Accounting 45 Multiple Choice Questions

| October 3, 2018

1. A product requires
processing in two departments, the Baking Department and then the Packaging
Department, before it is completed. Costs transferred out of the Baking
Department will be transferred to:

Cost of Goods

Work in
Process—Packaging Department.

Finished Goods


2. A process cost
accounting system is most appropriate when

the focus of
attention is on a particular job or order.

similar products are

a variety of different
products are produced, each one requiring different types of materials,
labor, and overhead.

individual products
are custom made to the specification of customers.

3. In process cost
accounting, manufacturing costs are summarized on a

production cost

manufacturing cost

process order cost

job order cost

4. Which of these best
reflects a distinguishing factor between a job order cost system and a process
cost system?

The manufacturing
cost elements included.

The detail at which
costs are calculated.

The time period each

The number of work
in process accounts.

5. When manufacturing
overhead costs are assigned to production in a process cost system, they are
debited to

a Manufacturing
Overhead account.

the Work in Process

the Finished Goods
Inventory account.

Cost of Goods

6. Which of the
following would not appear as a debit in the Work in Process account of
a second department in a two stage production process?

Materials used.

Overhead applied.

Cost of products
transferred out.

Labor assigned.

7. A characteristic of
products that are mass-produced in a continuous fashion is that

their costs are
accumulated on job cost sheets.

they are grouped in

they are produced at
the time an order is received.

the products are
identical or very similar in nature.

8. In Moyer Company,
the Cutting Department had beginning work in process of 6,000 units,
transferred out 16,000 units, and had an ending work in process of 3,000 units.
How many units were started by Moyer during the month?





9. Hanker Company had
the following department data on physical units:

Work in process,


Completed and
transferred out


Work in process,


Materials are added at
the beginning of the process. What is the total number of equivalent units for
materials during the period?





10. If beginning work
in process is 4,000 units, ending work in process is 2,000 units, and the units
accounted for equals 12,000 units, what must units started into production be?





11. The relevant range
of activity refers to the

geographical areas
where the company plans to operate.

activity level where
all costs are curvilinear.

level of activity
where all costs are constant.

levels of activity
over which the company expects to operate.

12. An increase in the
level of activity will have the following effects on unit costs for variable
and fixed costs:

Unit Variable

Unit Fixed Cost





Remains constant

Remains constant


Remains constant


Cost behavior
analysis is a study of how a firm’s costs

relate to
competitors’ costs.

respond to changes
in the gross national product.

relate to general
price level changes.

respond to changes
in the level of business activity.

14. Which of the
following would be the least controllable fixed costs?

Management training

Research and

Property taxes


15. If Whisper Wings
Airlines cuts its domestic fares by 30%,

a profit can be
earned either by increasing the number of passengers or by decreasing
variable costs.

profit will increase
by 30%.

its fixed costs will

a profit can only be
earned by decreasing the number of flights.

16. A mixed cost

both retailing and
manufacturing costs.

a variable element
and a fixed element.

both selling and
administrative costs.

both operating and
nonoperating costs.

17. Sutton Company
produces flash drives for computers, which it sells for $20 each. The variable
cost to make each flash drive is $13. During April, 700 drives were sold. Fixed
costs for April were $2 per unit for a total of $1,400 for the month. How much
is the monthly break-even level of sales in dollars for Sutton Company?





18. A company has
total fixed costs of $160,000 and a contribution margin ratio of 20%. The total
sales necessary to break even are





19. Keith Company
produces flash drives for computers, which it sells for $20 each. Each flash
drive costs $14 of variable costs to make. During April, 1,000 drives were
sold. Fixed costs for March were $2 per unit for a total of $1,000 for the
month. How much is the contribution margin ratio?





20. Isakson Company
has a contribution margin per unit of $21 and a contribution margin ratio of
60%. How much is the selling price of each unit?


Cannot be determined
without more information.



21. Small Tots Toys
has actual sales of $400,000 and a break-even point of $300,000. How much is
its margin of safety ratio?





22. Brown Company
produces flash drives for computers, which it sells for $20 each. Each flash
drive costs $6 of variable costs to make. During March, 1,000 drives were sold.
Fixed costs for March were $4.90 per unit for a total of $4,900 for the month.
If variable costs decrease by 10%, what happens to the break-even level of
units per month for Brown Company?

It decreases about
35 units.

It depends on the
number of units the company expects to produce and sell.

It is 10% higher
than the original break-even point.

It decreases about
14 units.

23. The most common
budget period is

six months.

one year.

one month.

three months.

24. Which of the
following does notappear as a separate section on the cash budget?


Cash receipts

Cash disbursements

Capital expenditures

25. A master budget
consists of

financial budgets
and a long-term plan.

financial budgets and operating budgets.

an interrelated
long-term plan and operating budgets.

all the accounting
journals and ledgers used by a company.

26. Which is true of

They are voted on
and approved by stockholders.

There is a standard
form and structure for budgets.

They are used in
performance evaluation.

They are used in the
planning, but not in the control, process.

27. Which of the
following statements about budget acceptance in an organization is true?

Budgets have a
greater chance of acceptance if all levels of management have provided input
into the budgeting process.

The most widely
accepted budget by the organization is the one prepared by top management.

The most widely
accepted budget by the organization is the one prepared by the department

Budgets are hardly
ever accepted by anyone except top management.

28. The financial
budgets include the

cash budget and the
production budget.

cash budget and the
budgeted balance sheet.

budgeted balance
sheet and the budgeted income statement.

cash budget and the
selling and administrative expense budget.

29. Crumine Company
budgets on an annual basis for its fiscal year. The following beginning and
ending inventory levels are planned for the fiscal year of July 1, 2012 to June
30, 2013:

June 30, 2013

June 30, 2012

Raw Materials

3,000 kilos

2,000 kilos

Three kilos of raw materials are needed to produce each unit of finished
product. If Crumine plans to produce 560,000 units during the 2012-2013 fiscal year,
how many kilos of materials will the company need to purchase for its
production during the year?





30. The direct
materials budget shows:

Desired ending
direct materials

72,000 pounds

Total materials

108,000 pounds

Direct materials

94,800 pounds

The total direct materials needed for production is

36,000 pounds.

13,200 pounds.

202,800 pounds.

22,800 pounds.

31. Jacob
Manufacturing is planning to sell 1,200 boxes of ceramic tile, with production
estimated at 1,160 boxes during May. Each box of tile requires 44 pounds of
clay mix and a quarter hour of direct labor. Clay mix costs $0.50 per pound and
employees of the company are paid $15.00 per hour. Manufacturing overhead is
applied at a rate of 110% of direct labor costs. Jacob has 5,200 pounds of clay
mix in beginning inventory and wants to have 6,000 pounds in ending inventory.

What is the total amount to be budgeted for manufacturing overhead for the





32. Davis Company has
12,000 units in beginning finished goods. The sales budget shows expected sales
to be 48,000 units. If the production budget shows that 56,000 units are
required for production, what was the desired ending finished goods?





33. The following
information is taken from the production budget forthe first quarter:

Beginning inventory
in units


Sales budgeted for
the quarter


Capacity in units of
production facility


How many finished goods units should be produced during the quarter if the
company desires 4,800 units available to start the next quarter?





34. A static budget is
not appropriate in evaluating a manager’s effectiveness if a company has

planned activity
levels that match actual activity levels.

substantial variable

no variable costs.

substantial fixed


All of the following
statements are correct about management by exception except it

means that top
management’s review of a budget report is focused primarily on differences
between actual results and planned objectives.

requires that there
must be some guidelines for identifying an exception.

means that
management has to investigate every budget difference.

enables top
management to focus on problem areas that need attention.

36. Which one of the
following would be the same total amount on a flexible budget and a static
budget if the activity level is different for the two types of budgets?

direct labor cost

manufacturing overhead

fixed manufacturing

direct materials

37. Under management
by exception, which differences between planned and actual results should be

controllable and

material and

All differences
should be investigated.

material and


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The flexible budget

is a series of
static budgets at different levels of activity.

is prepared before
the master budget.

is relevant both
within and outside the relevant range.

eliminates the need
for a master budget.

39. If a company plans
to sell 48,000 units of product but sells 60,000, the most appropriate
comparison of the cost data associated with the sales will be by a budget based

60,000 units of

54,000 units of

48,000 units of

the original planned
level of activity.

40. The current
controllable margin for Stern Division is $124,000. Its current operating
assets are $400,000. The division is considering purchasing equipment for
$120,000 that will increase annual controllable margin by an estimated $20,000.
If the equipment is purchased, what will happen to the return on investment for
Stern Division?

a decrease of 7.2%

an increase of 16.1%

a decrease of 13.3%

a decrease of 3.3%

41. Kessler Industries
is evaluating its Mountain division, an investment center. The division has a
$90,000 controllable margin and $600,000 of sales. How much will Kessler’s
average operating assets be when its return on investment is 10%?





42. If controllable margin
is $600,000 and the average investment center operating assets are $2,000,000,
the return on investment is





43. Kessler Company
uses flexible budgets. At normal capacity of 16,000 units, budgeted
manufacturing overhead is: $64,000 variable and $180,000 fixed. If Kessler had
actual overhead costs of $250,000 for 18,000 units produced, what is the
difference between actual and budgeted costs?

$2,000 favorable

$6,000 unfavorable

$8,000 favorable

$2,000 unfavorable

44. Center Industries
had average operating assets of $4,000,000 and sales of $2,000,000 in 2012. If
the controllable margin was $600,000, the ROI was





45. If an investment
center has generated a controllable margin of $150,000 and sales of $600,000,
what is the return on investment for the investment center if average operating
assets were $1,000,000 during the period?





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