20 Multiple choice questions
1 Cost allocation is:
The process of
tracking both direct and indirect costs associated with a cost object
The process of
determining the actual cost of the cost object
The assignment
of indirect costs to the chosen cost object
A function
of cost tracing
2 Which one of the following items is a direct cost?
Customer-service
costs of a multiproduct firm; Product A is the cost object.
Printing costs
incurred for payroll check processing; payroll check processing is the cost
object.
The salary of a
maintenance supervisor in a multiproduct manufacturing plant; Product B is the
cost object.
Utility costs of
the administrative offices; the accounting department is the cost object.
3 Variable costs:
Are always
indirect costs
Increase in
total when the actual level of activity increases
Include most
personnel costs and depreciation on machinery
Can always be
traced directly to the cost object
4 The Singer Company manufactures several different products. Unit costs associated with Product ICT101 are as follows: What are the variable costs per unit associated with Product ICT101?
Direct materials
$60
Direct
manufacturing labor 10
Variable
manufacturing overhead 18
Fixed
manufacturing overhead 32
Sales
commissions (2% of sales) 4
Administrative
salaries 16
Total $ 140
a. $18 b. $22
c. $88 d. $92
5 Cost-volume-profit analysis is used primarily by management:
As a planning
tool
For control purposes
To prepare
external financial statements
To attain
accurate financial results
6 Operating income calculations use:
Net income
Income tax
expense
Cost of goods
sold and operating costs
Non-operating
revenues and non-operating expenses
7 Contribution margin equals:
Revenues minus
period costs
Revenues minus
product costs
Revenues minus
variable costs
Revenues minus
fixed costs
8 Holly's Ham, Inc. sells hams during the major holiday seasons. During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs. Contribution margin per ham is:
$5.00 $15.00 $20.00 None of these answers are
correct.
9 The actual indirect-cost rate is calculated by:
Dividing actual
total indirect costs by the actual total quantity of the cost-allocation base.
Multiplying
actual total indirect costs by the actual total quantity of the cost-allocation
base.
Dividing the
actual total quantity of the cost allocation base by actual total indirect
costs.
Multiplying the
actual total quantity of the cost allocation base by actual total indirect
costs.
10 O'Reilly Enterprises manufactures digital video equipment. For each unit $2,950 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labor hour. Calculate the cost of each unit.
$4,950, B.
$9,950, C. $8,450, D. $11,950
11 Joni's Kitty Supplies applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials $40,000; 500 direct manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs. Manufacturing overhead cost estimates for this special order total:
$10,000 $30,000 $36,000 None
of these answers is correct.
12 Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 20X3, the following estimates were provided for the coming year:
Machining Assembly
Direct
labor-hours 30,000 60,000
Machine-hours 80,000 20,000
Direct labor
cost $500,000 $900,000
Manufacturing
overhead costs $420,000 $240,000
The accounting
records of the company show the following data for Job #316:
Machining Assembly
Direct
labor-hours 120 70
Machine-hours 60 5
Direct material
cost $300 $200
Direct labor
cost $100 $400
For Bauer
Manufacturing, what is the annual manufacturing overhead cost-allocation rate
for the Machining Department?
A. $4.00, B.$4.20 C. $4.67 D. $5.25
13 ABC systems create:
One large cost
pool
Homogenous activity-related
cost pools
Activity-cost
pools with a broad focus
activity-cost
pools containing many direct costs
15 Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2010, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2010 Velshi Printers has decided to evaluate the use of additional cost pools.
After analyzing
manufacturing overhead costs, it was determined that number of design changes,
setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the
analysis:
Cost Pool Manufacturing Overhead Costs Activity Level
Design changes $120,000 300design changes
Setups $640,000 5,000 setups
Inspections $80,000 8,000
inspections
Total manufacturing
overhead costs $840,000
During
2010, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
Activity Money
Managers Hospital Systems
Pages 60,000 76,000
Design changes 10 0
Setups 20 10
Inspections 30 38
What is the cost
driver rate if manufacturing overhead costs are considered one large cost pool
and are assigned based on 12 million pages of production capacity?
16 Activity-based costing systems provide better product costs when they:
Employ more
activity-cost drivers
Employ fewer
activity-cost drivers
Identify and
cost more indirect cost differences among products
Always yield
more accurate product costs than traditional systems
17 Quality management provides an important competitive edge because it:
Reduces costs
Increases
customer satisfaction
Often results in
substantial savings and higher revenues in the short run
All of these
answers are correct.
18 An example of a nonfinancial measure for customer satisfaction is:
Average
manufacturing time for key products
Contribution
margin
Percentage of
products that fail soon after delivery
Number of
employees trained on managing bottleneck operations
19 A tool which indicates how frequently each type of defect occurs is a:
Control chart Pareto diagram Cause-and-effect diagram Fishbone diagrams
20 An important difference between financial measures of quality and nonfinancial measures of quality is that:
Financial
measures of quality tend to be useful indicators of future long-term
performance, while nonfinancial measures have more of a short-term focus
Nonfinancial
measures of quality tend to be useful indicators of future long-term
performance, while financial measures of quality have more of a short-term
focus
Nonfinancial
measures are generally too subjective to have any long-term value
None of these
answers is correct.
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