Advanced Cost Accounting Problems

Advanced Cost Accounting
Answer sheet (place correct latter in the space provided.

1. ___ 9. ___ 17.___
2. ___ 10. ___ 18.___
3. ___ 11. ___ 19.___
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5. ___ 13. ___ 21. ___
6.___ 14. ___ 22. ___
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8. ___ 16. 24. ___

1. Which of the following is False?
A. Product costs are costs assigned to goods that were either purchased or manufactured for resale.
B. Product costs become expenses in the period they are purchased.
C. The product cost of merchandise inventory acquired by a retailer consists of the purchase cost of the inventory plus any shipping charges.
D. Inventoriable cost is another term for product costs.

2. Which of the following is not a name for indirect resources?
A. Overhead costs
B. Burden
C. Direct costs
D. Common costs

3. Absorption costing measures contribution to profit as:
A. Sales less unit- level costs spent of goods sold.
B. Sales less variable costs of goods sold.
C. Sales less absorption cost of goods sold.
D. Sales less all costs including operating expenses

4. Which of the following is True?
A. Job costing or job-order costing treats each individual job as the unit of output and assigns, or allocates costs to each job as resources are used.
B. In order to qualify for job-order costing, each job must consist of a single, unique product consisting of only one unit produced of relatively high value.
C. Process Costing treats each individual job as the unit of output and assigns, or allocates costs to each job as resources are used.
D. In job costing, each unit produced is of relatively low value.

5. 64. Manufacturing Overhead applied was $60,000, while actual overhead incurred was $62,000. Which of the following is always true of this situation?
A. Overhead was overapplied by $2,000
B. Overhead was underapplied by $2,000
C. Direct labor activity was overestimated
D. This difference must be reported as a loss for the period.

6. Which of the following is False?
A. Activity-based costing is an approach that first assigns costs to activities and then to goods and services.
B. The first step in activity-based costing is to calculate a cost-driver rate for each activity.
C. A typical result of Activity-Based Costing analysis is that low-complexity customer business is often more profitable than previously thought and high-complexity customer business is often less profitable.
D. None of the above.

7. Which of the following is not a value-added activity?
A. Setup of machinery in a manufacturing company
B. Making new products in a manufacturing company
C. Making customer calls in a sales department
D. Processing payments at the telephone company

8. The following information is available for last year:
Sales Revenue Variable Cost Contribution Margin
Product X $125,000 $105,000 $20,000
Product Y 62,500 38,750 23,750
If the salesperson's commission is 3 percent of sales, which product would he prefer to sell?
A. Product X
B. Product Y
C. Either Product X or Y
D. Neither Product X nor Y

Use the following to answer questions 9-10:
Picture This (PT) manufactures two types of picture frames - large and small - that are sold to two types of customers - gift shops and discount stores. Information on the customers and products is presented below. (Assume operating costs are allocated based upon sales)
Large Frames Small Frames
Revenues $15,000,000 $10,000,000
Contribution Margin 65% 40%

Customer sales to Gift Shops Discount Stores
Large Frames 40% 60%
Small Frames 70% 30%
Operating Costs Traces to Customers $5,000,000 $3,000,000
9. The Current Contribution Margin for Picture This (rounded) is
A) 45.0%
B) 47.5%
C) 52.5%
D) 55.0%

10. If Picture This desires a return on sales of 25%, costs must be reduced by:
A. $ 500,000
B. $ 825,000
C. $18,750,000
D. $19,250,000

11. Current return on sales (rounded) for Large Frames is
A. 8%
B. 13%
C. 32%
D. 34%

12. Sietens Company is trying to identify the most frequent causes of its quality problems so that it can concentrate on those that offer the greatest potential for improvement. The quality tool that would be most useful to Sietens is:
A. Flowchart
B. Pareto chart
C. Cause-and-effect diagram
D. Run chart

13 Companies using just-in-time (JIT) inventory systems will generally have:
A. Higher inventory turnover and higher total sales than traditional companies.
B. Higher inventory turnover and higher total sales than traditional companies.
C. Lower inventory turnover and higher sales per employee than traditional companies.
D. Higher inventory turnover and higher sales per employee than traditional companies.

Use the following to answer questions 14-16:

Harold Manufacturing Company has the following information available for its process-costing system for the month of May in the finishing department. The finishing department is the second of a multiple-department manufacturing plant. Materials are added at the end of the process in finishing.

Work-in-Process Units
Materials $ 0 Beginning inventory 100,000
Conversion $30,000 Transferred-in from prior department 200,000
Prior department $50,000 Ending inventory 50,000

Costs added this month
Materials $225,000
Conversion $510,000
Prior department $550,000

Beginning inventory is 30% complete as to conversion costs; ending inventory is 80% complete as to conversion costs.

14. The number of finished equivalent units of materials under weighted-average is:
A. 300,000
B. 250,000
C. 200,000
D. 50,000

15. The cost per finished equivalent unit for materials under weighted-average is:
A. $0.75
B. $2.00
C. $0.90
D. $0.94

16. The value assigned to the materials portion of ending inventory under weighted-average is:
A. $140,000
B. $100,000
C. $45,000
D. $0

17. Which of the following is True?
A. Joint costs are irrelevant in a sell-or-process-further decision.
B. Costs incurred before the split-off point should be allocated to products according to sales revenue to determine whether products should be sold at the split-off point or processed further.
C. Joint costs should never be allocated to final products, since they cannot be easily identified as to which product caused the cost.
D. Because joint-cost allocation is always arbitrary, it is excluded from consideration in determining casualty losses for insurance purposes.

18. Which of the following is not a recognized method of allocating costs of service departments to user departments.
A. The direct method
B. The reciprocal method
C. The labor hours method
D. The step method

19. The cost for a salesperson that is paid a flat salary of $500 per month plus a 5% commission on all sales is an example of what type of cost?
A. Fixed cost.
B. Variable cost.
C. Step cost.
D. Mixed cost.

20. Which of the following would most likely increase when the activity level increases, within the relevant range?
A. Total fixed costs.
B. Per unit fixed costs.
C. Total variable costs.
D. Per unit variable costs

21. Uible Corp. has the following information for its candy line:
Selling price per unit $ 10
Unit sales 100,000
Variable costs $600,000
Fixed costs $200,000

Based on a market study, Uible estimates that it could increase the unit selling price by 15% and increase the unit sales volume by 10% if $100,000 was spent on advertising. Based on the analysis, what would Uible's operating income be from selling the candy if the decision is made to advertise?
A) $250,000.
B) $290,000.
C) $305,000.
D) $365,000.

22. At the break-even point of 1,400 units, variable costs are $84,000, and fixed costs are $42,000. What would operating income be if 1,401 units are sold?
A) $ 30.
B) $ 60.
C) $ 90.
D) $140

23. Management is considering purchasing a Model B300 machine to use in addition to the company's present Model B100 machine. This will increase the company's production and sales. The increase in volume will be large enough to require increases in fixed and selling expenses and in general administrative overhead, but not in the fixed manufacturing overhead. Which of the following items would be considered relevant to the case?
A) Variable manufacturing overhead.
B) Depreciation - Model B100 machine.
C) Both of the above.
D) None of the above.

24.Which of the following is True?
A. A slightly inaccurate sales forecast will not affect the other schedules comprising the master budget.
B. The master budget is a comprehensive profit plan tying together all phases of an organization's operations.
C. Strategic long-range plans are usually stated in rather specific terms.
D. Base-budgeting is similar to zero-based budgeting in that it sets the initial budget for virtually everything to zero.