Multiple Choice Costing Questions

1. A variable cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units increases or decreases.
True False

2. A sunk cost is:
A. a cost that is planned to be incurred in the near future.
B. irrelevant for decision making.
C. a cost connected with drilling for oil.
D. affected by changes in the level of activity.

3. The following costs were incurred in July:

Direct material-----------------------------$35,000
Direct Labor -------------------------------$13,000
Manufacturing overhead--------------- --$15,000
Selling expenses---------------------------$14,000
Administrative expenses------------ -----$30,000
Prime costs during the month totaled :

A. $48,000
B. $28,000
C. $107,000
D. $63,000

4. Chezpere Company manufactures and sells washing machines. In order to make assembly of the
machines faster and easier, some of the metal parts in the machines are coated with grease. How should
the cost of this grease be classified?

Direct Material Cost Fixed Cost
YES YES
Yes NO
NO YES
NO NO

A. Item A
B. Item B
C. Item C
D. Item D

5. Period costs are also known as inventoriable costs.
True False

6. The cost of goods sold of a manufacturing company equals beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory.
True False

7. The cost of the cushions that are used to manufacture sofas is best described as a:
A. manufacturing overhead cost.
B. period cost.
C. variable cost.
D. conversion cost.

8. The fixed portion of the cost of electricity for a manufacturing plant is a:
Period Cost Product Cost

A) YES NO
B) YES YES
C) NO YES
D) NO NO

A. Item A
B. Item B
C. Item C
D. Item D

9. Colby Company has a process costing system in which the weighted-average method is used. The company adds all materials at the beginning of the process in the Molding Department, which is the first of two stages of its production process. Information concerning the materials used in the Molding Department during March is as follows:

Materials

Units Cost
Work in process at March 1...................................... 22,000 $11,000
Units started during March -------------------------------- -------- 90,000 $46,000
Units completed and transferred to next department
During March---------------------------------------------------------------97, 000

What was the materials cost of the work in process inventory at March 31?

A. $11,220
B. $7,500
C. $5,100
D. $7,650

10. Maurice Company uses the weighted-average method in its process costing system. The company adds materials at the beginning of the process in the Forming Department, which is the first of two stages of its production process. Information concerning the materials used in the Forming Department in April follows:

Material
Units Costs

Work in process at April..................................12,000 $6,000
Units started during April.................................100,000.................$51,120
Units completed and transferred to next department
During April.................................................88,000

What was the materials cost of the work in process at April 30?
A. $6,120
B. $11,040
C. $12,000
D. $12,240

11. In the computation of costs per equivalent unit, the weighted-average method of process costing considers:
A. costs incurred during the current period only.
B. costs incurred during the current period plus cost of ending work in process inventory.
C. costs incurred during the current period plus cost of beginning work in process inventory.
D. costs incurred during the current period less cost of beginning work in process inventory.

Johnson Company has provided the following data for the first five months of the year:

Machine Hours Lubrication Cost
January------------------ 120 $750
February-----------------160 $800
March--------------------200 $870
April---------------------150 $790
May----------------------170 $840

12. Using the least-squares regression method of analysis, the estimated variable lubrication cost per machine hour is closest to:
A. $0.80
B. $1.56
C. $1.40
D. $1.28

(Appendix 5A) Lacourse Inc.'s inspection costs are listed below:

Units Produced Inspection Cost
January------------------ 647 $15,309
February-----------------724 $15,965
March--------------------694 $15,715
April---------------------645 $15,721
May----------------------696 $15,745
June----------------------665 $15,442
July----------------------718 $15,933
August------------------699 $15,739

Management believes that inspection cost is a mixed cost that depends on units produced.

13. Using the least-squares regression method, the estimate of the fixed component of inspection cost per month is closest to:
A. $9,608
B. $15,640
C. $9,587
D. $15,271

14. The following production and average cost data for a month's operations have been supplied by a company that produces a single product.

Production volume-----------------------------1,000 units 2,000 units
Directed materials--------------------------$4.00 per unit $4.00 per unit
Direct labor----------------------------------$3.50 per unit $3.50 per unit
Manufacturing overhead------------------$10,00 per unit $6.20 per unit
The total fixed manufacturing cost and variable manufacturing costs per unit are as follows:

A. $3,600; $7.50
B. $3,600; $9.90
C. $7,600; $7.50
D. $7,600; $9.90

15. Contribution margin and gross margin mean the same thing.
True False

16. Salaries of accounts receivable clerks when one clerical worker is needed for every 750 accounts
receivable is an example of a:

A. fixed cost
B. step-variable cost
C. mixed cost
D. curvilinear cost

17. In the standard cost formula Y = a + bX, what does the "b" represent?
A. total cost
B. total fixed cost
C. total variable cost
D. variable cost per unit

18. Multiple regression analysis is used when:
A. more than one cost category must be analyzed.
B. when more than one factor causes variation in a cost.
C. the high-low method cannot be used because there is only one observation.
D. all of the points on a scattergraph fall exactly on a regression line.

19. Shipping cost at Junk Food Imports is a mixed cost with variable and fixed components. Past records
indicate total shipping cost was $18,000 for 16,000 pounds shipped and $22,500 for 22,000 pounds shipped. Assuming that this activity is within the relevant range, if the company plans to ship 18,000 pounds next month, the expected shipping cost is:
A. $18,500
B. $20,400
C. $19,500
D. $24,000

20. Bledsoe Corporation has provided the following data for the month of November:

Required:
Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of Goods Sold in good
form.

21. Mat Company's actual manufacturing overhead cost for the month ended March 31 was $78,000. The company's predetermined overhead rate was 50% of direct labor cost. Other information pertaining to Mat Company's inventories and production for the month of March is as follows:

Required:
a. Determine the amount of direct materials used during March.
b. Determine the underapplied or overapplied overhead for the month.
c. Determine the Cost of Goods Manufactured for the month.