Charan- Bus 3/3 4-5-6 1. Mixed costs are also referred to as semivariable costs. A) True B) False 2. Indirect costs occur when A) costs are directly traced to products or services. B) controllable costs are incurred by cost objectives. C) resources are shared by more than one product or service. D) All of these answer choices are correct. 3. Indirect costs occur because resources are shared by more than one cost obiective A) True B) False 4. Which of the following is a measure of activity used to distribute indirect costs? A) Cost driver B) Cost unitization C) Cost objective D) Cost pool 5. In full costing, when does fixed manufacturing overhead bee A) At the time units when are produced B) In the period when all other fixed costs are expensed C) In the period when the expense is incurred D) In the period when the product is sold 6. When the level of activity decreases, total variable costs A) decrease in direct proportion to the decrease in activity. B) increase. C) remain the same. D) decrease, but at a slower rate than the level of activity. Version 4 Page 1 10. Which of the A) Product B) Product C) Fixed D 7. VelCraft allocates costs from its payroll department and the maintenance departe its production departments using the direct method of allocation. Payroll department to costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet that the production department occupies within the factory. Information about the departments in presented below: Number of Number of Square Feet Occupied Employees Costs Department 2,000 Payroll S150,000 64,000 Maintenance $220,000 100,000 Molding 60,000 50 Finishing 40,000 Packaging When the maintenance department costs are allocated, what amount will be charged to the packaging department (Round your intermediate calculation to two decimal places) A) $44,000 B) $52,932 C) $33,083 D) $70,400 8. Which of the following is accounted for differently in full costing compared to variable costing? A) Fixed manufacturing overhead B) Direct material C) Variable manufacturing overhead D) Direct labor come costs anishing 9. Maintenance costs at Sturgeon Company are allocated to the production departments based on area occupied. Maintenance costs of $300,000 are budgeted to maintain a 60,000 square foot production area. If the finishing department occupies 25,000 square feet, how much of the maintenance department costs will be allocated to the finishing department? A) $5,000 B) $175,000 C) $125,000 D) $100,000 Version 4 Page 2 10. Which of the following is accounted for as a product cost in variable costing? A) Product advertising costs B) Product delivery costs to customers C) Fixed manufacturing overhead D) Variable manufacturing overhead 11 The law firm of Barnes & Cohen purchased a new $17,600 copier. Copying costs will be shared by the purchasing, accounting, and information technology departments since those are the only departments that will have access to the machine. The company hee decided to allocate the copying cost based on the number of copies made by each department. The sales person who sold the copier to the attorneys expects it will generate 1,000,000 copies. The manager of each department has estimated the number of copies that his or her department will make over the life of the copier: to allocate the copying cost h ave access to the machine partments since Department Copies Purchasing 150,000 Accounting 450,000 Information Technology 200,000 How much overhead will be allocated each time a copy is made by the accounting department? A) 2.2 cents B) 3.9 cents C) 1.76 cents D) None of these answer choices are correct. 12. If the contribution margin is greater than zero, A) total variable costs are less than sales revenue. B) the company will be profitable. C) the selling price of each product is less than the variable cost per unit. D) the fixed costs are greater than variable cost. 13. A cost pool is A) a method of allocating costs among service departments. B) useful when separating mixed costs into their fixed and variable components. C) not necessary in cost-plus contracts. D) allocated using a single allocation base. 20. Ama 14. What is the major difference between ABC and ABM? A) The goal of ABC is to accurately control costs, while the goal of ABM is to allocate costs most effectively to cost objectives. 1) There is no difference: ABC and ABM are two names for the same thing C) ABC is used in managerial accounting, while ABM is used in financial accounting D) ABC focuses on measurement, while ABM focuses on control 15. Full costing A) is another name for variable costing. B) often provides the information needed for CVP analysis c) considers fixed production cost as period cost. D) considers fixed manufacturing overhead as an inventory cost. 16. A contract that specifies that the supplier will be paid for the cost of production as well as some fixed amount or percentage of cost is called a[n) A) relative-benefits contract. B) cost-plus contract. C) allocation cost pool. D) indirect cost budget. 17. An allocation base A) relates the cost pool to the cost objectives. B) is also called a cost pool. C) is the minimum amount to be allocated to a cost objective. D) represents the items to which a cost will be allocated. 18. The advantage of allocating budgeted rather than actual service department costs is that A) only one cost pool is necessary. B) service departments cannot pass on the costs of inefficiencies and waste. C) managers are not motivated to evaluate the charges. D) this practice is acceptable under GAAP. 19. Past relationships between cost and activity may not be a useful basis for estimating future costs A) if most of a company's costs are variable. B) if the cost is a mixed cost. C) if future activity levels are expected to be beyond the relevant range. D) the company is able to accurately estimate its cost behavior. Version 4 Page 4 20. A major proble tive to allocate as much cost as possible to the goods produced under A major problem with cost-plus contracts is that they A) create an incentive to allocate as much cost as the contract. B) cause the supplier to take significant financial risks. C) include costs that do not follow GAAP. D) require the supplier to use variable costing 21 The production departments at Windsor Parke occupy a total area of 50.000 square feet Heating costs total $600,000 and are allocated based on the area that cach department occupies. The finishing department occupies 30,000 square feet and the packaging department occupies 20,000 square feet. What amount of heating cost will be allocated to the finishing and packaging departments, respectively? A) $300,000 and $300.000 B) $360,000 and $240,000 C) $32,727 and $21,818 D) $36,000 and $24,000 22. Rango Enterprises manufacturing costs for 2017 are as follows: Direct materials Direct labor Manufacturing supplies Depreciation of factory equipment Other fixed manufacturing overhead $ 65,000 118,000 9,000 22.000 43,000 What amount should be considered as product costs for extemal reporting purposes? A) $248,000 B) $183,000 C) $257,000 D) $192,000 23. Excellence Pastries produces baked goods. Utility costs are allocated to the products based on the baking time required for the product. Utility costs of $291,500 are budgeted in a period when 550,000 total minutes of baking time and 100,000 minutes of cooling time are anticipated. If a batch of rolls bakes for 45 minutes, and then cools for 15 minutes, what amount of utility cost will be allocated to each batch of rolls A) $31.80 B) $38.87 C) $20.18 D) $23.85 Version 4 Page 5 24. The following information relates to Charlin Industries for the year ending December 31, 2017, the company's first year of operations: Units produced Units sold Units in ending inventory Fixed manufacturing overhead 100,000 80,000 20,000 $650,000 How much fixed manufacturing overhead would be expensed in 2017 using variable costing? A) $650,000 B) SO C) $520,000 D) $130,000 25. The Crab Shack experienced the following costs in 2017 (Assume the same unit costs in all years): Direct materials $2.25 per unit Direct labor $1.50 per unit Manufacturing overhead costs Variable $1.10 per unit Fixed $60,000 Selling & administrative costs Variable selling $0.80 per unit Fixed selling $9,000 Fixed administrative $13,000 There were 1.800 units in beginning inventory. During the year, the company manufactured 24,000 units and sold 25,000 units. If net income using variable costing was $76,250, how much is net income using full costing? A) $73,750 B) $79,250 C) $74,350 D) $5,880 26. When the level of activity increases, total fixed costs A) increase within the relevant range. B) remain the same within the relevant range. C) decrease. D) decrease inversely with the change in activity. are not charged for centrally administered services, what may manners 27. If managers are not che likely do? A) Limit their frivolous use of these services B) Evaluate and consider lower-cost alternatives for the services C) Consider the services as free D) Seek outside suppliers 28. From a decision-making standpoint, the allocated cost should measure the A) product cost of the goods produced B) variable costs of the materials purchased. C) sunk cost of the resource involved. D) opportunity cost of using a company resource. cated cost ariable cost of the good point, the Cost of the the mater produced 29. Which of the following is not a reason that companies allocate costs? A) To calculate the full cost of products for financial reporting purposes B) To provide information needed by managers to make appropriate decisions C) To discourage managers from using external suppliers D) To reduce the frivolous use of company resources 30. Committed fixed costs are costs that can be changed easily in a relatively brief period of time. A) True B) False 31. Full cost information A) provides managers with cost information on uncontrollable costs. B) is required by GAAP for internal reporting purposes. C) requires the allocation of indirect costs. D) treats all costs as fixed costs. Version 4 Page 7 36. One 32. Anders Supply experienced the following costs in May Direct materials $6.50 per unit Direct labor 52.20 per unit Manufacturing overhead costs Variable $3.10 per unit Fixed $44,000 Selling & administrative costs Variable selling costs $1.50 per unit Fixed selling costs $21,000 Fixed administrative costs $16,000 Buning May, the company manufactured 22.000 units and sold 24,000 units. Beginning inventory totaled 3,400 units. If the average selling price per unit was $28, how much is the company's contribution margin? A) $344,800 B) $323,400 C) $352,800 D) $327,400 33. Step costs A) change in total at every level of activity. B) are considered to be step fixed costs within a relatively small range. C) per unit are the same for each range of volume. D) are classified as step variable or step fixed depending on the range of activity for which the cost remains fixed. 34. Variable costing income is a function of A) neither units sold nor units produced. B) only units produced. C) only units sold. D) both units sold and units produced. 35. Which of the following steps is not involved in the ABC approach? A) Identify activities that cause costs to be incurred. B) Group costs of activities into cost pools. C) Improve processes based on benchmarking. D) Allocate costs to products based on activity usage. Version 4 Page 8 he reasons that companies allocate costs is to encourage managers to use lly provided services, rather than those that are internally provided One of the reaso externally provided A) True B) False Intermodal Moving uses the direct method and allocates its maintenance costs on the hasis of repair hours and its payroll department costs on the basis of employees Estimated costs and information on the services and production departments follows: Payroll Maintenance Packing Driving $36,000 S48,000 30 employees, 280 repair hours 10 employees, 1,960 repair hours How much of the payroll and maintenance costs will be allocated to the packing department? Payroll Maintenance $900 $171.43 $27,000 $6,000 $27,000 $21.43 $1,200 $6,000 38. Happy Foods uses ABC costing. Which of the following is most likely to be a cost driver for the cost of cashiering at a convenience store? A) Number of customers processed B) Number of employees handling the job C) Cost of items purchased D) Direct labor cost 39. Full costing is A) less likely to enable managers to manipulate income by increasing production B) more useful for decision making than variable costing because it treats all costs of production as an inventory cost. C) required for financial reporting under generally accepted accounting principles. D) based on cost behavior. Version 4 Page 9