Cost Accounting. Multiple Choice Questions:

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1 Multiple Choice Questions: 1- The Value Chain a- Involves external companies as well as internal activities. b- Is the sequence of business functions in which customer usefulness is added to products or services c- Supplies only to Manufacturing companies. d- It is not relevant in today's cost accounting environment Management exists to provide advice and assistance to those responsible for attaining the objectives of the organization. a- Line b- Functional c- Staff d- Risk 3- Which type of company converts materials into finished products? a- Not-for-profit. b- Service. c- Merchandising. d- Manufacturing. 4- Period costs are a- All costs in the income statement other than costs of goods sold. b- Defined as manufacturing costs incurred this period on the schedule of cost of goods manufactured. c- Always recorded as assets when first incurred. d- Those costs that benefit future periods. 5- The primary focus of cost management is to a- Help managers make different decisions. b- Calculate product costs. c- Aid managers in budgeting. d- Distinguish between relevant and irrelevant information. 6- Manufacturing overhead costs may include all of the following except: a- Salaries of the plant janitorial staff. b- Labor that can be traced to individual products. c- Wages paid for unproductive times due to machine breakdowns. d- Overtime premiums paid to plant workers. 1 P a g e

2 7- The general term used to identify both tracing and allocating of accumulated costs to cost objects is: a- Cost accumulation. b- Cost assignment. c- Cost tracing. d- Conversion cost. 8- Budgeted costs are: a- The costs incurred this year. b- The cost incurred last year. c- Planed or forecasted costs. d- Competitor's costs. 9- Which of the following doesn't affect the direct / indirect classification of cost: a- The level of budgeted profit for next year. b- The materiality of the costs in question. c- Available technology to gather information about the costs. d- All of the above answers are correct. 10- Classifying the costs as either direct or indirect depends on: a- The behavior of the cost in response to volume changes. b- Whether the cost is expenses in the period in which it was incurred. c- Whether the cost can be easily identified with the cost object. d- All of the above answers are correct. 11- The design of management accounting system should be guided by the requirements for financial reporting. a- Challenges facing managers. b- Standards developed for cost accounting by the cost. c- Accounting standards board. d- Preferences of the organization's financial officer. 12- Which type of company doesn't have inventoriable costs? a- Not-for-profit. b- Merchandising. c- Service. d- Manufacturing. 13- Indirect Manufacturing costs a- Can be traced to the product that created costs. b- Can be identified with the cost object. c- Generally include to cost of materials and cost of labor. d- May include both variable and fixed costs. 2 P a g e

3 14- When 10,000 units are produced, fixed cost will be $14 per unit. Therefore when 20,000 units are produced, the fixed cost per unit will be: a- Increase to $28 per unit. b- Decrease to $7 per unit. c- Remain at $14 per unit. d- Total $280, Cost assignment is: a- The assignment of direct costs to the chosen cost object. b- Function of cost allocation. c- The process of tracking both direct and indirect costs associated with cost object. d- The process of determining the actual cost of the cost object. 16- Which of the following is a variable cost for insurance company? a- Rent. b- President's salary. c- Sales commissions d- Property taxes. 17- For a manufacturing company, direct labor costs may be included in: a- Direct materials inventory only. b- Merchandise inventory only. c- Both work-in-process inventory and finished goods inventory. d- Direct materials inventory, work-in-process inventory, and finished goods inventory accounts. 18- Wheel & Tire manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular customers: Direct materials $20 Direct manufacturing labor $3 Variable manufacturing overhead $6 Fixed manufacturing overhead $10 Total manufacturing costs $39 The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires? a- $39,000 b- $78,000 c- $68,000 d- $62,000 3 P a g e

4 19- Mena's Co. provided the following information for the last month: Sales $10,000 Variable Costs $3,000 Fixed Costs $5,000 Operating Income $2,000 If Sales doubles in next month, what is the projected operating income? a- $4,000 b- $7,000 c- $9,000 d- $12, Inventories consisting of units of product that are only partially complete are called a- Finished Goods. b- Direct Materials. c- Work-In-Process. d- None of the above answers are correct. 21- The following costs were incurred in April Direct Materials. $20,000 Direct Labor. $15,000 Manufacturing Overhead. $30,000 Selling Expenses. $18,000 Administrative Expenses. $12,000 - Prime Costs during the month totaled: a- $35,000 b- $37,000 c- $45,000 - Conversion Costs during the month totaled: a- $32,000 b- $45,000 c- $50,000 4 P a g e

5 22- Fady's Inc. planned and actually manufactured 200,000 units of its single product in 2013, its first year of operations. Variable manufacturing costs were $30 per unit of product, planned and actual fixed manufacturing costs were $600,000. Marketing and administrative costs totaled $400,000 in Fady sold 120,000 units of product in 2013 at selling price of $40 per unit. Fady's Operating Income using Variable costing is a- $800,000 b- $600,000 c- $440,000 d- $200,000 What is Inventoriable cost per unit using absorption costing? a- $32 b- $35 c- $60 d- $ The Contribution Margin Format of the income statement: a- Is used with absorption costing b- Calculates gross margin c- Distinguishes between manufacturing and non-manufacturing costs d- Is used with variable costing Use the Information below to answer the Questions (24/25/26/27) Mena Company had the following data during 2012: Direct Materials Beginning Inventory $25,000 Purchases $77,000 Ending Inventory $13,000 Direct Manufacturing Labor $20,000 Manufacturing Overhead (60% is variable) $15,000 Ending Work in Process Inventory (60% is variable) $5,000 Beginning Work In Process Inventory (60% is variable) $1,000 Ending Finished goods Inventory (40% is fixed) $20,000 Beginning Finished Goods Inventory (40% is Fixed) $30, Mena's Cost of goods manufactured during 2012 by using Absorption costing: a- $134,000 b- $124,000 c- $120,000 d- $119,000 5 P a g e

6 25- Mena's Cost of goods sold during 2012 by using Absorption costing: a- $130,000 b- $116,000 c- $110,000 d- $100, Mena's Cost of goods manufactured during 2012 by using Variable costing: a- $134,000 b- $124,000 c- $120,000 d- Other 27- Mena's Cost of goods sold during 2012 by using Variable costing: a- $130,000 b- $116,000 c- $110,000 d- Other 6 P a g e

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