MCQ’S 1-28 Q1Which of the following does NOT affect the direct/indirect classification of a cost?…..

Corresponds to CLO 1(a)
Which of the following does NOT affect the direct/indirect classification of a
cost?

the level of budgeted profit for the next year

the materiality of the cost in question

available technology to gather information about the cost

the design of the operation

Question 2

Corresponds to CLO 1(b)
Fixed costs depend on the:

amount of resources used

amount of resources acquired

volume of production

volume of sales

Question 3

Corresponds to CLO 1(c)
A band of normal activity or volume in which specific cost-volume relationships
are maintained is referred to as the:

average range

cost-allocation range

relevant range

cost driver range

Question 4

Corresponds to CLO 1(d)
Christi Manufacturing provided the following information for last month:

Sales $10,000
Variable costs 3,000
Fixed costs 5,000
Operating income $2,000

If sales double next month, what is the projected operating income?

$4,000

$7,000

$9,000

$12,000

Question 5

Corresponds to CLO 2(a) Which of the following items is NOT an
assumption of CVP analysis?

Total costs can be divided into a fixed component and a component
that is variable with respect to the level of output.

When graphed, total costs curve upward.

The unit-selling price is known and constant.

All revenues and costs can be added and compared without taking into
account the time value of money.

Question 6

Corresponds to CLO 2(b) 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.
Breakeven point in units is:

1,000 hams

1,200 hams

1,600 hams

None of these answers are correct.

Question 7

Corresponds to CLO 2(c) Fixed costs equal $12,000, unit contribution
margin equals $20, and the number of units sold equal 1,600. Operating income
is:

$12,000

$20,000

$32,000

$40,000

Question 8

Corresponds to CLO 2(d) The breakeven point in CVP analysis is defined as:

when fixed costs equal total revenues

fixed costs divided by the contribution margin per unit

revenues less variable costs equal operating income

when the contribution margin percentage equals total revenues divided
by variable costs

Question 9

Corresponds to CLO 3(a)
Job costing:

can only be used in manufacturing

records the flow of costs for each customer

allocates an equal amount of cost to each unit made during a time
period

is commonly used when each unit of output is identical

Question 10

Corresponds to CLO 3(b)
Problems with accurate costing occur when:

incorrect job numbers are recorded on source documents

bar coding is used to record materials used on the job

a computer screen requests an employee number before that employee is
able to work on information related to a specific job

All of these answers are correct.

Question 11

Corresponds to CLO 3(c)
The law firm of Smith & Jones has a staff of 30 lawyers and administrative
staff. Budgeted total costs of the firm total $2,100,000 of which $1,200,000 is
direct-labor costs. Assuming that the remaining costs are indirect and
direct-labor cost is the allocation base, calculate the budgeted indirect cost
rate.

57% of direct-labor cost

75% of direct-labor cost

43% of direct-labor cost

175% of direct-labor cost

Question 12

Corresponds to CLO 3(d)
A local accounting firm employs 20 full-time professionals. The budgeted annual
compensation per employee is $40,500. The average chargeable time is 500 hours
per client annually. All professional labor costs are included in a single
direct-cost category and are allocated to jobs on a per-hour basis.
Other costs are included in a single indirect-cost pool, allocated according to
professional labor-hours. Budgeted indirect costs for the year are $787,500,
and the firm expects to have 90 clients during the coming year.
What is the budgeted indirect-cost rate per hour?

$1,575.00 per hour

$78.75 per hour

$18.00 per hour

$17.50 per hour

Question 13

Corresponds to CLO 4(a)
Budgeting is used to help companies:

plan to better satisfy customers

anticipate potential problems

focus on opportunities

All of these answers are correct.

Question 14

Corresponds to CLO 4(b)
The order to follow when preparing the operating budget is:

revenues budget, production budget, and direct
manufacturing labor costs budget

costs of goods sold budget, production budget, and cash budget

revenues budget, manufacturing overhead costs budget, and production
budget

cash expenditures budget, revenues budget, and production budget.

Question 15

Corresponds to CLO 4(c)
DeArmond Corporation has budgeted sales of 18,000 units, target ending finished
goods inventory of 3,000 units, and beginning finished goods inventory of 900
units. How many units should be produced next year?

21,900 units

20,100 units

15,900 units

18,000 units

Question 16

Corresponds to CLO 4(d)
Fiscal Company has the following sales budget for the last six months of 20X5:
July 100,000 October $ 90,000
August 80,000 November 100,000
September 110,000 December 94,000

Historically, the cash collection of sales has been as follows:
65% of sales collected in the month of sale,
25% of sales collected in the month following the sale,
8% of sales collected in the second month following the sale, and
2% of sales are uncollectible.
Cash collections for September are:

$71,500

$86,700

$99,500

$102,000

Question 17

Corresponds to CLO 5(a)
The flexible budget contains:

budgeted amounts for actual output

budgeted amounts for planned output

actual costs for actual output

actual costs for planned output

Question 18

Corresponds to CLO 5(b)

JJ White planned to use $82 of material per unit but actually used $80
of material per unit, and planned to make 1,200 units but actually made 1,000
units.

The flexible-budget amount is:

$80,000

$82,000

$96,000

$98,400

Question 19

Corresponds to CLO 5(c)
When actual input data from past periods is used to develop a budget:

past inefficiencies are excluded

expected future changes are incorporated

information is available at a low cost

audited financial information must be used

Question 20

Corresponds to CLO 5(d)

Robb Industries, Inc. (RII), developed standard costs for direct
material and direct labor. In 2004, RII estimated the following standard costs
for one of their major products, the 10-gallon plastic container.

Budgeted quantity Budgeted price

Direct materials 0.10 pounds $30 per pound

Direct labor 0.05 hours $15 per hour

During June, RII produced and sold 5,000 containers using 490 pounds of
direct materials at an average cost per pound of $32 and 250 direct
manufacturing labor-hours at an average wage of $15.25 per hour.

June’s direct material flexible-budget variance is:

$980 unfavorable

$300 favorable

$680 unfavorable

None of these answers are correct.

Question 21

Corresponds to CLO 6(a)
For calculating the costs of products and services, a standard costing system:

only requires a simple recording system

uses standard costs to determine the cost of products

does not have to keep track of actual costs

All of these answers are correct.

Question 22

Corresponds to CLO 6(b)
Shimon Corporation manufactures industrial-sized water coolers and uses
budgeted machine-hours to allocate variable manufacturing overhead. The
following information pertains to the company’s manufacturing overhead data:

Budgeted output units 15,000 units
Budgeted machine-hours 5,000 hours
Budgeted variable manufacturing overhead costs for 15,000 units $161,250

Actual output units produced 22,000 units
Actual machine-hours used 7,200 hours
Actual variable manufacturing overhead costs $242,000

What is the flexible-budget amount for variable manufacturing overhead?

$165,000

$236,500

$242,000

None of these answers is correct.

Question 23

Corresponds to CLO 6(c)
Fearless Frank’s Fertalizer Farm produces fertalizer and distributes the
product by using his tanker trucks. Frank’s uses budgeted fleet hours to
allocate variable manufacturing overhead. The following information pertains to
the company’s manufacturing overhead data:

Budgeted output units 300 truckloads
Budgeted fleet hours 225 hours
Budgeted pounds of fertalizer 12,000,000 pounds
Budgeted variable manufacturing overhead costs for 300 loads $37,500

Actual output units produced and delivered 315 truckloads
Actual fleet hours 218 hours
Actual pounds of fertalizer produced and delivered 12,600,000 pounds
Actual variable manufacturing overhead costs $38,250

What is the budgeted variable overhead cost rate per output unit?

$120.00

$125.00

$166.67

$175.00

Question 24

Corresponds to CLO 6(d)
An unfavorable variable overhead efficiency variance indicates that:

variable overhead items were not used efficiently

the price of variable overhead items was less than budgeted

the variable overhead cost-allocation base was not used
efficiently

the denominator level was not accurately determined

Question 25

Corresponds to CLO 7(a)
Absorption costing is required for all of the following EXCEPT:

generally accepted accounting principles

determining a competitive selling price

external reporting to shareholders

income tax reporting

Question 26

Corresponds to CLO 7(b)
Marie’s Decorating produces and sells a mantel clock for $100 per unit. In
20X5, 100,000 clocks were produced and 80,000 were sold. Other information for
the year includes:

Direct materials $30.00 per unit
Direct manufacturing labor $ 2.00 per unit
Variable manufacturing costs $ 3.00 per unit
Sales commissions $ 5.00 per part
Fixed manufacturing costs $25.00 per unit
Administrative expenses, all fixed $15.00 per unit

What is the inventoriable cost per unit using variable costing?

$32

$35

$40

$60

Question 27

Corresponds to CLO 7(c)
When comparing the operating incomes between absorption costing and variable
costing, and beginning finished inventory exceeds ending finished inventory, it
may be assumed that:

sales increased during the period

variable cost per unit is less than fixed cost per unit

there is an unfavorable production-volume variance

variable costing operating income exceeds absorption
costing operating income

Question 28

Corresponds to CLO 7(d)
Greene Manufacturing incurred the following expenses during 20X5:

Fixed manufacturing costs $45,000
Fixed nonmanufacturing costs $35,000
Unit selling price $100
Total unit cost $40
Variable manufacturing cost rate $20
Units produced 1,340 units

What will be the breakeven point in units if absorption costing is used?

1,330 units

1,000 units

887 units

563 units