This document contains 42 multiple choice questions about cost accounting, activity-based costing, budgeting, and pricing concepts. The questions cover topics such as what costs are included in manufacturing overhead, how overhead is allocated under different costing systems, calculating variances, making make-or-buy decisions, break-even analysis, budgeting production and inventory levels, and determining pricing approaches.

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1) What does cost accounting measure, record, and report?
2) What is the best way to handle manufacturing overhead costs in order
to get the most timely job cost information?
3) At the end of the year, manufacturing overhead has been overapplied.
What occurred to create this situation?
4) Which of the following would be accounted for using a job order cost
system?
5) In a job order cost accounting system, the Work in Process account is
6) Which one of the following is an important feature of a job order cost
system?
7) Which one of the following is indirect labor considered?
8) Which of the following is an element of manufacturing overhead?
9) Which one of the following costs would be included in manufacturing
overhead of a lawn mower manufacturer?
10) A well-designed activity-based costing system starts with
11) An activity that has a direct cause-effect relationship with the
resources consumed is a(n)
12) In traditional costing systems, overhead is generally applied based
on

2. 13) All of the following statements are correct EXCEPT that
14) Which of the following is a value-added activity?
15) Which of the following is a nonvalue-added activity?
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
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
18) Which of the following factors would suggest a switch to activity-
based costing?
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 repackaged, at a cost of
$15,000, they could be sold to toy stores for $2.50 per unit. What

3. alternative should be chosen, and why?
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?
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,
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?
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?
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?
25) Which cost is charged to the product under variable costing?
26) Which cost is NOT charged to the product under variable costing?
27) Variable costing
28) If a company is concerned with the potential negative effects of
establishing standards, they should
29) The difference between a budget and a standard is that
30) A standard cost is
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

4. 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?
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
34) If the standard hours allowed are less than the standard hours at
normal capacity,
35) Manufacturing overhead costs are applied to work in process on the
basis of
36) The overhead volume variance relates only to
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?
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?
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?
40) The cost-plus pricing approach's major advantage is
41) A company must price its product to cover its costs and earn a
reasonable profit in

5. 42) Prices are set by the competitive market when

6. 42) Prices are set by the competitive market when