Review Materials/Exercises (Chapters 1, 2, 5, 6, 7)

Chapter 1

1. Which of the following statements about managerial accountants is false?

A. Managerial accountants more and more are considered "business partners."
B. Managerial accountants often are part of cross-functional teams.
C. An increasing number of organizations are segregating managerial accountants in separate managerial-
accounting departments.
D. In a number of companies, managerial accountants make significant business decisions and resolve
operating problems.
E. The role of managerial accountants has changed considerably over the past decade.

2. The day-to-day work of management teams will typically comprise all of the following activities except:
A. decision making.
B. planning.
C. cost minimizing.
D. directing operational activities.
E. controlling.

3. Which of the following functions is best described as choosing among available alternatives?
A. Decision making.
B. Planning.
C. Directing operational activities.
D. Controlling.
E. Budgeting.

4. Which of the following managerial functions involves a detailed financial and operational description of
anticipated operations?
A. Decision making.
B. Planning.
C. Directing operational activities.
D. Controlling.
E. Measuring.

5. Which of the following involves the coordination of daily business functions within an organization?
A. Decision making.
B. Planning.
C. Directing operational activities.
D. Controlling.
E. Motivating.

6. Taurus Company has set various goals, and management is now taking appropriate action to ensure that the
firm achieves these goals. One such action is to reduce outlays for overhead, which have exceeded budgeted
amounts. Which of the following functions best describes this process?
A. Decision making.
B. Planning.
C. Coordinating.
D. Controlling.
E. Organizing.
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7. Which of the following is not an objective of managerial accounting?
A. Providing information for decision making and planning.
B. Assisting in directing and controlling operations.
C. Maximizing profits and minimizing costs.
D. Measuring the performance of managers and subunits.
E. Motivating managers toward the organization's goals.

8. The role of managerial accounting information in assisting management is a(n):

A. financial-directing role.
B. attention-directing role.
C. planning and controlling role.
D. organizational role.
E. problem-solving role.

9. Employee empowerment involves encouraging and authorizing workers to take initiatives to:
A. improve operations.
B. reduce costs.
C. improve product quality.
D. improve customer service.
E. All of these.

10. The process of encouraging and authorizing workers to take appropriate initiatives to improve the overall
firm is commonly known as:
A. planning and control.
B. employee empowerment.
C. personnel aggressiveness.
D. decision making.
E. problem recognition and solution.

11. Which of the following business models considers financial, customer, internal operating, and other
measures in the evaluation of performance?
A. Deterministic simulation.
B. Balanced scorecard.
C. Payoff matrix.
D. Decision tree.
E. Chart of operating performance (COP).

12. Which of the following perspectives is normally absent in a balanced scorecard?

A. Financial.
B. Customer.
C. Internal operations.
D. Learning and innovation/growth.
E. None of these.

13. Managerial accounting:

A. focuses only on historical data.
B. is governed by GAAP.
C. focuses primarily on the needs of personnel within the organization.
D. provides information for parties external to the organization.
E. focuses on financial statements and other financial reports.
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14. Managerial accounting:
A. is unregulated.
B. produces information that is useful only for manufacturing organizations.
C. is based exclusively on historical data.
D. is regulated by the Securities and Exchange Commission (SEC).
E. generally focuses on reporting information about the enterprise in its entirety rather than by subunits.

15. All of the following entities would have a need for managerial accounting information except:
A. the state of Michigan.
B. Google.
C. Abercrombie & Fitch.
D. H&R Block.
E. None of these responses is correct, as all of these entities would use managerial accounting information.

16. Which of the following choices correctly depicts whether McDonald's, the University of Wisconsin, and
Apple Inc. would have a need for managerial accounting?

A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E

17. Which of the following would likely be considered an internal user of accounting information rather than
an external user?
A. Stockholders.
B. Consumer groups.
C. Lenders.
D. Middle-level managers.
E. Government agencies.

18. Financial accounting focuses primarily on reporting:

A. to parties outside of an organization.
B. to parties within an organization.
C. to an organization's board of directors.
D. to financial institutions.
E. for financial institutions.

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19. Which of the following characteristic(s) relate(s) more to managerial accounting than to financial
accounting?
A. A focus on reporting to personnel within an organization.
B. A focus on reporting to external parties.
C. An area of accounting that is heavily regulated.
D. A focus on providing information that is relevant for planning, decision making, directing, and control.
E. Choices "A" and "D" above.

Chapter 2

20. Which of the following statements is true?

A. The word "cost" has the same meaning in all situations in which it is used.
B. Cost data, once classified and recorded for a specific application, are appropriate for use in any application.
C. Different cost concepts and classifications are used for different purposes.
D. All organizations incur the same types of costs.
E. Costs incurred in one year are always meaningful in the following year.

21. Product costs are:

A. expensed when incurred.
B. inventoried.
C. treated in the same manner as period costs.
D. treated in the same manner as advertising costs.
E. subtracted from cost of goods sold.

22. Which of the following is a product cost?

A. Glass in an automobile.
B. Advertising.
C. The salary of the vice president-finance.
D. Rent on a factory.
E. Both "A" and "D."

23. Which of the following would not be classified as a product cost?

A. Direct materials.
B. Direct labor.
C. Indirect materials.
D. Insurance on a manufacturing plant.
E. Sales commissions.

24. The accounting records of Georgia Company revealed the following costs: direct materials used, $250,000;
direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative expenses, $220,000.
Georgia's product costs total:
A. $1,050,000.
B. $830,000.
C. $895,000.
D. $1,270,000.
E. some other amount.

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25. Costs that are expensed when incurred are called:
A. product costs.
B. direct costs.
C. inventoriable costs.
D. period costs.
E. indirect costs.

26. Which of the following is a period cost?

A. Direct material.
B. Advertising expense.
C. Indirect Labor.
D. Miscellaneous supplies used in production activities.
E. Both "B" and "C."

27. Carolina Plating Company reported a cost of goods manufactured of $520,000, with the firm's year-end
balance sheet revealing work in process and finished goods of $70,000 and $134,000, respectively. If
supplemental information disclosed raw materials used in production of $80,000, direct labor of $140,000, and
manufacturing overhead of $240,000, the company's beginning work in process must have been:
A. $130,000.
B. $10,000.
C. $66,000.
D. $390,000.
E. some other amount.

28. The accounting records of Bronco Company revealed the following information:

Bronco's cost of goods manufactured is:

A. $519,000.
B. $522,000.
C. $568,000.
D. $571,000.
E. some other amount.

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29. The accounting records of Dolphin Company revealed the following information:

Dolphin's cost of goods sold is:

A. $508,000.
B. $529,000.
C. $531,000.
D. $553,000.
E. some other amount.

30. The accounting records of Brownwood Company revealed the following information:

Brownwood's cost of goods sold is:

A. $721,000.
B. $730,000.
C. $778,000.
D. $787,000.
E. some other amount.

31. Total costs are $180,000 when 10,000 units are produced; of this amount, variable costs are $64,000. What
are the total costs when 13,000 units are produced?
A. $199,200.
B. $214,800.
C. $234,000.
D. Some other amount.
E. Total costs cannot be calculated based on the information presented.

32. When 5,000 units are produced variable costs are $35 per unit and total costs are $200,000. What are the
total costs when 8,000 units are produced?
A. $200,000.
B. $305,000.
C. $240,000.
D. Some other amount.
E. Total costs cannot be calculated based on the information presented.

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 33. Baxter Company, which pays a 10% commission to its salespeople, reported sales revenues of $210,000 for
the period just ended. If fixed and variable sales expenses totaled $56,000, what would these expenses total at
sales of $168,000?
A. $16,800.
B. $35,000.
C. $44,800.
D. $51,800.
E. Some other amount.

JOB ORDER COSTING

34. Which of the following manufacturers would most likely use job-order costing?
A. Chemical manufacturers.
B. Microchip processors.
C. Custom-furniture manufacturers.
D. Gasoline refiners.
E. Fertilizer manufacturers.

35. A custom-home builder would likely utilize:

A. job-order costing.
B. process costing.
C. mass customization.
D. process budgeting.
E. joint costing.

36. Which of the following types of companies would most likely use process costing?
A. Aircraft manufacturers.
B. Textile manufacturers.
C. Textbook publishers.
D. Custom-machining firms.
E. Shipbuilders.

37. A manufacturing firm produces goods in accordance with customer specifications, commencing
production upon receipt of a purchase order. To accumulate the cost of each order, the company would use a:
A. job-cost record.
B. cost allocation matrix.
C. production log.
D. overhead sheet.
E. manufacturing cost record.

38. A typical job-cost record would provide information about all of the following items related to an order
except:
A. the cost of direct materials used.
B. administrative costs.
C. direct labor costs incurred.
D. applied manufacturing overhead.
E. direct labor hours worked.

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39. Which of the following statements about material requisitions is false?
A. Material requisitions are often computerized.
B. Material requisitions are a common example of source documents.
C. Material requisitions contain information that is useful to the cost accounting department.
D. Material requisitions authorize the transfer of materials from the production floor to the raw materials
warehouse.
E. Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to
complete a job.

40. Strong Company applies overhead based on machine hours. At the beginning of 20x1, the company
estimated that manufacturing overhead would be $500,000, and machine hours would total 20,000. By 20x1
year-end, actual overhead totaled $525,000, and actual machine hours were 25,000. On the basis of this
information, the 20x1 predetermined overhead rate was:
A. $0.04 per machine hour.
B. $0.05 per machine hour.
C. $20 per machine hour.
D. $21 per machine hour.
E. $25 per machine hour.

41. Dixie Company, which applies overhead at the rate of 190% of direct material cost, began work on job no.
101 during June. The job was completed in July and sold during August, having accumulated direct material
and labor charges of $27,000 and $15,000, respectively. On the basis of this information, the total overhead
applied to job no. 101 amounted to:
A. $0.
B. $28,500.
C. $51,300.
D. $70,500.
E. $79,800.

42. Huxtable charges manufacturing overhead to products by using a predetermined application rate,
computed on the basis of machine hours. The following data pertain to the current year:
Budgeted manufacturing overhead: $480,000
Actual manufacturing overhead: $440,000
Budgeted machine hours: 20,000
Actual machine hours: 16,000
Overhead applied to production totaled:
A. $352,000.
B. $384,000.
C. $550,000.
D. $600,000.
E. some other amount.

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43. Simone uses a predetermined overhead application rate of $8 per direct labor hour. A review of the
company's accounting records for the year just ended discovered the following:
Underapplied manufacturing overhead: $7,200
Actual manufacturing overhead: $392,000
Budgeted labor hours: 50,000
Simone's actual labor hours worked totaled:
A. 48,100.
B. 49,100.
C. 49,900.
D. 50,900.
E. cannot be determined based on the information presented.

44. Trenton worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. A review of job
no. 403's cost record revealed direct material charges of $40,000 and total manufacturing costs of $50,000. If
Trenton applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have been:
A. $0.
B. $6,000.
C. $4,000.
D. $3,333.
E. $5,000.

Process Costing

45-46. Haskins Textile Co. manufactures a variety of fabrics. All materials are introduced at the beginning of
production; conversion cost is incurred evenly through manufacturing. The Weaving Department had 2,000
units of work in process on April 1 that were 30% complete as to conversion costs. During April, 9,000 units
were completed and on April 30, 4,000 units remained in production, 40% complete with espect to conversion
costs.

45. The equivalent units of direct materials for April total:

A. 9,000.
B. 13,000.
C. 13,600.
D. 14,400.
E. 15,000.

46. The equivalent units of conversion for April total:

A. 9,000.
B. 10,600.
C. 11,200.
D. 12,000.
E. 12,600.

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47. Fiero Corporation adds all materials at the beginning of production and incurs conversion cost evenly
throughout manufacturing. The company completed 70,000 units during the year and had 12,000 units in
process at year end, 20% complete with respect to conversion cost. Equivalent units for the year total:
A. materials, 70,000; conversion, 70,000.
B. materials, 70,000; conversion, 2,400.
C. materials, 72,400; conversion, 72,400.
D. materials, 82,000; conversion, 72,400.
E. materials, 82,000; conversion, 82,000.

48. Peach Company uses a weighted-average process-costing system. Company records disclosed that the firm
completed 40,000 units during the month and had 10,000 units in process at month-end, 20% complete.
Conversion costs associated with the beginning work-in-process inventory amounted to $231,000, and
amounts that relate to the current month totaled $966,000. If conversion is incurred uniformly throughout
manufacturing, Peach's equivalent-unit cost is:
A. $23.00.
B. $23.94.
C. $24.15.
D. $28.50.
E. some other amount.

49-50. Universal Manufacturing uses a weighted-average process-costing system. All materials are introduced
at the start of manufacturing, and conversion costs are incurred evenly throughout the process. The
company's beginning and ending work-in-process inventories totaled 10,000 units and 15,000 units,
respectively, with the latter units being 2/3 complete at the end of the period. Universal started 30,000 units
into production and completed 25,000 units. Manufacturing costs follow.
Beginning work in process: Materials, $60,000; conversion cost, $150,000
Current costs: Materials, $180,000; conversion cost, $480,000

49. Universal's equivalent-unit cost for materials is:

A. $4.50.
B. $6.00.
C. $8.00.
D. $9.60.
E. some other amount.

50. Universal's equivalent-unit cost for conversion cost is:

A. $13.71.
B. $18.00.
C. $21.00.
D. $25.20.
E. some other amount.

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51-56. Southern Lake Chemical manufactures a product called Zubek. Direct materials are added at the
beginning of the process, and conversion activity occurs uniformly throughout production. The beginning
work-in-process inventory is 60% complete with respect to conversion; the ending work-in-process inventory is
20% complete. The following data pertain to May:

51. Using the weighted-average method of process costing, the equivalent units of direct materials total:
A. 68,000.
B. 69,400.
C. 74,000.
D. 75,000.
E. some other amount.

52. Using the weighted-average method of process costing, the equivalent units of conversion activity total:
A. 60,400.
B. 68,000.
C. 69,400.
D. 74,000.
E. some other amount.

53. Using the weighted-average method of process costing, the cost per unit of direct materials is:
A. $1.17.
B. $1.18.
C. $1.20.
D. $1.28.
E. some other amount.

54. Using the weighted-average method of process costing, the cost per unit of conversion activity is:
A. $2.50.
B. $2.53.
C. $2.70.
D. $2.76.
E. some other amount.

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55. Using the weighted-average method of process costing, the cost of goods completed and transferred
during May is:
A. $249,560.
B. $250,240.
C. $258,400.
D. $263,840.
E. some other amount.

56. Using the weighted-average method of process costing, the total costs remaining in work in process on
May 31 are:
A. $0.
B. $12,040.
C. $17,480.
D. $25,640.
E. some other amount.

Activity Based Costing

57. Alamo's customer service department follows up on customer complaints by telephone inquiry. During a
recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were
for the company's wholesale operation (the remainder were for the retail division), costs allocated to the retail
division should amount to:
A. $0.
B. $29.
C. $85,260.
D. $117,740.
E. $203,000.

58. Aladin's customer service department follows up on customer complaints by telephone inquiry. During a
recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were
for the company's wholesale operation (the remainder were for the retail division), costs allocated to the
wholesale operation should amount to:
A. $0.
B. $29.
C. $85,260.
D. $117,740.
E. $203,000.

59. Alaina's customer service department follows up on customer complaints by telephone inquiry. During a
recent period, the department initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were
for the company's wholesale operation; the remainder were for the retail division. Costs allocated to the
wholesale operation are:
A. $0.
B. $31,200.
C. $118,560.
D. $193,440.
E. $203,000.

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60. Astro's customer service department follows up on customer complaints by telephone inquiry. During a
recent period, the department initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were
for the company's wholesale operation; the remainder were for the retail division. Costs allocated to the retail
division are:
A. $0.
B. $31,200.
C. $118,560.
D. $193,440.
E. $203,000.

61-62. Riverside Florists uses an activity-based costing system to compute the cost of making floral bouquets
and delivering the bouquets to its commercial customers. Company personnel who earn $180,000 typically
perform both tasks; other firm-wide overhead is expected to total $70,000. These costs are allocated as
follows:

Riverside anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year.

61. The cost of wages and salaries and other overhead that would be charged to each bouquet made is:
A. $7.15.
B. $8.75.
C. $12.50.
D. $13.75.
E. some other amount.

62. The cost of wages and salaries and other overhead that would be charged to each delivery is closest to:
A. $19.63.
B. $20.31.
C. $26.75.
D. $40.63.
E. some other amount.

63. Emmette Corporation uses an activity-based costing system with three activity cost pools. The
company has provided the following data concerning its costs and its activity based costing system:

How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost
pool?

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A. $325,000
B. $312,000
C. $333,000
D. $429,000

64. Graney Corporation uses an activity-based costing system with three activity cost pools. The
company has provided the following data concerning its costs and its activity based costing system:

How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost
pool?
A. $143,000
B. $144,000
C. $108,000
D. $135,000

65. Vanfleet Corporation uses an activity-based costing system with three activity cost pools. The
company has provided the following data concerning its costs:

How much cost, in total, would be allocated in the first-stage allocation to the Fabricating activity cost
pool?
A. $120,000
B. $216,000
C. $161,000
D. $108,000
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