Accounting Multiple Choice Quiz

Accounting Multiple Choice Quiz

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1. Management accounting is primarily concerned with which of the following?
A) Following GAAP.
B) Producing information for management.
C) Preparing a full set of financial statements for external users.
D) Preparing tax returns for submission to the Internal Revenue Service
2. The management of the flow of materials from the supplier through production to distribution to the customer is known as
A) strategic cost management
B) firm value chain
C) industrial value chain
D) supply chain management
3. When is the cost of manufacturing equipment recognized as an expense on the income statement?
A) when selling expense is recognized
B) when cost of goods sold is recognized
C) Never since the expense is a non cash charge
D) when the equipment is depreciated
4. The certification sponsored by the Institute of Management Accountants that emphasizes economics, finance, and management; financial accounting and reporting; management reporting; and decision analysis is
A) the CPA
B) the CIA
C) none of the above
D) the CMA
5. Which of the following costs would be classified as an indirect cost in the manufacturing of custom built dining tables?
A) the cost of the table base
B) the cost of the person assembling the table
C) the cost of the table legs
D) the cost of the rent on the manufacturing facility

6. The grease used to maintain the production equipment in working order is an example of which of the following?
A) indirect material
B) indirect labor
C) direct material
D) direct labor

7. Which of the following is a product cost?
A) insurance on the office buildings
B) depreciation of the production facilities
C) depreciation of the salesmen’s cars
D) advertising expenditures

8. The salary of the vice-president of finance would be classified as which of the following?
A) manufacturing overhead
B) selling and administrative costs
C) direct materials
D) direct labor

9. Which of the following is a period cost?
A) direct labor
B) property taxes on the office building
C) property taxes on the production facilities
D) the production supervisor’s salary

10. An UNEXPECTED increase in sales and production volume will (most likely) result in:
A) an indeterminate impact on overhead
B) underapplied overhead
C) overapplied overhead
D) have no effect on applied overhead

11. Figure 2-2
Cost of goods manufactured
$470,000
Beginning work in process
60,000
Beginning finished goods inventory
105,000
Direct materials
75,000
Direct labor
160,000
Manufacturing overhead
215,000
Cost of goods sold
445,000
Refer to Figure 2-2. The cost of ending work in process would be
A) $45,000
B) $130,000
C) $40,000
D) $105,000
12. Figure 2-2
Cost of goods manufactured
$470,000
Beginning work in process
60,000
Beginning finished goods inventory
105,000
Direct materials
75,000
Direct labor
160,000
Manufacturing overhead
215,000
Cost of goods sold
445,000
Refer to Figure 2-2. The cost of ending finished goods inventory would be
A) $40,000
B) $105,000
C) $130,000
D) $45,000
13. Figure 2-3
Sales
$340,000

Direct materials inventory, 1/1
20,000

Direct materials inventory, 12/31
5,500

Direct materials purchases
95,000

Direct labor
52,500
Manufacturing overhead
49,500
Selling and administrative expenses
55,000
Cost of goods manufactured
?
Cost of goods sold
?
Work in process, 1/1
26,000

Work in process, 12/31
32,500
Finished goods inventory, 1/1
40,000
Finished goods inventory, 12/31
60,000
Income before income taxes
?
Refer to Figure 2-3. Income before taxes would be
A) $155,000
B) $340,000
C) $100,000
D) $128,500

14. The past year’s sales were $540,000 for the Max Company. The gross margin for the same year was $155,000 and cost of goods manufactured was $350,000. If beginning finished goods inventory was $50,000, ending finished goods inventory must have been
A) $385,000
B) $35,000
C) $15,000
D) $50,000

15. Fixed costs,
A) in total, decrease as activity decreases
B) in total, remain constant within a relevant range
C) in total, increase as activity increases
D) on a per unit basis, are constant as activity increases or decreases
16. Which of the following best describes the term “relevant range.”
A) The relevant range pertains to a single unit of product.
B) The relevant range is the range of output over which cost assumptions are valid.
C) The relevant range refers to the range of fixed costs present in an organization.
D) The relevant range is the same for all products a company may produce.

17. As the level of activity increases, what happens to fixed cost?
A) increases per unit
B) increases in total
C) decrease in total
D) decreases per unit

18. In January, 5,000 units were manufactured at a unit cost of $5. At this level of activity, variable costs are 40 percent of total unit costs. The following month, the company planned to manufacture 4,500 units. If cost behavior patterns remain unchanged in February,
A) total fixed costs will decrease
B) total cost per unit will increase
C) variable cost per unit will decrease
D) total variable cost will remain unchanged

19. The following information was available about supplies cost for the first three months of the year:
Month
Production Volume
Supplies Cost
January
12,000
$ 80,000
February
23,000
140,000
March
27,000
164,000
Using the high-low method, an estimate of supplies cost at 20,000 units of production would beA) $112,000
B) $130,400
C) $124,800
D) $96,000
20. Figure 3-4
The following information is available for electricity costs for the first six months of the year:
Month
Production Volume
Electricity Cost
January
2,800
$2,925
February
5,600
5,526

March
6,200
5,980
April
3,500
3,620

May
2,300

2,470

June
4,500

4,450
Refer to Figure 3-4. Using the high-low method, an estimate of the fixed cost for electricity would be
A) $3,510
B) $4,225
C) $3,900
D) $400
21. Based on regression results, ABC Company has a constant of $10,000 and an X coefficient of $4. At what level of the activity cost drivers will total cost be $22,000?
A) 5,500 units
B) 3,000 units
C) 10,000 units
D) 3,250 units
22. Ritchie Company adjusts cost of goods sold when overhead is over- or underapplied. The predetermined overhead rate for the year is $2 per direct labor hour. Estimated direct labor hours were 20,000. Actual direct labor hours were 25,000 and actual overhead cost was $55,000. What is the adjustment to cost of goods sold?
A) Overhead is overapplied by $15,000, therefore subtract this amount from cost of goods sold.
B) Overhead is overapplied by $5,000, therefore subtract this amount from cost of goods sold.
C) Overhead is underapplied by $15,000, therefore add this amount to cost of goods sold.
D) Overhead is underapplied by $5,000, therefore add this amount to cost of goods sold.

23. An activity-based costing system uses which of the following procedures?
A) Overhead costs are traced to activities, then costs are traced to products.
B) Overhead costs are traced directly to products.
C) All overhead costs are expensed as incurred.
D) Overhead costs are traced to departments, then costs are traced to products.

24. Which of the following would be more likely to use job-order costing rather than process costing?
A) steel mill
B) soap manufacturer
C) professional painter/artist
D) check processing department in a bank

25. The following information pertains to Job No. 15:
Job No. 15
Direct materials
$1,000
Direct labor
$2,000
Manufacturing overhead is applied at 60 percent of direct labor cost.
If 100 units were produced in Job No. 15, the unit cost of Job No. 15 would beA) $48
B) none of the above
C) $12
D) $30
E) $42

26. The job-order cost sheets of incomplete jobs are the subsidiary ledger of which account?
A) finished goods inventory
B) work in process
C) accounts receivable
D) raw materials inventory

27. In a job-order cost system, the amount of overhead cost applied to a job that remains incomplete at the end of a period is part of which of the following at the end of the period?
A) finished goods inventory
B) work in process
C) overhead control
D) raw materials inventory

28. For the accounting period just ended, Abway Company’s actual overhead costs equaled estimated overhead. Actual direct labor hours exceeded estimated direct labor hours used to calculate the predetermined overhead rate. If overhead is applied using the predetermined overhead rate, then overhead would be
A) Overhead cannot be determined from the information given.
B) overapplied
C) underapplied
D) $-0-

29. As goods are completed, the cost of the goods is transferred from
A) overhead to finished goods inventory
B) finished goods inventory to cost of goods sold
C) work in process to finished goods inventory
D) work in process to cost of goods sold

30. Figure 6-10

Alana Company had the following three jobs in process at the end of September.
Job No. 4

Job No. 5

Job No. 6

Direct materials
$ 64,000

$ 36,000

$50,000

Direct labor
$128,000

$106,000

$80,000

Machine hours
2,400

1,600

2,000
Alana uses a predetermined overhead rate of $20 per machine hour to apply overhead.
All three jobs were started during September. Job No. 5 and Job No. 6 were completed during the month, and Job No. 6 was sold on September 20.
There were no beginning inventory balances.
Refer to Figure 6-10. Alana’s cost of goods sold for September would be
A) $170,000
B) $130,000
C) $-0-
D) $344,000

31. The following information pertains to Raymond Company:

Selling price per unit
$1,000
Variable cost per unit
$700
Fixed costs
$900,000
If the firm wants to earn $400,000 in before-tax profit, contribution margin must equal
A) $1,300,000
B) $1,440,000
C) $900,000
D) $1,340,000

32. The following information pertains to Barth Company:
Sales price per unit
$80
Variable cost per unit
$55
Total fixed costs
$200,000
Before-tax income
$80,000
Unit sales for the company must have been
A) 11,200
B) 8,000
C) 5,091
D) 3,500
33. Last year Luchen Company had a net loss of $8,000 (before tax). The company sells one product with a selling price of $80 and a variable cost per unit of $60. This year the company would like to earn a before-tax profit of $40,000. How many additional units must the company sell this year than it sold last year? Assume that the tax rate is 40 percent.
A) 5,400 units
B) 2,400 units
C) 2,000 units
D) 400 units
34. Figure 11-2
Selling price per unit
$400
Variable manufacturing costs per unit
$100
Fixed manufacturing costs per unit
$80
Variable selling costs per unit
$60
Fixed selling costs per unit
$40
Expected production and sales
1,800 units
Refer to Figure 11-2. The contribution margin ratio is
A) 60%
B) 30%
C) 70%
D) 40%
35. Figure 11-4
The following information was extracted from the accounting records of MVA Corporation:
Selling price per unit
$60
Variable cost per unit
$20
Total fixed costs
$480,000
Refer to Figure 11-4. If MVA’s tax rate is 40 percent, how many units must be sold to earn an after-tax profit of $96,000?
A) 14,400
B) 16,000
C) 32,000
D) 28,800

36. Figure 11-5

Sales
$540,000
Variable costs
$378,000
Fixed costs
$120,000
Expected production and sales in units
40,000 units

Refer to Figure 11-5. The break-even point in sales dollars is
A) $112,500
B) $498,000
C) $171,429
D) $400,000
37. Inktomi sells software over the internet. The CEO has been quoted, “Next to the federal government, we’re one of the few companies allowed to print money. We have no marginal costs. Wahoo.” Inktomi’s cost structure (probably) results in a relatively:
A) Low contribution margin ratio and high degree of operating leverage.
B) High contribution margin ratio and high degree of operating leverage.
C) Low contribution margin ratio and low degree of operating leverage.
D) High contribution margin ratio and low degree of operating leverage.

38. As you are probably aware, 2008 was an unexpectedly bad year for business. For many firms this (probably) resulted in factory overhead being:
A) overapplied
B) impossible to calculate
C) was 2008 a bad business year? I had no idea.
D) underapplied

39. Which of the following does not pertain to job order costing?
A) Applying the applied sales expense to job order cost sheets.
B) Applying the applied overhead to the job order cost sheets.
C) Calculating the cost of goods manufactured when the job is compete.
D) Applying direct material cost to the job order cost sheets.

40. Assuming all other things are the same, variable costs per unit would_______if there is a decrease in the break-even point.
A) remain the same
B) increase
C) party wildly
D) decrease

41. When goods are completed on the factory floor, typically there is an increase in which of the following accounts:
A) Work in Process
B) Cost of Goods Sold
C) Finished Goods
D) Sales Revenue
42. The Tristan Corporation whose contribution margin ratio is 30%, broke even at a sales level of $120,000. What level of sales would yield an after-tax profit of $72,000? Assume a tax rate of 40%.
A) $360,000
B) $560,000
C) $520,000
D) $36,000
43. Anish Company produces pins for business fraternities.  The company is considering decreasing its print and radio advertising on college campuses by $20,000 next year.  The company is also considering lowering the selling price to stimulate demand, and expects sales to double next year.  What will be the result of these actions taken together?
A) Decrease the unit contribution margin, decrease the contribution margin ratio, decrease the fixed costs
B) Decrease the unit variable costs, increase the fixed costs, no change in contribution margin ratio
C) Increase the unit contribution margin, decrease the contribution margin ratio, decrease the breakeven point
D) Decrease the unit contribution margin, decrease the fixed costs, increase the contribution margin ratio
44. A company offers tours of spectacular tourist destinations such as Nebraska and Kansas.  The tours usually have between 5 and 50 people on them.   For each person who goes on the trip, the company incurs $10 per day in food cost, $50 per day in lodging, and $25 per day in entrance admissions and fees.  Also, the company incurs a certain total cost per day for transportation, regardless of whether the tour is full or not.    On the last tour, the total cost to the company per person per day was $100.  There were 30 people on the tour.  If the next tour has 20 people, what will be the cost per person per day?
A) $107.50
B) $66.66
C) $150.00
D) $110.00

45. I.M. Greedy and Company have collected the following information:
Cost to buy on unit                           $24
Production costs per unit:
Direct Materials                               $11
Direct Labor                                      $8
Variable Manufacturing Overhead        $1
Total Fixed Manufacturing Overhead $180,000
What level of production is needed for Strait to be indifferent between making or buying the part, assuming it can eliminate $130,000 of fixed costs if it buys the unit?
A) 0 units
B) 45,000 units
C) 12,500 units
D) 32,500 units

46. In 2008 Joe’s Oyster house broke even at 50,000 oysters a year and sold 80,000 oysters for the year. Joe sold some equipment which caused fixed costs to decrease and unit variable costs to increase. Sales remained at 80,000 oysters for the year and the break-even sales level remained unchanged at 50,000 units. All other variables remain unchanged. In that case, in 2009:
A) Profit would decrease
B) Profit would increase.
C) Fixed costs per unit would remain unchanged
D) Profit would remain unchanged

47. Provided a single cost allocation base is used within a factory, jobs are typically overcosted if:
A) jobs require more employees
B) jobs consume relatively more of the base
C) jobs consume proportionately less of the base
D) Jobs require more travel between the two parties

48. Assuming all other things are the same, which cost is mostly likely to increase if a firm decides to increase automation and decrease direct labor?
A) Fixed cost per unit
B) Variable cost per unit
C) Direct material cost per unit
D) Total variable cost