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ACC2052 Test#3

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

1. 

Cost behavior refers to the manner in which:
a.
a cost changes as the related activity changes
b.
a cost is allocated to products
c.
a cost is used in setting selling prices
d.
a cost is estimated
 

2. 

The three most common cost behavior classifications are:
a.
variable costs, product costs, and sunk costs
b.
fixed costs, variable costs, and mixed costs
c.
variable costs, period costs, and differential costs
d.
variable costs, sunk costs, and opportunity costs
 

3. 

Costs that remain constant in total dollar amount as the level of activity changes are called:
a.
fixed costs
b.
mixed costs
c.
opportunity costs
d.
variable costs
 

4. 

Which of the graphs in Figure 19-1 illustrates the behavior of a total fixed cost?
acc2052t3_files/i0050000.jpg
a.
Graph 2
b.
Graph 3
c.
Graph 4
d.
Graph 1
 

5. 

Costs that vary in total in direct proportion to changes in an activity level are called:
a.
fixed costs
b.
sunk costs
c.
variable costs
d.
differential costs
 

6. 

Which of the graphs in Figure 19-1 illustrates the behavior of a total variable cost?
acc2052t3_files/i0070000.jpg
a.
Graph 2
b.
Graph 3
c.
Graph 4
d.
Graph 1
 

7. 

The graph of a variable cost when plotted against its related activity base appears as a:
a.
circle
b.
rectangle
c.
straight line
d.
curved line
 

8. 

Which of the graphs in Figure 19-1 illustrates the nature of a mixed cost?
acc2052t3_files/i0090000.jpg
a.
Graph 2
b.
Graph 3
c.
Graph 4
d.
Graph 1
 

9. 

Which of the following costs is a mixed cost?
a.
Salary of a factory supervisor
b.
Electricity costs of $2 per kilowatt-hour
c.
Rental costs of $5,000 per month plus $.30 per machine hour of use
d.
Straight-line depreciation on factory equipment
 

10. 

In cost-volume-profit analysis, all costs are classified into the following two categories:
a.
mixed costs and variable costs
b.
sunk costs and fixed costs
c.
discretionary costs and sunk costs
d.
variable costs and fixed costs
 

11. 

If sales are $820,000, variable costs are 62% of sales, and operating income is $260,000, what is the contribution margin ratio?
a.
53.1%
b.
38%
c.
62%
d.
32%
 

12. 

If fixed costs are $300,000, the unit selling price is $95, and the unit variable costs are $45, what is the break-even sales (units)?
a.
3,500 units
b.
3,158 units
c.
14,000 units
d.
6,000 units
 

13. 

If fixed costs are $250,000, the unit selling price is $20, and the unit variable costs are $16, what is the break-even sales (units) if the variable costs are decreased by $2?
a.
41,667 units
b.
12,500 units
c.
62,500 units
d.
83,333 units
 

14. 

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
a.
decrease
b.
increase
c.
remain the same
d.
increase or decrease, depending upon the percentage increase in wage rates
 

15. 

The point where the profit line intersects the left vertical axis on the profit-volume chart represents:
a.
the maximum possible operating loss
b.
the maximum possible operating income
c.
the total fixed costs
d.
the break-even point
 

16. 

Phipps Co. sells two products, Arks and Bins. Last year Phipps sold 12,000 units of Arks and 28,000 units of Bins. Related data are:


Product
Unit Selling
Price
Unit Variable
Cost
Unit Contribution
Margin
Arks
$120
$80
$40
Bins
  80
 60
 20

What was Phipps Co.'s sales mix last year?
a.
30% Arks, 70% Bins
b.
12% Arks, 28% Bins
c.
70% Arks, 30% Bins
d.
40% Arks, 20% Bins
 

17. 

If a business had sales of $4,000,000, fixed costs of $1,200,000, a margin of safety of 25%, and a contribution margin ratio of 40%, what was the break-even point?
a.
$3,000,000
b.
$2,800,000
c.
$4,800,000
d.
$1,000,000
 

18. 

Cost-volume-profit analysis cannot be used if which of the following occurs?
a.
Costs cannot be properly classified into fixed and variable costs
b.
The total fixed costs change
c.
The per unit variable costs change
d.
Per unit sales prices change
 

19. 

The benefits of comparing actual performance of the operations against planned goals include all of the following except:
a.
providing prompt feedback to employees about their performance relative to the goal
b.
preventing unplanned expenditures
c.
helping to establish spending priorities
d.
determining how managers are performing against prior years' actual operating results
 

20. 

When management seeks to achieve personal departmental objectives that may work to the detriment of the entire company, the manager is experiencing:
a.
budgetary slack
b.
padding
c.
goal conflict
d.
cushions
 

21. 

The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as:
a.
flexible budgeting
b.
continuous budgeting
c.
zero-based budgeting
d.
master budgeting
 

22. 

A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed:
a.
flexible budgeting
b.
continuous budgeting
c.
zero-based budgeting
d.
master budgeting
 

23. 

McCabe Manufacturing Co.'s static budget at 8,000 units of production includes $40,000 for direct labor and $4,000 for electric power.  Total fixed costs are $23,000.  At 9,000 units of production, a flexible budget would show:
a.
variable costs of $49,500 and $25,875 of fixed costs
b.
variable costs of $44,000 and $23,000 of fixed costs
c.
variable costs of $49,500 and $23,000 of fixed costs
d.
variable and fixed costs totaling $75,375
 

24. 

A series of budgets for varying rates of activity is termed a(n):
a.
flexible budget
b.
variable budget
c.
master budget
d.
activity budget
 

25. 

Principal components of a master budget include which of the following?
a.
Production budget
b.
Sales budget
c.
Capital expenditures budget
d.
All of the above
 

26. 

Below is budgeted production and sales information for Fleming Company for the month of December:

 
Product XXX
Product ZZZ
Estimated beginning inventory
  30,000 units
  18,000 units
Desired ending inventory
  32,000 units
  15,000 units
Region I, anticipated sales
320,000 units
260,000 units
Region II, anticipated sales
190,000 units
130,000 units

The unit selling price for product XXX is $5 and for product ZZZ is $14. Budgeted sales for the month are:
a.
$2,040,000
b.
$4,680,000
c.
$6,692,000
d.
$8,010,000
 

27. 

Below is budgeted production and sales information for Fleming Company for the month of December:

 
Product XXX
Product ZZZ
Estimated beginning inventory
  30,000 units
  18,000 units
Desired ending inventory
  32,000 units
  15,000 units
Region I, anticipated sales
320,000 units
260,000 units
Region II, anticipated sales
190,000 units
130,000 units

The unit selling price for product XXX is $5 and for product ZZZ is $14. Budgeted production for product ZZZ during the month is:
a.
405,000 units
b.
390,000 units
c.
387,000 units
d.
423,000 units
 

28. 

Production and sales estimates for March for the Finneaty Co. are as follows:

Estimated inventory (units), March 1
17,500
Desired inventory (unit), March 31
19,300
  
Expected sales volume (units):
 
  Area M
6,000
  Area L
7,000
  Area O
9,000
Unit sales price
$15

The number of units expected to be manufactured in March is:
a.
22,000
b.
1,800
c.
23,800
d.
20,200
 

29. 

Production estimates for August are as follows:

Estimated inventory (units), August 1
12,000
Desired inventory (units), August 31
9,000
Expected sales volume (units), August
75,000

For each unit produced, the direct materials requirements are as follows:

Direct material A ($5 per lb.)
3 lbs.
Direct material B ($18 per lb.)
1/2 lb.

The number of pounds of materials A and B required for August production is:
a.
216,000 lbs. of A; 72,000 lbs. of B
b.
216,000 lbs. of A; 36,000 lbs. of B
c.
225,000 lbs. of A; 37,500 lbs. of B
d.
234,000 lbs. of A; 39,000 lbs. of B
 

30. 

Which of the following budgets provides the starting point for the preparation of the direct labor cost budget?
a.
Direct materials purchases budget
b.
Cash budget
c.
Production budget
d.
Sales budget
 

31. 

The budget that summarizes future plans for the acquisition of fixed assets is the:
a.
direct materials purchases budget
b.
production budget
c.
sales budget
d.
capital expenditures budget
 

32. 

O'Neill Co. has $296,000 in accounts receivable on January 1, 2000.  Budgeted sales for January are $860,000.  O'Neill expects to sell 20% of its merchandise for cash.  Of the remaining 80% of sales on account, 75% are expected to be collected in the month of sale and the remainder the following month.  The January cash collections from sales are:
a.
$812,000
b.
$688,000
c.
$468,000
d.
$984,000
 

33. 

Kidder Company began its operations on March 31 of the current year. Projected manufacturing costs for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month. The cash payments for manufacturing in the month of May are:
a.
$156,800
b.
$195,200
c.
$166,400
d.
$146,400
 

34. 

Planning for capital expenditures is necessary for all of the following reasons except:
a.
machinery and other fixed assets wear out
b.
expansion may be necessary to meet increased demand
c.
amounts spent for office equipment may be immaterial
d.
fixed assets may fall below minimum standards of efficiency
 

35. 

Which of the following conditions normally would not indicate that standard costs should be revised?
a.
The engineering department has revised product specifications in responding to customer suggestions.
b.
The company has signed a new union contract which increases the factory wages on average by $2.00 an hour.
c.
Actual costs differed from standard costs for the preceding week.
d.
The world price of raw materials increased.
 

36. 

Standards that represent levels of operation that can be attained with reasonable effort are called:
a.
theoretical standards
b.
ideal standards
c.
practical standards
d.
normal standards
 

37. 

The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows:

Standard Costs
Direct materials
2,600 kilograms @ $8.75
Direct labor
7,400 hours @ $11.40
  
Actual Costs
Direct materials
2,500 kilograms @ $8
Direct labor
7,500 hours @ $12
Factory overhead (100% capacity - 10,000 hrs.):
 
  
          Variable cost @ $2.08 per hour
 
          Total variable cost, $18,720
 
          Fixed cost @ $.83 per hour
 
          Total fixed cost, $8,320
 

The amount of direct materials price variance is:
a.
$1,875 unfavorable
b.
$1,950 favorable
c.
$1,875 favorable
d.
$1,950 unfavorable
 

38. 

The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows:

Standard Costs
Direct materials
2,500 kilograms @ $8
Direct labor
7,500 hours @ $12
  
Actual Costs
Direct materials
2,600 kilograms @ $8.75
Direct labor
7,400 hours @ $11.40
Factory overhead (100% capacity - 10,000 hrs.):
 
  
          Variable cost @ $2 per hour
 
          Total variable cost, $18,000
 
          Fixed cost @ $.80 per hour
 
          Total fixed cost, $8,000
 

The amount of the direct materials quantity variance is:
a.
$875 favorable
b.
$800 unfavorable
c.
$800 favorable
d.
$875 unfavorable
 

39. 

The following data relate to direct materials costs for November:

Actual costs
4,600 pounds at $5.50
Standard costs
4,500 pounds at $6.00

What is the direct materials quantity variance?
a.
$550 unfavorable
b.
$600 favorable
c.
$550 favorable
d.
$600 unfavorable
 

40. 

If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed:
a.
variable variance
b.
controllable variance
c.
price variance
d.
volume variance
 

41. 

Agnew Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram
$1.76
Actual kilograms of material used
61,500
Actual hourly labor rate
$20.60
Actual hours of production
8,850
Standard price per kilogram
$1.80
Standard kilograms per completed unit
5 kilograms
Standard hourly labor rate
$20.00
Standard time per completed unit
3/4 hr.
Actual total factory overhead
$64,500
Fixed factory overhead
$30,000
Standard fixed factory overhead rate
$3.00 per labor hour
Standard variable factory overhead rate
$5.00 per labor hour
Maximum plant capacity
10,000 hours
Plant operated during the period
9,000 hours
Units completed during the period
12,000

The direct materials price variance is:
a.
$2,460 favorable
b.
$2,700 favorable
c.
$2,700 unfavorable
d.
$2,460 unfavorable
 

42. 

The following data relate to direct labor costs for the current period:

Standard costs
6,000 hours at $12.00
Actual costs
7,500 hours at $11.60

What is the direct labor rate variance?
a.
$15,000 unfavorable
b.
$3,000 favorable
c.
$17,400 unfavorable
d.
$2,400 favorable
 

43. 

Frogue Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram
$3.00
Actual kilograms of material used.
31,000
Actual hourly labor rate
$18.10
Actual hours of production
4,900 labor hours
Standard price per kilogram
$2.80
Standard kilograms per completed unit
6 kilograms
Standard hourly labor rate
$18.00
Standard time per completed unit
1 hr.
Actual total factory overhead
$34,900
Fixed factory overhead
$18,000
Standard fixed factory overhead rate
$1.20 per labor hour
Standard variable factory overhead rate
$3.80 per labor hour
Maximum plant capacity
15,000 hours
Plant operated during the period
10,000 hours
Units completed during the period
5,000

The direct labor rate variance is:
a.
$1,800 favorable
b.
$490 favorable
c.
$490 unfavorable
d.
$1,800 unfavorable
 

44. 

The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture of 2,500 units of product are as follows:

Standard Costs
Direct materials
2,500 kilograms @ $8
Direct labor
7,500 hours @ $12
  
Actual Costs
Direct materials
2,600 kilograms @ $8.75
Direct labor
7,400 hours @ $11.40
Factory overhead (100% capacity = 10,000 hrs.):
 
  
          Variable cost @ $2 per hour
 
          Total variable cost, $18,000
 
          Fixed cost @ $.80 per hour
 
          Total fixed cost, $8,000
 

The amount of the factory overhead controllable variance is:
a.
$2,000 unfavorable
b.
$3,000 favorable
c.
$0
d.
$3,000 unfavorable
 

45. 

The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours.  The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows:

Actual:
Variable factory overhead
$360,000
 
Fixed factory overhead
104,000
Standard:
60,000 hours at $7.50
450,000

What is the amount of the factory overhead controllable variance?
a.
$12,000 unfavorable
b.
$12,000 favorable
c.
$14,000 unfavorable
d.
$26,000 unfavorable
 

46. 

Frogue Corporation uses a standard cost system. The following information was provided for the period that just ended:

Actual price per kilogram
$3.00
Actual kilograms of material used
31,000
Actual hourly labor rate
$18.10
Actual hours of production
4,900 labor hours
Standard price per kilogram
$2.80
Standard kilograms per completed unit
6 kilograms
Standard hourly labor rate
$18.00
Standard time per completed unit
1 hr.
Actual total factory overhead
$34,900
Fixed factory overhead
$18,000
Standard fixed factory overhead rate
$1.20 per labor hour
Standard variable factory overhead rate
$3.80 per labor hour
100% of normal capacity
15,000 hours
Plant operated during the period
10,000 hours
Units completed during the period
5,000

The factory overhead volume variance is:
a.
$2,100 favorable
b.
$6,000 favorable
c.
$12,000 unfavorable
d.
$2,100 unfavorable
 

47. 

Favorable volume variances may be harmful when:
a.
machine repairs cause work stoppages
b.
supervisors fail to maintain an even flow of work
c.
production in excess of normal capacity cannot be sold
d.
there are insufficient sales orders to keep the factory operating at normal capacity
 

48. 

Variances from standard costs are usually reported to:
a.
suppliers
b.
stockholders
c.
management
d.
creditors
 

49. 

Assuming that the Morrita Desk Co. purchases 8,000 feet of lumber at $5.50 per foot and the standard price for direct materials is $5.00, the entry to record the purchase and unfavorable direct materials price variance is:
a.
Direct Materials                       40,000
    Direct Materials Price Variance     4,000
      Accounts Payable                                 44,000
b.
Direct Materials                       40,000
      Accounts Payable                                 40,000
c.
Direct Materials                       44,000
      Direct Materials Price Variance                   4,000
      Accounts Payable                                 40,000
d.
Work in Process                        44,000
      Direct Materials Price Variance                   4,000
      Accounts Payable                                 40,000
 

50. 

The use of standards for nonmanufacturing expenses is:
a.
not as common as it is for manufacturing costs
b.
as common as it is for manufacturing costs
c.
not useful
d.
impossible
 



 
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