Chapter 2

d. Cost of sand spread on the factory floorto absorb oil from manufacturingmachines.

c. Cost of travel necessary to sell themanufactured product.

b. Cost of guided public tours through thecompany's facilities.

a. Cost of a warehouse used to storefinished goods.

1. Which of the following would be considered a product cost for external financialreporting purposes?

d. Cost of sand spread on the factoryfloor to absorb oil frommanufacturing machines.

c. Cost of travel necessary to sell themanufactured product.

b. Cost of guided public tours through thecompany's facilities.

a. Cost of a warehouse used to storefinished goods.

1. Which of the following would be considered a product cost for external financialreporting purposes?

Cost of goods manufactured

2. Beginning work in process was $125,000. Manufacturingcosts incurred for the month were $835,000. There were$200,000 of partially finished goods remaining in work in processinventory at the end of the month. What was the cost of goodsmanufactured during the month?

a. $1,160,000b. $ 910,000c. $ 760,000d. $ 730,000

Cost of goods manufactured

2. Beginning work in process was $125,000. Manufacturingcosts incurred for the month were $835,000. There were$200,000 of partially finished goods remaining in work in processinventory at the end of the month. What was the cost of goodsmanufactured during the month?

a. $1,160,000b. $ 910,000c. $ 760,000d. $ 730,000

Cost Behaviour

Total cost per unit will decrease.D)

Variable cost per unit will increase.C)

Fixed costs will increase in total.B)

Total variable costs will remain unchanged.A)

Last month, when 10,000 units of a product weremanufactured, the average cost per unit was $60. At thislevel of activity, variable costs are 50% of total unit costs. If10,500 units are manufactured next month and cost behaviorpatterns remain unchanged, how will costs be affected?

3.

Cost Behaviour

Total cost per unit will decrease.D)

Variable cost per unit will increase.C)

Fixed costs will increase in total.B)

Total variable costs will remain unchanged.A)

Last month, when 10,000 units of a product weremanufactured, the average cost per unit was $60. At thislevel of activity, variable costs are 50% of total unit costs. If10,500 units are manufactured next month and cost behaviorpatterns remain unchanged, how will costs be affected?

3.

Chapter 3

Self-test #1

1. Which of the following companies is most likely to use a job-order costing systemrather than a process costing system?

A)Fast food restaurant

B)Shipbuilder

C)Crude oil refinery

D)Candy maker

Self-test #1

1. Which of the following companies is most likely to use a job-order costing systemrather than a process costing system?

A)Fast food restaurant

B)Shipbuilder

C)Crude oil refinery

D)Candy maker

Self-test #22.Which of the following statements about labour time

and cost in a job-order costing system is NOT correct?

– A)Time tickets are kept by employees showing the amount ofwork on specific jobs.

– B)The job cost sheet for a job contains all direct labourcharges to that particular job.

– C)Labour cost that can be traced to a job only with a great dealof effort is treated as part of manufacturing overhead.

– D)A machine operator performing routine annual maintenancework on a piece of equipment charges the maintenance time toa specific job.

Self-test #22.Which of the following statements about labour time

and cost in a job-order costing system is NOT correct?

– A)Time tickets are kept by employees showing the amount ofwork on specific jobs.

– B)The job cost sheet for a job contains all direct labourcharges to that particular job.

– C)Labour cost that can be traced to a job only with a great dealof effort is treated as part of manufacturing overhead.

– D)A machine operator performing routine annualmaintenance work on a piece of equipment charges themaintenance time to a specific job.

Self-test #3

3.In a job-order costing system, when a job remainsincomplete at the end of a period, how is the amount ofoverhead cost that has been applied to that job treated?

A)It is deducted on the Income Statement asoverapplied overhead.

B)It is closed out to Cost of Goods Sold.C)It is transferred to Finished Goods.D)It is part of the ending balance of the Work

in Process inventory account

Self-test #3

3.In a job-order costing system, when a job remainsincomplete at the end of a period, how is the amount ofoverhead cost that has been applied to that job treated?

A)It is deducted on the Income Statement asoverapplied overhead.

B)It is closed out to Cost of Goods Sold.C)It is transferred to Finished Goods.D)It is part of the ending balance of the

Work in Process inventory account

4.Lucy Sportswear manufactures a specialty line of T-shirts. Thecompany uses a job-order costing system. During March, thefollowing costs were incurred on Job ICU2:

Direct materials: $13,700

Direct labour: $4,800

In addition, selling and shipping costs of $7,000 were incurred on thejob. Manufacturing overhead was applied at the rate of $25 permachine hour, and Job ICU2 required 800 machine hours.

If Job ICU2 consisted of 7,000 shirts, what was the Cost of GoodsSold per shirt?

A)$5.50.

B)$5.70.

C)$6.00.

D)$6.50.

4.Lucy Sportswear manufactures a specialty line of T-shirts. Thecompany uses a job-order costing system. During March, thefollowing costs were incurred on Job ICU2:

Direct materials: $13,700

Direct labour: $4,800

In addition, selling and shipping costs of $7,000 were incurred on thejob. Manufacturing overhead was applied at the rate of $25 permachine hour, and Job ICU2 required 800 machine hours.

If Job ICU2 consisted of 7,000 shirts, what was the Cost of GoodsSold per shirt?

A)$5.50.

B)$5.70.

C)$6.00.

D)$6.50.

Self-test #5

5. For the current year, Paxman Company incurred$150,000 in actual manufacturing overhead cost. TheManufacturing Overhead account showed thatoverhead was overapplied in the amount of $6,000for the year.If the predetermined overhead rate was $8.00 perdirect labour hour, how many hours were workedduring the year?A)17,750 hours.B)18,000 hours.C)18,750 hours.D)19,500 hours.

Self-test #5

5. For the current year, Paxman Company incurred$150,000 in actual manufacturing overhead cost. TheManufacturing Overhead account showed thatoverhead was overapplied in the amount of $6,000for the year.If the predetermined overhead rate was $8.00 perdirect labour hour, how many hours were workedduring the year?A)17,750 hours.B)18,000 hours.C)18,750 hours.D)19,500 hours.

Self-test #66. Harrell Company uses a predetermined overhead rate based on

direct labour hours to apply manufacturing overhead to jobs. Atthe beginning of the year, the company estimated its totalmanufacturing overhead cost at $400,000 and its direct labourhours at 100,000 hours. The actual overhead cost incurredduring the year was $350,000 and the actual direct labour hoursincurred on jobs during the year was 90,000 hours. By howmuch is overhead under or over applied for the year?A)$10,000 underapplied.B)$10,000 overapplied.C)$50,000 underapplied.D)$50,000 overapplied.

Self-test #66. Harrell Company uses a predetermined overhead rate based on

direct labour hours to apply manufacturing overhead to jobs. Atthe beginning of the year, the company estimated its totalmanufacturing overhead cost at $400,000 and its direct labourhours at 100,000 hours. The actual overhead cost incurred duringthe year was $350,000 and the actual direct labour hours incurredon jobs during the year was 90,000 hours.What would be the manufacturing overhead for the year?A)$10,000 underapplied.B)$10,000 overapplied.C)$50,000 underapplied.D)$50,000 overapplied.

Self-test #77. Which of the following suggests the need for

multiple departmental overhead rates:A. A highly automated production process.B. The majority of overhead is incurred in one

department.C. Significant overhead costs in several departments,

each with a unique cost driver.D. The company produces two products each

requiring very similar production processes.

Self-test #77. Which of the following suggests the need for

multiple predetermined overhead rates:A. A highly automated production process.B. The majority of overhead is incurred in one

department.C. Significant overhead costs in several

departments, each with a unique cost driver.D. The company produces two products each

requiring very similar production processes.

Chapter 4

1.Jawson Company uses the weighted-average method in itsprocess costing system. Operating data for the PaintingDepartment for the month of April appear below:

What were the equivalent units of production for conversioncosts in the Painting Department for April?

A)67,300 units.

B)68,820 units.

C)70,520 units.

D)63,900 units.

1.Jawson Company uses the weighted-average method in itsprocess costing system. Operating data for the PaintingDepartment for the month of April appear below:

What were the equivalent units of production for conversioncosts in the Painting Department for April?

A)67,300 units.

B)68,820 units.

C)70,520 units.

D)63,900 units.

2.Black Company uses the weighted-average method in its processcosting system. The company's ending work-in-process inventoryconsists of 5,000 units, 80% complete with respect to materialsand 50% complete with respect to labour and overhead.

If the total dollar value of the ending inventory is $60,000 and thecost per equivalent unit for labour and overhead is $8.00, what isthe cost per equivalent unit for materials?

A)$5.00.B)$10.00.C)$8.00.D)$4.00.

2.Black Company uses the weighted-average method in its processcosting system. The company's ending work-in-process inventoryconsists of 5,000 units, 80% complete with respect to materialsand 50% complete with respect to labour and overhead.

If the total dollar value of the ending inventory is $60,000 and thecost per equivalent unit for labour and overhead is $8.00, what isthe cost per equivalent unit for materials?

A)$5.00.B)$10.00.C)$8.00.D)$4.00.

3.Department 2 is the second of three sequential processes. All materials areadded at the beginning of processing in Department 2. During October,Department 2 reported the following data:

The company uses the weighted-average method in its process costingsystem. To the nearest cent, what is the cost per equivalent unit on theproduction report for conversion costs?

A)$5.51.

B)$6.45.

C)$6.30.

D)$7.38.

3. Department 2 is the second of three sequential processes. All materials areadded at the beginning of processing in Department 2. During October,Department 2 reported the following data:

The company uses the weighted-average method in its process costingsystem. To the nearest cent, what is the cost per equivalent unit on theproduction report for conversion costs?

A)$5.51.

B)$6.45.

C)$6.30.

D)$7.38.

4.Valley Manufacturing Company's beginning work-in-processinventory consisted of 10,000 units, 100% complete with respect tomaterials cost and 40% complete with respect to conversion costs.The total cost in the beginning inventory was $30,000. During themonth, 50,000 units were transferred out. The equivalent unit costwas computed to be $2.00 for materials and $3.70 for conversioncosts under the weighted-average method.

Given this information, what was the total cost of the unitscompleted and transferred out?

A)$255,000.B)$270,000.C)$240,000.D)$285,000.

4.Valley Manufacturing Company's beginning work-in-processinventory consisted of 10,000 units, 100% complete with respect tomaterials cost and 40% complete with respect to conversion costs.The total cost in the beginning inventory was $30,000. During themonth, 50,000 units were transferred out. The equivalent unit costwas computed to be $2.00 for materials and $3.70 for conversioncosts under the weighted-average method.

Given this information, what was the total cost of the unitscompleted and transferred out?

A)$255,000.B)$270,000.C)$240,000.D)$285,000.

Chapter 8

1. Why may departmental overhead rates NOT correctlyassign overhead costs?

A) Because of the potential use of machine hours inallocating overhead costs to products rather thandirect labour hours or direct labour cost.

B) Because of the high correlation between directlabour hours and the incurrence of overhead costs.

C) Because of the over-reliance on volume as abasis for allocating overhead costs where productsdiffer regarding the number of units produced,batch size, or complexity of production.

D) Because of the difficulties associated withidentifying cost pools for the first stage of theallocation process.

1. Why may departmental overhead rates NOTcorrectly assign overhead costs?

A) Because of the potential use of machine hours inallocating overhead costs to products rather than directlabour hours or direct labour cost.

B) Because of the high correlation between direct labourhours and the incurrence of overhead costs.

C) Because of the over-reliance on volume as a basisfor allocating overhead costs where products differregarding the number of units produced, batch size,or complexity of production.

D) Because of the difficulties associated with identifyingcost pools for the first stage of the allocation process.

2. A company inspects 10 finished units in everyproduction run, regardless of how many units are

produced in that run. What kind of activity isthis?

• A) unit-level activity.

• B) batch-level activity.• C) product-level activity• D) customer-level activity

• A) unit-level activity.

• B) batch-level activity.• C) product-level activity• D) customer-level activity

2. A company inspects 10 finished units in everyproduction run, regardless of how many units are

produced in that run. What kind of activity isthis?

3. Which of the following is least likely to beclassified as an organization sustaining activity

in an activity based costing system?

A) plant maintenanceB) property taxesC) machine processing costsD)plant depreciation

3. Which of the following is least likely to beclassified as an organization sustaining activity

in an activity based costing system?

A) plant maintenanceB) property taxesC) machine processing costsD)plant depreciation

4. When selecting a cost driver, which of thefollowing should be considered:

A) the correlation between the cost driver andoverhead costs.

B) the total amount of the overhead costs

C) the potential effects of selecting a particularcost driver on managers’ behavior.

D) Both A & C

4. When selecting a cost driver, which of thefollowing should be considered:

A) the correlation between the cost driver andoverhead costs.

B) the total amount of the overhead costs

C) the potential effects of selecting a particularcost driver on managers’ behavior.

D) Both A & C

5. Dundas Company uses an activity-based costingsystem. Consider the following information:

Manufacturing Activity Area

Cost Driver Used As Application

Base

Conversion Cost per Unit of

Application Base

Machine set-up Material handling Milling Assembly

Number of set-ups Number of parts Machine hours Direct labour hours

$100 5

40 20

During the past month, 40 units of a component were produced. Two set-upswere required. Each unit needs 25 parts, 3 direct labour hours and 5 machinehours. Direct materials costs $125 per finished unit. All other costs areclassified as conversion costs.

The total manufacturing cost per unit of the component is:A) $139.63.B) $290.00.C) $390.00.D) $515.00.E) $710.00.

5. Dundas Company uses an activity-based costingsystem. Consider the following information:

Manufacturing Activity Area

Cost Driver Used As Application

Base

Conversion Cost per Unit of

Application Base

Machine set-up Material handling Milling Assembly

Number of set-ups Number of parts Machine hours Direct labour hours

$100 5

40 20

During the past month, 40 units of a component were produced. Two set-upswere required. Each unit needs 25 parts, 3 direct labour hours and 5 machinehours. Direct materials costs $125 per finished unit. All other costs areclassified as conversion costs.

The total manufacturing cost per unit of the component is:A) $139.63.B) $290.00.C) $390.00.D) $515.00.E) $710.00.

6. Which of the following statements is false?

A) A traditional volume-based system basedusing direct labor hours as the driver generallyovercosts high volume product lines.

B) A traditional volume-based system usingdirect labor hours as the driver generally distortsproduct costs.

C) In a traditional volume-based costing systembased on direct labor, high-volume productsgenerally subsidize low-volume products.

D) An activity-based costing system generallyundercosts low-volume, complex product lines.

6. Which of the following statements is false?

A) A traditional volume-based system basedusing direct labor hours as the driver generallyovercosts high volume product lines.

B) A traditional volume-based system usingdirect labor hours as the driver generally distortsproduct costs.

C) In a traditional volume-based costing systembased on direct labor, high-volume productsgenerally subsidize low-volume products.

D) An activity-based costing system generallyundercosts low-volume, complex product lines.

7. Consider the following statements concerningactivity-based management (ABM) and ABC:

I) ABM complements ABC.II) ABM is an alternative to ABC.III) ABM is incompatible with ABC.

A) I is true.B) II is true.C) III is true.D) I and II are true.

7. Consider the following statements concerningactivity-based management (ABM) and ABC:

I) ABM complements ABC.II) ABM is an alternative to ABC.III) ABM is incompatible with ABC.

A) I is true.B) II is true.C) III is true.D) I and II are true.