31.

The value chain

a. reflects the production of goods within an organizational context.
b. is concerned with upstream suppliers, but not downstream customers.
c. results when all non-value-added activities are eliminated from a production process.
d. is the foundation of strategic resource management.
ANS: D

PTS: 1

DIF: Moderate

OBJ: 1-5

32. In a global economy,

a. the trade of goods and services is focused on trade between or among countries on the
same continent.
b. the international movement of labor is prohibited except for multilingual persons.
c. the international flows of capital and information are common.
d. all of the above happen in a global economy.
ANS: C

PTS: 1

DIF: Moderate

OBJ: 1-5

33. The balanced scorecard perspective that focuses on using a firms intellectual capital to adapt to customer
needs through product or service innovations is the:
a. learning and growth perspective
c. customer value perspective
b. internal business perspective
d. financial perspective
ANS: A

PTS: 1

DIF: Easy

OBJ: 1-7

34. The balanced scorecard perspective that addresses things that an organization needs to do well to meet
customer needs and expectations:
a. learning and growth perspective
c. customer value perspective
b. internal business perspective
d. financial perspective
ANS: B

PTS: 1

DIF: Easy

OBJ: 1-7

35. The balanced scorecard perspective that addresses how well the organization is meeting specific
customer-based criteria is the:
a. learning and growth perspective
c. customer value perspective
b. internal business perspective
d. financial perspective
ANS: C

PTS: 1

DIF: Easy

OBJ: 1-7

Long Enterprises
Inventories:
Raw material
Work in process
Finished goods
Additional information for March:
Raw material purchased
Direct labor payroll
Direct labor rate per hour
Overhead rate per direct labor hour

March 1
$18,000
9,000
27,000
$42,000
30,000
7.50
10.00

50. Refer to Long Enterprises. For March, prime cost incurred was

March 31
$15,000
6,000
36,000

a.
b.
c.
d.

$75,000.
$69,000.
$45,000.
$39,000.

50. ANS:

A
Begin Inv
$18,000

Raw Materials

Purch
$42,000
Rate
$
7.50

Direct Labor

PTS: 1

DIF: Easy

Ending Inv
$(15,000)
Hours
4,000

$45,000
30,000
$75,000

OBJ: 2-5

51. Refer to Long Enterprises. For March, conversion cost incurred was
a. $30,000.
b. $40,000.
c. $70,000.
d. $72,000.
51. ANS:

C
Begin Inv

Direct Labor
Overhead

PTS: 1

Purch
Ending Inv
$
7.50
4,000
Rate
Hours
$ 10.00
4,000

DIF: Easy

30,000
40,000
$70,000

OBJ: 2-5

52. Refer to Long Enterprises. For March, Cost of Goods Manufactured was
a. $118,000.
b. $115,000.
c. $112,000.
d. $109,000.
52. ANS:

Beginning WIP Inventory

Raw Materials
Direct Labor
Factory Overhead
Ending WIP Inventory

PTS: 1

DIF: Easy

$
$

45,000
30,000
40,000

9,000

115,000
(6,000)
$ 118,000

OBJ: 2-6

64. Use of activity-based costing and activity-based management requires

a. the creation of an environment for change in an organization.
b. elimination of all non-value-added activities in an organization.
c. that company processes be automated and the use of direct labor be minimal.
d. each process be fully mapped and all activities be identified as value-added or non-value-

added.
ANS: A

PTS: 1

DIF: Easy

OBJ: 4-5

65. If activity-based costing is implemented in an organization without any other changes being implemented,
total overhead costs will
a. be reduced because of the elimination of non-value-added activities.
b. be reduced because organizational costs will not be assigned to products or services.
c. be increased because of the need for additional people to gather information on cost
drivers and cost pools.
d. remain constant and simply be spread over products differently.
ANS: D

PTS: 1

DIF: Difficult

OBJ: 4-5

66. A just-in-time manufacturing process should have substantially less of which of the following than a
traditional manufacturing process?
Idle time Transfer time
a.
b.
c.
d.

yes
yes
yes
no

Value-added time

Cycle time

yes
no
no
yes

yes
yes
yes
no

yes
no
yes
yes

ANS: C

PTS: 1

DIF: Difficult

OBJ: 4-6

Trenton Company
Trenton Company has two departments (Processing and Packaging) and uses a job-order costing system.
Baker applies overhead in Processing based on machine hours and on direct labor cost in Packaging. The
following information is available for July:
Machine hours
Direct labor cost
Applied overhead

Processing

Packaging

2,500
$44,500
$55,000

1,000
$23,000
$51,750

77. Refer to Trenton Company. What is the overhead application rate per machine hour for Processing?
a. $ 0.81
b. $ 1.24
c. $17.80
d. $22.00
ANS: D
Total Applied Overhead
$55,000

PTS: 1

DIF: Easy

Machine Hours
2,500

Rate per
Hour
$22.00

OBJ: 5-3

78. Refer to Trenton Co. What is the overhead application rate for Packaging?

a.
b.
c.
d.

$ 0.44
$ 2.25
$23.00
$51.75

ANS: B
Total Applied
Overhead
$51,750

PTS: 1

DIF: Easy

Total Direct Labor

$23,000

Rate per Dollar

of DL
$2.25

OBJ: 5-4

Mathis Company
The following information is available for Mathis Company for the current year:
Beginning Work in Process
(75% complete)
Started
Ending Work in Process
(60% complete)
Abnormal spoilage
Normal spoilage
(continuous)
Transferred out

Costs of Beginning Work in Process:

$25,100
Material
50,000
Conversion
Current Costs:
16,000 units
$120,000
Material
2,500 units
300,000
Conversion
14,500 units
75,000 units

5,000 units
66,000 units

All materials are added at the start of production.

93. Refer to Mathis Company. Using weighted average, what are equivalent units for material?
a. 82,000
b. 89,500
c. 84,500
d. 70,000
93. ANS:

Materials: Weighted Average

Beginning Work in Process
+ Units Started and Completed
+ Ending Work in Process
+ Abnormal Spoilage
Equivalent Units of Production

PTS: 1

DIF: Easy

Units
% Complete
14,500
100%
51,500
100%
16,000
100%
2,500
100%

Eq. Units
14,500
51,500
16,000
2,500
84,500

OBJ: 6-8

94. Refer to Mathis Company. Using weighted average, what are equivalent units for conversion costs?
a. 80,600
b. 78,100
c. 83,100
d. 75,600

94. ANS:

Conversion: Weighted Average

Beginning Work in Process
+ Units Started and Completed
+ Ending Work in Process
+ Abnormal Spoilage
Equivalent Units of Production

PTS: 1

Units
% Complete
14,500
100%
51,500
100%
16,000
60%
2,500
100%

DIF: Easy

Eq Units
14,500
51,500
9,600
2,500
78,100

OBJ: 6-8

95. Refer to Mathis Company. What is the cost per equivalent unit for material using weighted average?
a. $1.72
b. $1.62
c. $1.77
d. $2.07
95. ANS:

Weighted Average: Materials

Beginning
Current Period

PTS: 1

Php25,100
120,000
145,100 84,500 =
units

DIF: Moderate

Php1.72
per unit

OBJ: 6-3

96. Refer to Mathis Company. What is the cost per equivalent unit for conversion costs using weighted
average?
a. $4.62
b. $4.21
c. $4.48
d. $4.34
96. ANS:

Weighted Average: Conversion

Beginning
Current Period

PTS: 1

Php50,000
300,000
350,000
78,100 =
units

DIF: Moderate

Php4.48
per unit

OBJ: 6-3

97. Refer to Mathis Company. What is the cost assigned to normal spoilage using weighted average?
a. $31,000
b. $15,500
c. $30,850
d. None of the responses are correct
97. ANS:

No costs are assigned to normal, continuous spoilage. Higher costs are assigned to good units
produced.

PTS: 1

DIF: Easy

OBJ: 6-8

98. Refer to Mathis Company. Assume that the cost per EUP for material and conversion are $1.75 and $4.55,
respectively. What is the cost assigned to ending Work in Process?
a. $100,800
b. $87,430
c. $103,180
d. $71,680
98. ANS:
D
Equivalent
Cost per
Units
Equivalent Unit
16,000
$1.75
9,600
$4.55

PTS: 1

DIF: Easy

Total
$28,000
$43,680
$71,680
OBJ: 6-3

99. Refer to Mathis Company. Using FIFO, what are equivalent units for material?
a. 75,000
b. 72,500
c. 84,500
d. 70,000
99. ANS:

Materials: FIFO
Beginning Work in Process
+ Units Started and Completed
+ Ending Work in Process
+ Abnormal Spoilage
Equivalent Units of Production

PTS: 1

DIF: Easy

51,500
16,000
2,500

0%
100%
100%
100%

51,500
16,000
2,500
70,000

OBJ: 6-8

100. Refer to Mathis Company. Using FIFO, what are equivalent units for conversion costs?
a. 72,225
b. 67,225
c. 69,725
d. 78,100
100. ANS:

Conversion: FIFO
Beginning Work in Process
+ Units Started and Completed
+ Ending Work in Process
+ Abnormal Spoilage
Equivalent Units of Production

PTS: 1

DIF: Easy

14,500
51,500
16,000
2,500

OBJ: 6-8

25% 3,625
100%
51,500
60%
9,600
100%
2,500
67,225

101. Refer to Mathis Company. Using FIFO, what is the cost per equivalent unit for material?
a. $1.42
b. $1.66
c. $1.71
d. $1.60
101. ANS:

FIFO: Materials
Current Period

PTS: 1

120,000
120,000
70,000 =
units

DIF: Easy

1.71
per unit

OBJ: 6-4

102. Refer to Mathis Company. Using FIFO, what is the cost per equivalent unit for conversion costs?
a. $4.46
b. $4.15
c. $4.30
d. $3.84
102. ANS:

FIFO: Conversion
Current Period

PTS: 1

DIF: Easy

300,000
300,000 67,225 =
units

4.46
per unit

OBJ: 6-4

103. Refer to Mathis Company. Assume that the FIFO EUP cost for material and conversion are $1.50 and
$4.75, respectively. Using FIFO what is the total cost assigned to the units transferred out?
a. $414,194
b. $339,094
c. $445,444
d. $396,975
103. ANS:

Transferred Out Units: FIFO

Beginning Work in Process
+ Completion of Beginning Inventory
+Units Started and Completed
Equivalent Units of Production

PTS: 1

DIF: Difficult

Equiv Cost per

Units Equiv Unit
(14,500 * 25%) 3,625
51,500

OBJ: 6-4

1.A primary purpose of using a standard cost system is

a. to make things easier for managers in the production facility.
b. to provide a distinct measure of cost control.

4.75
6.25

Total
75,100
17,219
321,875
414,194

c. to minimize the cost per unit of production.

d. b and c are correct.
ANS: B

PTS: 1

DIF: Easy

OBJ: 7-1

2. The standard cost card contains quantities and costs for

a. direct material only.
b. direct labor only.
c. direct material and direct labor only.
d. direct material, direct labor, and overhead.
ANS: D

PTS: 1

DIF: Easy

OBJ: 7-2

3. Which of the following statements regarding standard cost systems is true?

a. Favorable variances are not necessarily good variances.
b. Managers will investigate all variances from standard.
c. The production supervisor is generally responsible for material price variances.
d. Standard costs cannot be used for planning purposes since costs normally change in the
future.
ANS: A

PTS: 1

DIF: Easy

OBJ: 7-2

4. In a standard cost system, Work in Process Inventory is ordinarily debited with

a. actual costs of material and labor and a predetermined overhead cost for overhead.
b. standard costs based on the level of input activity (such as direct labor hours worked).
c. standard costs based on production output.
d. actual costs of material, labor, and overhead.
ANS: C

PTS: 1

DIF: Easy

OBJ: 7-2

5. A standard cost system may be used in

a. job order costing, but not process costing.
b. process costing, but not job order costing.
c. either job order costing or process costing.
d. neither job order costing nor process costing.
ANS: C

PTS: 1

DIF: Easy

OBJ: 7-1

DIF: Easy

OBJ: 7-1

6. Standard costs may be used for

a. product costing.
b. planning.
c. controlling.
d. all of the above.
ANS: D

PTS: 1

7. A purpose of standard costing is to

a. replace budgets and budgeting.
b. simplify costing procedures.
c. eliminate the need for actual costing for external reporting purposes.
d. eliminate the need to account for year-end underapplied or overapplied manufacturing
overhead.

ANS: B

PTS: 1

DIF: Easy

OBJ: 7-1

8. Standard costs
a. are estimates of costs attainable only under the most ideal conditions.
b. are difficult to use with a process costing system.
c. can, if properly used, help motivate employees.
d. require that significant unfavorable variances be investigated, but do not require that
significant favorable variances be investigated.
ANS: C

PTS: 1

DIF: Easy

OBJ: 7-1

DIF: Easy

OBJ: 7-2

9. A bill of material does not include

a. quantity of component inputs.
b. price of component inputs.
c. quality of component inputs.
d. type of product output.
ANS: B

PTS: 1

10. An operations flow document

a. tracks the cost and quantity of material through an operation.
b. tracks the network of control points from receipt of a customer's order through the delivery
of the finished product.
c. specifies tasks to make a unit and the times allowed for each task.
d. charts the shortest path by which to arrange machines for completing products.
ANS: C

PTS: 1

DIF: Moderate

OBJ: 7-2

11. A total variance is best defined as the difference between total

a. actual cost and total cost applied for the standard output of the period.
b. standard cost and total cost applied to production.
c. actual cost and total standard cost of the actual input of the period.
d. actual cost and total cost applied for the actual output of the period.
ANS: D

PTS: 1

DIF: Easy

OBJ: 7-2

16.Fisher Company produces three products from a joint process. The products can be sold at split-off or
processed further. In deciding whether to sell at split-off or process further, management should
a. allocate the joint cost to the products based on relative sales value prior to making the
decision.
b. allocate the joint cost to the products based on a physical quantity measure prior to making
the decision.
c. subtract the joint cost from the total sales value of the products before determining relative
sales value and making the decision.
d. ignore the joint cost in making the decision.
ANS: D

PTS: 1

DIF: Easy

OBJ: 11-3

17. By-products are

a. allocated a portion of joint production cost.
b. not sufficient alone, in terms of sales value, for management to justify undertaking the
joint process.
c. also known as scrap.

d. the primary reason management undertook the production process.

ANS: B

PTS: 1

DIF: Easy

OBJ: 11-1

18. Which of the following statements is true regarding by-products or scrap?

a. Process costing is the only method that should result in by-products or scrap.
b. Job order costing systems will never have by-products or scrap.
c. Job order costing systems may have instances where by-products or scrap result from the
production process.
d. Process costing will never have by-products or scrap from the production process.
ANS: C

PTS: 1

DIF: Moderate

OBJ: 11-4

DIF: Easy

OBJ: 11-4

19. Which of the following has sales value?

By-products
a.
b.
c.
d.

no
yes
yes
no

ANS: B

Waste
no
no
yes
yes

PTS: 1

20. Under an acceptable method of costing by-products, inventory costs of the by-product are based on the
portion of the joint production cost allocated to the by-product
a. but any subsequent processing cost is debited to the cost of the main product.
b. but any subsequent processing cost is debited to revenue of the main product.
c. plus any subsequent processing cost.
d. minus any subsequent processing cost.
ANS: C

PTS: 1

DIF: Easy

OBJ: 11-4

21. Which of the following is a false statement about scrap and by-products?
a. Both by-products and scrap are salable.
b. A by-product has a higher sales value than does scrap.
c. By-products and scrap are the primary reason that management undertakes the joint
process.
d. Both scrap and by-products are incidental outputs to the joint process.
ANS: C

PTS: 1

DIF: Easy

OBJ: 11-4

22. The split-off point is the point at which

a. output is first identifiable as individual products.
b. joint costs are allocated to joint products.
c. some products may first be sold.
d. all of the above.
ANS: D

PTS: 1

DIF: Easy

OBJ: 11-2

23. A product may be processed beyond the split-off point if management believes that
a. its marketability will be enhanced.
b. the incremental cost of further processing will be less than the incremental revenue of

further processing.
c. the joint cost assigned to it is not already greater than its prospective selling price.
d. both a and b.
ANS: D

PTS: 1

DIF: Easy

OBJ: 11-3

24. Which of the following would not be considered a sunk cost?

a. direct material cost
b. direct labor cost
c. joint cost
d. building cost
ANS: D

PTS: 1

DIF: Easy

OBJ: 11-2

25. The definition of a sunk cost is

a. a cost that cannot be recovered regardless of what happens.
b. a cost that relates to money poured into the ground.
c. considered the original cost of an item.
d. also known as an opportunity cost.
ANS: A

PTS: 1

DIF: Easy

OBJ: 11-2

26. The net realizable value approach mandates that the NRV of the by-products/scrap be treated as
a. an increase in joint costs.
b. a sunk cost.
c. a reduction of joint costs.
d. a cost that can be ignored totally.
ANS: C

PTS: 1

DIF: Easy

OBJ: 11-4

27. The net realizable value approach is normally used when the NRV is expected to be
insignificant
a.
b.
c.
d.

yes
no
no
yes

ANS: B

significant
yes
yes
no
no

PTS: 1

DIF: Easy

OBJ: 11-3

28. Approximated net realizable value at split-off for joint products is computed as
a. selling price at split-off minus further processing and disposal costs.
b. final selling price minus further processing and disposal costs.
c. selling price at split-off minus allocated joint processing costs.
d. final selling price minus a normal profit margin.
ANS: B

PTS: 1

DIF: Easy

OBJ: 11-3

29. Which of the following is a commonly used joint cost allocation method?
a. high-low method
b. regression analysis
c. approximated sales value at split-off method

d. weighted average quantity technique

ANS: C

PTS: 1

DIF: Easy

OBJ: 11-2

30. Incremental separate costs are defined as all costs incurred between ___________ and the point of sale.
a. inception
b. split-off point
c. transfer to finished goods inventory
d. point of addition of disposal costs
ANS: B

PTS: 1

DIF: Easy

OBJ: 11-2

31. All costs that are incurred between the split-off point and the point of sale are known as
a. sunk costs.
b. incremental separate costs.
c. joint cost.
d. committed costs.
ANS: B

PTS: 1

DIF: Easy

OBJ: 11-2