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COSTCONCEPTSANDTHECOST
ACCOUNTINGINFORMATIONSYSTEM
MULTIPLECHOICE
Question Nos. 14, 15, 17, and 20-26 are AICPA adapted.
Question Nos. 13, 18, and 19 are ICMA adapted.
Question No. 16 is CIA adapted.
C
1.
2.
Cost classifications are based on the relationship of costs to all of the following
except:
A.
ledger accounts
B.
accounting periods
C.
products
D.
volume of production
E.
manufacturing departments
3.
4.
Chapter 2
5.
6.
7.
8.
9.
An expense that is likely to contain both fixed and variable components is:
A.
security guard wages
B.
supplies
C.
heat, light, and power
D.
small tools
E.
taxes on real estate
10.
A type of employee whose wages are not a component of indirect labor is a(n):
A.
inspector
B.
supervisor
C.
assembler
D.
maintenance worker
E.
shop clerk
11.
12.
13.
Chapter 2
14.
15.
The term "relevant range" as used in cost accounting means the range over
which:
A.
cost relationships are valid
B.
production may vary
C.
relevant costs are incurred
D.
costs may fluctuate
E.
none of the above
16.
When the number of units manufactured increases, the most significant change
in average unit cost will be reflected as:
A.
a decrease in the variable element
B.
a decrease in the nonvariable element
C.
an increase in the semivariable element
D.
an increase in the variable element
E.
an increase in the nonvariable element
17.
18.
The
A.
B.
C.
D.
E.
19.
20.
Direct labor is a:
A.
B.
C.
D.
E.
Conversion Cost
Yes
No
No
No
Yes
Manufacturing Cost
Yes
Yes
No
No
Yes
Prime Cost
Yes
Yes
No
Yes
No
21.
22.
Prime cost and conversion cost share what common element of total cost?
A.
direct labor
B.
commercial expense
C.
variable overhead
D.
fixed overhead
E.
direct materials
23.
24.
25.
Wages of the security guard for a small plant are an example of:
A.
B.
C.
D.
E.
Indirect Labor
No
No
Yes
Yes
none of the above
Fixed Factory
Overhead
Yes
No
Yes
No
10
B
Chapter 2
26.
Prime Cost
Conversion Cost
Yes
No
Yes
Yes
No
No
No
Yes
none of the above
27.
28.
Joint
A.
B.
C.
D.
E.
costs are:
direct costs
costs of facilities or services employed by two or more operations
revenue expenditures
incurred when the production of one product is possible only if other
products are produced at the same time
always variable
29.
30.
31.
11
32.
General corporate-level costs, such as bond interest and taxes, would be readily
traceable to:
A.
each unit of product
B.
each division of the company
C.
each batch of production
D.
all units of product ever produced
E.
none of the above
33.
34.
35.
36.
37.
38.
12
Chapter 2
E.
13
PROBLEMS
PROBLEM
1.
IdentificationofVariable,Fixed,andSemivariableCosts. Place a check mark in the appropriate
column to indicate whether the following costs are variable, fixed, or semivariable.
Item
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
............................................................
Small tools..........................................
Patent amortization............................
Health and accident insurance...........
Heat, light, and power.........................
Straight-line depreciation...................
Maintenance of buildings and
grounds...............................................
Royalties.............................................
Materials handling..............................
Property and liability insurance..........
Maintenance of factory equipment.....
SOLUTION
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Variable
Fixed
Semivariable
Semivariable
Fixed
Fixed
Variable
Variable
Fixed
Semivariable
Variable
Fixed
Semivariable
14
Chapter 2
PROBLEM
2.
ClassificationofCosts. Place a check mark in the appropriate column to indicate the proper
classification of each of the following costs.
Item
1. Factory heat, light,
and power.....................................
2. Advertising...................................
3. Wages of stockroom clerk............
4. Freight out....................................
5. Oil for machines............................
6. Salary of vice president
of human relations.......................
7. Legal expenses.............................
8. Salary of the factory manager......
9. Employer payroll taxes on
controller's salary.........................
10. Idle time due to assembly
line breakdown.............................
Indirect
Materials
Indirect
Labor
Other
Indirect
Factory Marketing
Costs Expenses
Administrative
Expenses
SOLUTION
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
PROBLEM
3.
FixedandVariableCosts. In 19A, the Lin Company had sales of $2,500,000, with $1,250,000
variable and $900,000 fixed costs. In 19B, sales are expected to decrease 10% and the
fixed costs are not expected to change.
Required: Determine Lin Company's expected operating income or loss for 19B.
15
SOLUTION
Sales
Less:
($2,500,000 x 90%)...........................................................
Variable costs
($1,250,000 x 90%)...................................................... $1,125,000
Fixed costs.........................................................................
900,000
Operating income.........................................................................
225,000
$2,250,000
2,025,000
$
PROBLEM
4.
DeterminationofperUnitTotalCosts. The estimated unit costs for Hoteling Industries, when
operating at a production and sales level of 10,000 units, are as follows:
Cost Item
Estimated Unit Cost
Direct materials...........................
$15
Direct labor..................................
10
Variable factory overhead...........
8
Fixed factory overhead................
5
Variable marketing......................
4
Fixed marketing...........................
3
Required:
(1)
(2)
(3)
(4)
SOLUTION
(1)
(2)
(3)
(4)
PROBLEM
5.
ComponentsofManufacturingCost. Myerson Inc. produces video cameras. The direct labor
cost of one camera is $200, and the total manufacturing cost is $650. The overhead cost of
one camera is two-thirds as large as its conversion cost.
16
Chapter 2
Required:
(1)
(2)
(3)
SOLUTION
(1)
(2)
(3)
PROBLEM
6.
Identificationoffinancialmeasures,customermeasures,internalbusinessprocessmeasures,andgrowth&
learningmeasuresforabalancedscorecard.Place a check mark in the appropriate column to
indicate which one of the four perspectives of a typical balanced scorecard is most likely to
contain each of the following measures.
Internal
Business
Growth &
Item
Financial
Customer
Process
Learning
1. Number of shipments rejected
by customers. . . . . . . . . . . . . .
2. Number of defective units removed
from work in process. . . . . . . . .
3. Percentage of employees whove
completed all training relevant
to their duties. . . . . . . . . . . . . .
4. Growth rate of sales revenue . . . .
5. Percentage of employees whose
cash bonuses depend on
achieving scorecard objectives . . .
6. Income from continuing
operations, before income taxes . .
7. Percentage of employees who
receive all information their job
requires, on time and error-free . .
8. Market share in targeted market
segment . . . . . . . . . . . . . . . . .
9. Number of new products launched
10. Number of patents received . . . . .
SOLUTION
1. customer
2. internal business process
3. growth & learning
4. financial
5. growth & learning
6. financial
7. growth & learning
8. customer
9. internal business process
10. internal business process
17