35

County Bank had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}&\text { Traceable }&\text { Physical Flow of }\\\text { Activities }&\text { Costs }&\text { DriverUnits }\\\hline\text { Open new accounts } & \$ 50,000 & {1,000 \text { accounts }} \\\text { Process deposits } & 36,000 & 400,000 \text { deposits } \\\text { Process with dr aw als } & 15,000 & 200,000 \text { withdrawals }\\\text { Process loan applications }&27,000&90\text { applications }\end{array}$ The above activities are used by North County branch and South County branch: $$\begin{array} { l l l } & \text { North } & \text { South } \\\text { New accounts } & 200 & 400 \\\text { Deposits } & 40,000 & 20,000 \\\text { With drawals } & 15,000 & 18,000 \\\text { Loan applications } & 100 & 160\end{array}$$ The new account cost assigned to South County branch is:

A) $10,000
B) $30,000
C) $20,000
D) $50,000

Question 36

is not a product cost.

A) A sales commission
B) Indirect labor
C) Wages of factory guards
D) Depreciation on factory equipment

Question 37

Rainbow Company manufactures paint in two processes: Mixing and Cooking. Total costs incurred in the mixing and cooking departments are as follows: $$\begin{array} { l l l } & \text { Direct Materials } & \begin{array} { l } \text { Direct } \\\text { Labor }\end{array} \\\text { Mixing } & \$ 60,000 & \$ 80,000 \\\text { Cooking } & \$ 25,000 & \$ 50,000\end{array}$$ Indirect manufacturing costs were $90,000 for the Mixing department and $180,000 for the Cooking department. Rainbow Company manufactures two products, Superior Paint and Deluxe Paint. Costs are allocated to these products in the following proportions: $\begin{array}{lllll}&\text { Mixing }&&\text { Cooking }\\&DM&DL&DM&DL\\\text { Superior } & \mathbf{6 0} \% & \mathbf{5 0} \% & \mathbf{5 0} \% & \mathbf{4 0} \% \\\text { Deluxe } & \mathbf{4 0} \% & \mathbf{5 0} \% & \mathbf{5 0} \% & \mathbf{6 0} \%\end{array}$ Indirect cost is allocated in proportion to the direct labor costs with each department. The Cooking department cost allocated to Deluxe is:

A) $104,500
B) $12,500
C) $32,500
D) $150,500

Question 38

is the sum of direct labor and direct materials.

A) Period costs
B) Indirect costs
C) Prime costs
D) Conversion costs

Question 39

is the process of collecting costs by classification.

A) Cost application
B) Cost allocation
C) Cost accumulation
D) Cost accounting

Question 40

is not an inventory account.

A) Work- in- process
B) Direct labor
C) Direct materials
D) Finished goods

Question 41

Dickerson Corporation had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}& \text { Traceable } & \text { Physical Flow of } \\\text { Activities } & \text { Costs } & \text { Driver Units }\\\text { Acc ount inquiry (hours) } & \$ 10,000 & 500 \text { hours } \\\text { Acc ount billing (lines) } & 5,600 & 200,000 \text { lines } \\\text { Account verification (accounts) } & 3,000 & 2,000 \text { accounts } \\\text { Correspondence (letters) } & 1,000 & 200 \text { letters }\end{array}$ The above activities are used by departments A and B as follows: $$\begin{array} { l l l } & \underline { \text { A } } & \underline { \text { B } } \\\text { Acc ount inquiry (hours) } & 50 \text { hours } & 80 \text { hours } \\\text { Account billing (lines) } & 25,000 \text { lines } & 20,000 \text { lines } \\\text { Account verification (accounts) } & 200 \text { contracts } & 100 \text { contracts } \\\text { Correspondence (letters) } & 20 \text { letters } & 100 \text { letters }\end{array}$$ The cost per driver unit for the account inquiry activity is:

A) $5.00
B) $20.00
C) $0.028
D) $1.50

Question 42

The Grinch Company has gathered the following information for the year ended December 31, 20X0: $\begin{array}{ll}\text { Sales } & \$ 75,000 \\\text { Direct materials used } & 12,900 \\\text { Direct labor } & 5,200 \\\text { Fixed: } & \\\text { Factory overhead } & 6,400 \\\text { Selling expenses } & 2,300 \\\text { Administrative expenses } & 1,700\end{array}$ $$\begin{array}{l}\text { Variable: }\\\begin{array} { l l } \text { Factory overhead } & 3,300 \\\text { Selling expenses } & 5,700 \\\text { Administrative expenses } & 8,300\end{array}\end{array}$$ There were no beginning or ending inventories. Net income is:

A) $48,900
B) $39,600
C) $56,900
D) $29,200

Question 43

Where a specific product is the cost object, the materials used to manufacture the product would probably be classified as a(n):

A) indirect, variable cost
B) direct, variable cost
C) direct, fixed cost
D) indirect, fixed cost

Question 44

need cost accounting systems.

A) Service organizations and nonprofit organizations
B) Manufacturing firms, service organizations, and nonprofit organizations
C) Manufacturing firms and service organizations
D) Manufacturing firms and nonprofit organizations

Question 45

Rams Company purchased $34,000 of direct materials and incurred $9,600 of direct labor costs during the year. Indirect labor amounted to $1,000, while indirect materials totaled $1,200. Other operating expenses pertaining to the factory included utilities of $1,280, maintenance of $1,840, supplies of $720, depreciation of $6,040, and property taxes of $1,160. The only inventory was $2,720 of finished goods at year end. The cost of goods manufactured is:

A) $69,000
B) $50,800
C) $56,840
D) $45,800

Question 46

Multistage ABC systems:

A) have more than five stages of allocation
B) use cost drivers other than percentages
C) use percentages as cost drivers
D) use stages in place of cost pools

Question 47

Managers have greater confidence in the accuracy of costs of products and services reported by activity- based systems because:

A) activity- based systems are more complex
B) activity- based systems are more expensive
C) activity- based systems classify more costs as direct
D) All of these answers are correct.

Question 48

Youngblood Corporation had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}&\text { Traceable }&\text { Physical Flow of }\\\text { Activities }&\text { Costs }&\text { DriverUnits }\\\hline\text { Account inquiry (hours) } & \$ 8,000 & 500 \text { hours } \\\text { Account billing(lines) } & 5,600 & 200,000 \text { lines } \\\text { Account verification (accounts) } & 6,000 & 2,000 \text { accounts } \\\text { Correspondence (letters) } & 1,000 & 200 \text { letters }\end{array}$ The above activities are used by departments A and B as follows: $\begin{array}{lll}&A&B\\\text { Account inquiry (hours) } & 50 \text { hours } & 80 \text { hours } \\\text { Account billing (lines) } & 25,000 \text { lines } & 20,000 \text { lines } \\\text { Account verification (accounts) } & 200 \text { contracts } & 100 \text { contracts } \\\text { Correspondence (letters) } & 20 \text { letters } & 100 \text { letters }\end{array}$ The cost per driver unit for the account verification activity is:

A) $5.00
B) $0.028
C) $16.00
D) $3.00

Question 49

The Rainbow Company manufactures paint in two processes: Mixing and Cooking. Total costs incurred in the mixing and cooking departments are as follows: $\begin{array}{lll}&\text { Direct Materials }&\text { Direct labor }\\\text { Mixing } & \$ 60,000 & \$ 80,000 \\\text { Cooking } & \$ 25,000 & \$ 50,000\end{array}$ Indirect manufacturing costs were $90,000 for the Mixing department and $180,000 for the Cooking department. Rainbow Company manufactures two products, Superior Paint and Deluxe Paint. Costs are allocated to these products in the following proportions: $\begin{array}{lllll}&\text { Mixing }&&\text { Cooking }\\&DM&DL&DM&DL\\\text { Superior } & \mathbf{4 0} \% & \mathbf{7 0} \% & \mathbf{5 0} \% & \mathbf{4 0} \% \\\text { Deluxe } & \mathbf{6 0} \% & \mathbf{3 0} \% & \mathbf{5 0} \% & \mathbf{6 0} \%\end{array}$ Indirect cost is allocated in proportion to the direct labor costs with each department. The Mixing department cost allocated to Deluxe is:

A) $60,000
B) $36,000
C) $87,000
D) $143,000

Question 50

County Bank had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{lll}& \text { Traceable } & \text { Physical Flow of } \\\text { Activities } & \text { Costs } & \text { Driver Units }\\\hline\text { Open new accounts } & \$ 50,000 & 1,000 \text { accounts } \\\text { Process deposits } & 36,000 & 400,000 \text { deposits } \\\text { Process with drawals } & 15,000 & 200,000 \text { withdrawals } \\\text { Process loan applications } & 27,000 & 900 \text { applications }\end{array}$ The above activities are used by North County branch and South County branch: $\begin{array}{lll}& \text { North } & \text { South } \\\text { New accounts } & 200 & 400 \\\text { Deposits } & 40,000 & 20,000 \\\text { Withdrawals } & 15,000 & 18,000 \\\text { Loan applications } & 100 & 160\end{array}$ The loan application cost assigned to North County branch is:

A) $4,800
B) $7,800
C) $27,000
D) $3,000

Question 51

is a false statement.

A) That product costs show up on the income statement in cost of goods sold
B) That product costs are automatically deducted as expenses during the current period
C) That product costs are inventoriable costs
D) That product costs become expenses when the inventory is sold

Question 52

County Bank had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{lll}& \text { Traceable } & \text { Physical Flow of } \\\text { Activities } & \text { Costs } & \text { Driver Units }\\\hline\text { Open new accounts } & \$ 90,000 & 1,000 \text { accounts } \\\text { Process deposits } & 36,000 & 400,000 \text { deposits } \\\text { Process with drawals } & 30,000 & 200,000 \text { withdrawals } \\\text { Process loan applications } & 36,000 & 900 \text { applications }\end{array}$ The above activities are used by North County branch and South County branch: $$\begin{array} { l l l } & \text { North } & \text { South } \\\text { New accounts } & 200 & 400 \\\text { Deposits } & 40,000 & 20,000 \\\text { With drawals } & 15,000 & 18,000 \\\text { Loan applications } & 100 & 160\end{array}$$ The cost per driver unit for the loan application activity is:

A) $90.00
B) $0.15
C) $40.00
D) $0.09

Question 53

The Grinch Company has gathered the following information for the year ended December 31, 20X0: $\begin{array}{ll}\text { Sales } & \$ 75,000 \\\text { Direct materials used } & 12,900 \\\text { Direct labor } & 5,200\\\text { Fixed: }\\\text { Factory overhead }&6,400\\\text { Selling expenses } & 2,300 \\\text { Administrative expenses } & 1,700\end{array}$ $\begin{array}{ll}\text { Variable: }\\\text { Factory overhead } & 3,300 \\\text { Selling expenses } & 5,700 \\\text { Administrative expenses } & 8,300\end{array}$ There were no beginning or ending inventories. The contribution margin is:

A) $29,200
B) $56,900
C) $39,600
D) $31,600

Question 54

Many more costs are direct if the cost objective is a:

A) service
B) department
C) physical product
D) manager

Question 55

are included in factory overhead.

A) Prime costs
B) Indirect and direct labor
C) Direct materials and direct labor
D) Indirect labor and indirect materials

Question 56

is not a direct cost of a furniture manufacturer.

A) Glass for table tops
B) Wood
C) Paint for finished products
D) Glue

Question 57

A merchandising firm typically has inventory account(s).

A) three
B) one
C) two
D) no

Question 58

need aggregate measures of inventory value and cost of goods sold.

A) External stockholders
B) Creditors
C) Investors
D) All of these answers are correct.

Question 59

Dickerson Corporation had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}&\text { Traceable }&\text { Physical Flow of }\\\text { Activities }&\text { Costs }&\text { DriverUnits }\\\hline\text { Account inquiry (hours) } & \$ 8,000 & 500 \text { hours } \\\text { Account billing(lines) } & 8,000 & 200,000 \text { lines } \\\text { Account verification (accounts) } & 3,000 & 2,000 \text { accounts } \\\text { Correspondence (letters) } & 1,000 & 200 \text { letters }\end{array}$ The above activities are used by departments A and B as follows: $\begin{array}{lll}&A&B\\\text { Account inquiry (hours) } & 50 \quad \text { hours } & 80 \text { hours } \\\text { Account billing (lines) } & 25,000 \text { lines } & 20,000 \text { lines } \\\text { Account verification (accounts) } & 200 \text { contracts } & 100 \text { contracts } \\\text { Correspondence (letters) } & 20 \quad \text { letters } & 100 \text { letters }\end{array}$ The cost per driver unit for the account billing activity is:

A) $5.00
B) $16.00
C) $1.50
D) $0.04

Question 60

is the process of reassigning cost to a cost object.

A) Cost allocation
B) Cost accumulation
C) Cost application
D) Cost accounting

Question 61

Opie Corporation has gathered the following information for the year ended December 31, 20X0: $\begin{array}{ll}\text { Sales } & \$ 38,400 \\\text { Direct material s used } & 7,340 \\\text { Direct labor } & 3,040 \\\text { Fixed: } & \\\text { Factory overhead } & 2,480 \\\text { Selling expenses } & 840 \\\text { Administrative expenses } & 1,720 \\\text { Variable: } & \\\text { Factory overhead } & 12,470 \\\text { Selling expenses } & 1,580 \\\text { Administrative expenses } & 1,230\end{array}$ There were no beginning or ending inventories. The total product costs are:

A) $10,380
B) $15,510
C) $30,700
D) $25,330

Question 62

are the three major categories of manufacturing costs.

A) Prime costs, period costs, and product costs
B) Indirect labor, indirect materials, and conversion costs
C) Prime costs, direct materials, and factory overhead
D) Direct labor, factory overhead, and direct materials

Question 63

Clyde Corporation has gathered the following information for the year ended December 31, 20X0: $\begin{array}{ll}\text { Sales } & \$ 38,400 \\\text { Direct materials used } & 7,340 \\\text { Direct labor } & 3,040 \\\text { Fixed: } & \\\text { Factory overhead } & 2,480 \\\text { Selling expenses } & 840 \\\text { Administrative expens es } & 1,720\end{array}$ $$\begin{array} { l c } \text { Variable: } & \\\text { Factory overhead } & 1,320 \\\text { Selling expenses } & 1,760 \\\text { Administrative expenses } & 920\end{array}$$ There were no beginning or ending inventories. The total conversion costs are:

A) $8,200
B) $5,240
C) $12,000
D) $6,840

Question 64

The following information was extracted from the accounting records of Jabbar Manufacturing Company: $\begin{array}{ll}\text { Direct material s purchased } & \$ 80,000 \\\text { Direct materials used } & 76,000 \\\text { Direct manuf acturing labor costs } & 10,000 \\\text { Indirect manufacturing lab or costs } & 12,000 \\\text { Sales sal aries } & 14,000 \\\text { Other factory expenses } & 22,000 \\\text { Selling and administrative expens es } & 30,000\end{array}$ The total period cost is:

A) $14,000
B) $68,000
C) $44,000
D) $56,000

Question 65

The following information was extracted from the accounting records of Chamberlain Company: $\begin{array}{ll}\text { Direct materials purchased } & \$ 80,000 \\\text { Direct materials used } & 76,000 \\\text { Direct manuf acturing labor costs } & 10,000 \\\text { Indirect manufacturing lab or costs } & 12,000 \\\text { Sales sal aries } & 14,000 \\\text { Other factory expenses } & 22,000 \\\text { Selling and administrative expens es } & 20,000\end{array}$ The finished goods inventory was $0 at the beginning of the period and $15,000 at the end of the period. The cost of goods sold is:

A) $147,000
B) $113,000
C) $139,000
D) $105,000

Question 66

The cost of goods manufactured line on the income statement of a manufacturer is the equivalent to the line on a retailer's income statement.

A) cost of goods sold
B) cost of goods purchased
C) cost of goods available for sale
D) ending merchandise inventory

Question 67

The Rainbow Company manufactures paint in two processes: Mixing and Heating. Total costs incurred in the Mixing and Heating departments are as follows: $\begin{array}{lll}&\text { Direct Materials }&\text { Direct labor }\\\text { Mixing } & \$ 60,000 & \$ 80,000 \\\text { Heating } & \$ 25,000 & \$ 50,000\end{array}$ Indirect manufacturing costs were $90,000 for the Mixing department and $180,000 for the Heating department. Rainbow Company manufactures two products, Fantastic Paint and Super Paint. Costs are allocated to these products in the following proportions: $\begin{array}{lllll}&\text { Mixing }&&\text { Heating }\\&DM&DL&DM&DL\\\text { Fantastic } & \mathbf{5 0} \% & \mathbf{8 0} \% & \mathbf{4 0} \% & \mathbf{8 0} \% \\\text { Super } & \mathbf{5 0} \% & \mathbf{2 0} \% & \mathbf{6 0} \% & \mathbf{2 0} \%\end{array}$ Indirect cost is allocated in proportion to the direct labor costs with each department. The Mixing department cost allocated to Fantastic is:

A) $166,000
B) $94,000
C) $230,000
D) $30,000

Question 68

Period costs and product costs:

A) refer to inventory costs
B) are costs of service firms
C) appear on the income statement
D) All of these answers are correct.

Question 69

A _ is an activity for which a separate measurement is desired.

A) product cost
B) cost objective
C) period cost
D) cost accumulation system

Question 70

Where a specific product is the cost object, the wages of a security guard would probably be classified as a(n):

A) direct, fixed cost
B) direct, variable cost
C) indirect, variable cost
D) indirect, fixed cost

Question 71

is a factor in determining how a cost will be classified.

A) The amount of the cost
B) The cost allocation technique
C) The cost objective
D) The payment status of the cost

Question 72

West, Inc., started the year with $80,000 in direct materials. During the year West, Inc., purchased $535,000 in direct materials, and used $515,000 in materials. The direct materials inventory on the balance sheet is:

A) $60,000
B) $535,000
C) $20,000
D) $100,000

Question 73

is the necessary cost of an activity that cannot be eliminated without affecting a product's value to the customer.

A) A product cost
B) A prime cost
C) A period cost
D) A value- added cost

Question 74

Youngblood Corporation had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}&\text { Traceable }&\text { Physical Flow of }\\\text { Activities }&\text { Costs }&\text { DriverUnits }\\\hline\text { Account inquiry (hours) } & \$ 8,000 & 500 \text { hours } \\\text { Account billing(lines) } & 5,600 & 200,000 \text { lines } \\\text { Account verification (accounts) } & 3,000 & 2,000 \text { accounts } \\\text { Correspondence (letters) } & 1,000 & 200 \text { letters }\end{array}$ The above activities are used by departments A and B as follows: $\begin{array}{lll}&A&B\\\text { Account inquiry (hours) } & 50 \quad \text { hours } & 80 \text { hours } \\\text { Account billing (lines) } & 25,000 \text { lines } & 20,000 \text { lines }\\\text { Account verification ( accounts) }&200\text { comtracts }&100\text { comtracts }\\\text { Corresp ondence (letters) }&20\text { letters }&100\text { letters }\end{array}$ The correspondence cost assigned to Department B is:

A) $500
B) $100
C) $1,000
D) None of these answers is correct.

Question 75

County Bank had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{lll}& \text { Traceable } & \text { Physical Flow of } \\\text { Activities } & \text { Costs } & \text { Driver Units }\\\hline\text { Open new accounts } & \$ 90,000 & 1,000 \text { accounts } \\\text { Process deposits } & 36,000 & 400,000 \text { dep osits } \\\text { Process with draw als } & 30,000 & 200,000 \text { withdr awals } \\\text { Process loan applications } & 36,000 & 900 \text { applications }\end{array}$ The above activities are used by North County branch and South County branch: $$\begin{array} { l l l } & \text { North } & \text { South } \\\text { New accounts } & 200 & 400 \\\text { Deposits } & 40,000 & 20,000 \\\text { Withdr awals } & 15,000 & 18,000 \\\text { Loan applic ations } & 100 & 160\end{array}$$ What is the cost per driver unit for the withdrawal activity?

A) $90.00
B) $0.09
C) $0.15
D) $40.00

Question 76

is an example of the decisions reflecting the strategic purpose of the cost- management system.

A) The cost of a manufacturing process
B) The amount of inventory which should appear on the balance sheet
C) The product mix to optimize profitability
D) All of these answers are correct.

Question 77

Barney Corporation has gathered the following information for the year ended December 31, 20X0: $\begin{array}{ll}\text { Sales } & \$ 38,400 \\\text { Direct materials used } & 8,340 \\\text { Direct lab or } & 5,040\\\text { Fixed: }\\\text { Factory overhead } & 2,480 \\\text { Selling expens es } & 840 \\\text { A dministrative expenses } & 1,720\\\text { Variable: }\\\text { Factory overhead } & 12,470 \\\text { Selling expens es } & 1,580 \\\text { Administrative expenses } & 1,230\end{array}$ There were no beginning or ending inventories. The total prime costs are:

A) $13,380
B) $5,040
C) $14,950
D) $12,470

Question 78

is a true statement.

A) That direct costs cannot be identified specifically with a given cost objective in an economically feasible way
B) That indirect costs can be identified specifically with a given cost objective in an economically feasible way
C) That a cost may simultaneously be direct and indirect depending on the cost objective
D) That managers prefer to classify costs as indirect rather than direct

Question 79

Baylor Corporation had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}&\text { Traceable }&\text { Physical Flow of }\\\text { Activities }&\text { Costs }&\text { DriverUnits }\\\hline\text { Account inquiry (hours) } & \$ 8,000 & 500 \text { hours } \\\text { Account billing(lines) } & 8,000 & 200,000 \text { lines } \\\text { Account verification (accounts) } & 3,000 & 2,000 \text { accounts } \\\text { Correspondence (letters) } & 1,000 & 200 \text { letters }\end{array}$ The above activities are used by departments A and B as follows: $$\begin{array} { l c c } & \underline { A } & \underline { B } \\\text { Accountinquiry (hours) } & 50 \text { hours } & 80 \text { hours } \\\text { Account billing (lines) } & 25,000 \text { lines } & 20,000 \text { lines } \\\text { Account verification (accounts) } & 200 \text { contracts } & 100 \text { contracts } \\\text { Correspondence (letters) } & 20 \text { letters } & 100 \text { letters }\end{array}$$
The account verification cost assigned to Department A is:

A) $3,000
B) $450
C) $150
D) $300

Question 80

Aloha Manufacturing Co. has two departments: Cooking and Bottling. For the period just ended, Aloha's costs were: direct materials, $140,000; direct labor, $80,000; and indirect manufacturing, $100,000. Costs assigned to the Cooking department were: direct materials, 50%; direct labor, 80%. Indirect costs are assigned in the same proportion as direct labor cost. The total cost incurred in the Cooking department is:

A) $150,000
B) $320,000
C) $134,000
D) $214,000