BUSINESS

9. In a job-order costing system, the use of indirect materials that have been previously purchased is recorded as a credit to

A.  Manufacturing Overhead.

B.   Finished Goods inventory.

C.   Work in Process inventory.

D.  Raw Materials inventory.

10. The following data pertains to activity and utility cost for two recent periods:

Activity level (units) 8,000 5,000 Utility cost                    $8,000 $6,500

Utility cost is a mixed cost with both fixed and variable components. Using the high-low method, what would be the cost formula for utility cost?

A.Y = $1.25 X

B.Y = $4,000 + $0.50 X

C.Y = $1.00 X

D.Y = $1,500 + $1.25 X

11. Which of the following costs is classified as a prime cost?

A.  Both direct materials and indirect materials

B.   Direct materials

C.   Indirect materials

D.  Neither direct materials nor indirect materials

12. Inventoriable costs are also known as

A. product costs.

B.   variable costs.

C.   fixed costs.

D.  conversion costs.

13. There are two acceptable methods for closing out any balance of underapplied or overapplied manufacturing overhead. One method involves allocation of the balance among several accounts, whereas the other closes any balance directly to

A.  work in process inventory.

B.   finished goods inventory.

C.   cost of goods sold.

D.  cost of goods manufactured.

14. Laurie Corporation uses the FIFO method in its process costing system. Department A is the first stage of Laurie Corporation’s production process. The following information is available for conversion costs for the month of May for Department A:

  Unlis
Work in process, beginning 125% complete with respect to conversion costs), ….. 6.000
           Started in May           

           

40.000
Corn plete,clin May and transferred lo Department B      ………… 3-5.000
Work in process, ending (60% complete with respect to conversion costs)  ……….. 10.000

 

How many are the equivalent units of production for conversion costs for the month?

A.44,000 units

B.38,000 units

C.36,000 units

D.42,000 units

15. Adams Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 900 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.5 direct labor-hours per unit. The total estimated overhead for next period is $67,522. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with estimated overhead costs and expected activity as follows:

  Estimated
Overhead
Expected Activity  
Activity Cost Pool Costs Product A Product B Total
Activity 1 $ 6,915 300 200 500
Activity 2 24,948 2,100 700 2,800
General Factor 35,659 200 450 650
Total …………………….. $67,522      

 

(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-hours.) The overhead cost per unit of Product A under the traditional costing system is closest to which value?

A.     $3.56

B.     $41.55

C.   $21.94

D.   $5.53

16. Eagle Company’s quality cost report is to be based on the following data:

Quality data gathering, analysis, and reporting._  $59,000

Test and inspection of incoming materials           $48,000

Final product testing and inspection                        $27,000

Depreciation of test equipment                                                  $30,000

Cost of field servicing and handling complaints …………… $52,000

Disposal of defective products  …………………………… $13,000

Downtime caused by quality problems ,,,, … ,,……………………………………. $52,000

Technical support provided to suppliers.__,…_.._..  ……… $18,000

Returns arising from quality problems                     539,000

What would be the total prevention cost appearing on the quality cost report?

A.   $77,000

B.   $48,000

C.   $86,000

D.   $57,000

17. In October, one of the processing departments at Ridling Corporation had ending work in process inventory of $39,000. During the month, $252,000 of costs was added to production and the cost of units transferred out from the department was $235,000. The company uses the FIFO method in its process costing system. In the department’s cost reconciliation report for October, what would be the total cost to be accounted for?

A.   $548,000

B.   $274,000

C.   $61,000

D.   $526,000

18. A company has several service departments that provide differing amounts of service to each other and to the company’s operating departments. Which of the following statements is true?

A.      The step-down method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.

B.       The direct method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.

C.       The direct method and the step-down method will result in the same amount of cost being allocated to each operating department.

D.      The direct method is more accurate than the step-down method when service departments provide services to each other.

19. In order to reduce its overall quality costs, on what costs should a company focus most of its efforts?

A.Prevention costs

B.Internal failure costs

C.Appraisal costs

D.External failure costs

20. Index Corporation uses the FIFO method in its process costing system. The first processing department, the Forming Department, started the month with 17,000 units in its beginning work in process inventory that were 10% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $9,010. An additional 76,000 units were started into production during the month and 83,000 units were completed and transferred to the next processing department. There were 10,000 units in the ending work in process inventory of the Forming Department that were 70% complete with respect to conversion costs. A total of $445,915 in conversion costs were incurred in the department during the month. What is the cost per equivalent unit for conversion costs for the month closest to?

A.$5.150

B.$5.050

C.$5.300

D.$5.867

End of exam

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