16) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting, $600,000. Information on the two products is: Mini A Maxi B Direct labor hours 15,000 25,000 Machine setups 600 400 Machine hours 24,000 26,000 Inspections 800 700 Overhead applied to Mini A using activity-based costing is A. $1,536,000 B. $1,664,000 C. $1,200,000 D. $1,920,000

1. ACC/349 Final Exam Guide
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1) What does cost accounting measure, record, and report?
A. Future costs
B. Product costs
C. Managerial accounting decisions
D. Manufacturing processes
2) What is the best way to handle manufacturing overhead costs in order to get the most
timely job cost information?
A. The company should apply overhead using an estimated rate throughout the year.
B. The company should account for only the direct production costs.
C. The company should determine an allocation rate as soon as the actual costs are
known, and then apply manufacturing overhead to jobs.
D. The company should add actual manufacturing overhead costs to jobs as soon as
the overhead costs are incurred.
3) At the end of the year, manufacturing overhead has been overapplied. What occurred to
create this situation?
A. The actual manufacturing overhead costs were less than the manufacturing
overhead assigned to jobs.
B. The company incurred more total job costs than the amount budgeted for the job.

2. C. Estimated manufacturing overhead was less than actual manufacturing overhead
costs.
D. The company incurred more manufacturing overhead costs than the manufacturing
overhead assigned to jobs.
4) Which of the following would be accounted for using a job order cost system?
A. The production of town homes
B. The pasteurization of milk
C. The production of cans of spinach
D. The production of textbooks
5) In a job order cost accounting system, the Work in Process account is
A. a period cost
B. closed at year end
C. a control account
D. an expense
6) Which one of the following is an important feature of a job order cost system?
A. Each consists of features which distinguish it from the next.
B. Each must be completed before a new product order is accepted.
C. Each job has characteristics similar to the next.
D. Each job uses similar processes to produce.
7) Which one of the following is indirect labor considered?

3. A. Nonmanufacturing cost
B. Raw material cost
C. Product cost
D. Period cost
8) Which of the following is an element of manufacturing overhead?
A. Components used in calculators during production
B. Flour used in manufactured cake mixes
C. Factory workers wages
D. Plant manager’s salary
9) Which one of the following costs would be included in manufacturing overhead of a lawn
mower manufacturer?
A. The cost of the fuel lines that run from the motor to the gas tank
B. The wages earned by motor assemblers
C. The cost of the wheels
D. Depreciation on the testing equipment
10) A well-designed activity-based costing system starts with
A. computing the activity-based overhead rate
B. analyzing the activities performed to manufacture a product
C. identifying the activity-cost pools
D. assigning manufacturing overhead costs for each activity cost pool to products

4. 11) An activity that has a direct cause-effect relationship with the resources consumed is a(n)
A. overhead rate
B. product activity
C. cost driver
D. cost pool
12) In traditional costing systems, overhead is generally applied based on
A. machine hours
B. units of production
C. directlabor
D. direct material dollars
13) All of the following statements are correct EXCEPT that
A. the objective of installing ABC in service firms is different than it is in a
manufacturing firm
B. the general approach to identifying activities and activity cost pools is the same in
a service company as in a manufacturing company
C. activity-based costing has been widely adopted in service industries
D. a larger proportion of overhead costs are company-wide costs in service industries
14) Which of the following is a value-added activity?
A. Machinery repair
B. Inspections
C. Engineering design

5. D. Inventory storage
15) Which of the following is a nonvalue-added activity?
A. Machining
B. Packaging
C. Engineering design
D. Inspection
16) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead
costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting,
$600,000. Information on the two products is:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Mini A using activity-based costing is
A. $1,536,000
B. $1,664,000
C. $1,200,000
D. $1,920,000

6. 17) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's overhead
costs consist of setting up machines, $800,000; machining, $1,800,000; and inspecting,
$600,000. Information on the two products is:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Mini A using traditional costing using direct labor hours is
A. $1,536,000
B. $1,670,000
C. $1,200,000
D. $1,920,000
18) Which of the following factors would suggest a switch to activity-based costing?
A. Overhead costs constitute a significant portion of total costs.
B. The manufacturing process has been stable.
C. Product lines similar in volume and manufacturing complexity.
D. Production managers use data provided by the existing system.
19) Rosen, Inc. has 10,000 obsolete calculators, which are carried in inventory at a cost of
$20,000. If the calculators are scrapped, they can be sold for $1.10 each (for parts). If they are

7. repackaged, at a cost of $15,000, they could be sold to toy stores for $2.50 per unit. What
alternative should be chosen, and why?
A. Repackage; revenue is $5,000 greater than cost.
B. Scrap; incremental loss is $9,000.
C. Scrap; profit is $1,000 greater.
D. Repackage; receive profit of $10,000.
20) Walton, Inc. is unsure of whether to sell its product assembled or unassembled. The unit
cost of the unassembled product is $16, while the cost of assembling each unit is estimated at
$17. Unassembled units can be sold for $55, while assembled units could be sold for $71 per
unit. What decision should Walton make?
A. Sell before assembly; the company will save $15 per unit.
B. Process further; the company will save $1 per unit.
C. Sell before assembly; the company will save $1 per unit.
D. Process further; the company will save $16 per unit.
21) The cost to produce Part A was $10 per unit in 2005. During 2006, it has increased to $11
per unit. In 2006, Supplier Company has offered to supply Part A for $9 per unit. For the
make-or-buy decision,
A. incremental costs are $1 per unit
B. net relevant costs are $1 per unit
C. incremental revenues are $2 per unit
D. differential costs are $2 per unit
22) Hess, Inc. sells a single product with a contribution margin of $12 per unit and fixed costs
of $74,400 and sales for the current year of $100,000. How much is Hess’s break-even point?

8. A. $25,600
B. 6,200 units
C. 4,600 units
D. 2,133 units
23) Hartley, Inc. has one product with a selling price per unit of $200, the unit variable cost is
$75, and the total monthly fixed costs are $300,000. How much is Hartley’s contribution
margin ratio?
A. 37.5%
B. 150%.
C. 62.5%.
D. 266.6%
24) H55 Company sells two products, beer and wine. Beer has a 10 percent profit margin and
wine has a 12 percent profit margin. Beer has a 27 percent contribution margin and wine has
a 25 percent contribution margin. If other factors are equal, which product should H55 push
to customers?
A. Wine
B. Selling either results in the same additional income for the company
C. Beer
D. It should sell an equal quantity of both.
25) Which cost is charged to the product under variable costing?
A. Fixed manufacturing overhead
B. Variable manufacturing overhead
C. Variable administrative expenses

9. D. Fixed administrative expenses
26) Which cost is NOT charged to the product under variable costing?
A. Direct labor
B. Direct materials
C. Variable manufacturing overhead
D. Fixed manufacturing overhead
27) Variable costing
A. is required under GAAP
B. is used for external reporting purposes
C. treats fixed manufacturing overhead as a period cost
D. is also known as full costing
28) If a company is concerned with the potential negative effects of establishing standards,
they should
A. offer wage incentives to those meeting standards
B. set loose standards that are easy to fulfill
C. not employ any standards
D. set tight standards in order to motivate people
29) The difference between a budget and a standard is that
A. a budget expresses management's plans, while a standard reflects what actually
happened

10. B. a budget expresses what costs were, while a standard expresses what costs should
be
C. a budget expresses a total amount while a standard expresses a unit amount
D. standards are excluded from the cost accounting system, whereas budgets are
generally incorporated into the cost accounting system
30) A standard cost is
A. the average cost in an industry
B. a cost which is paid for a group of similar products
C. a predetermined cost
D. the historical cost of producing a product last year
31) The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in
producing 2,400 units, the actual direct labor cost was $51,200 for 4,000 direct labor hours
worked, the total direct labor variance is
A. $6,400 favorable
B. $1,920 unfavorable
C. $4,000 unfavorable
D. $6,400 unfavorable
32) The total variance is $10,000. The total materials variance is $4,000. The total labor
variance is twice the total overhead variance. What is the total overhead variance?
A. $2,000
B. $1,000
C. $3,000
D. $4,000

11. 33) The per-unit standards for direct materials are 2 gallons at $4 per gallon. Last month,
11,200 gallons of direct materials that actually cost $42,400 were used to produce 6,000 units
of product. The direct materials quantity variance for last month was
A. $2,400 favorable
B. $5,600 unfavorable
C. $3,200 favorable
D. $3,200 unfavorable
34) If the standard hours allowed are less than the standard hours at normal capacity,
A. variable overhead costs will be underapplied
B. variable overhead costs will be overapplied
C. the overhead volume variance will be unfavorable
D. the overhead controllable variance will be favorable
35) Manufacturing overhead costs are applied to work in process on the basis of
A. standard hours allowed
B. actual overhead costs incurred
C. actual hours worked
D. ratio of actual variable to fixed costs
36) The overhead volume variance relates only to
A. fixed overhead costs
B. all manufacturing costs

12. C. variable overhead costs
D. both variable and fixed overhead costs
37) At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets. Barry estimates
it will sell 35,000 units during the first quarter of 2004 with a 10% increase in sales each
quarter. Barry’s policy is to maintain an ending inventory equal to 25% of the next quarter’s
sales. Each widget costs $1 and is sold for $1.50. How much is budgeted sales revenue for the
third quarter of 2004?
A. $63,000
B. $42,350
C. $57,525
D. $63,525
38) Lewis Hats is planning to sell 600 straw hats. Each hat requires a half pound of straw and
a quarter hour of direct labor. Straw costs $0.20 per pound and employees of the company are
paid $22 per hour. Lewis has 80 pounds of straw and 40 hats in beginning inventory and
wants to have 50 pounds of straw and 60 hats in ending inventory. How many units should
Lewis Hats produce in April?
A. 620
B. 630
C. 600
D. 580
39) Gottberg Mugs is planning to sell 2,000 mugs and produce 2,200 mugs during April.
Each mug requires 2 pounds of resin and a half hour of direct labor. Resin costs $1 per pound
and employees of the company are paid $12.50 per hour. Manufacturing overhead is applied
at a rate of 120% of direct labor costs. Gottberg has 2,000 pounds of resin in beginning
inventory and wants to have 2,400 pounds in ending inventory. How much is the total amount
of budgeted direct labor for April?

13. A. $13,750
B. $27,500
C. $12,500
D. $25,000
40) The cost-plus pricing approach's major advantage is
A. that sales volume has no effect on per unit costs
B. it can be used to determine a product’s target cost
C. it considers customer demand
D. it is simple to compute
41) A company must price its product to cover its costs and earn a reasonable profit in
A. its early years
B. the short run
C. all cases
D. the long run
42) Prices are set by the competitive market when
A. the product is specially made for a customer
B. a company can effectively differentiate its product from others
C. a product is not easily distinguished from competing products
D. there are no other producers capable of manufacturing a similar item