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ACCT Practice Final Exam Problems




Engines Done Right Co. is trying to establish the standard labor cost of a typical engine tune-up. The following data have been collected from time and motion studies conducted over the past month.;Actual time spent on the tune-up 1.0 hour;Hourly wage rate $16;Payroll taxes 10% of wage rate;Setup and downtime 10% of actual labor time;Cleanup and rest periods 20% of actual labor time;Fringe benefits 25% of wage rate;Instructions;(a) Determine the standard direct labor hours per tune-up;(b) Determine the standard direct labor hourly rate.;(c) Determine the standard direct labor cost per tune-up.;(d) If a tune-up took 1.5 hours at the standard hourly rate, what was the direct labor quantity variance?;Riggins, Inc. manufactures one product called tybos. The company uses a standard cost system and sells each tybo for $8. At the start of monthly production, Riggins estimated 9,500 tybos would be produced in March. Riggins has established the following material and labor standards to produce one tybo;Standard Quantity Standard Price;Direct materials 2.5 pounds $3 per pound;Direct labor 0.6 hours $10 per hour;During March 2013, the following activity was recorded by the company relating to the production of tybos;1. The company produced 9,000 units during the month.;2. A total of 24,000 pounds of materials were purchased at a cost of $66,000.;3. A total of 24,000 pounds of materials were used in production.;4. 5,000 hours of labor were incurred during the month at a total wage cost of $55,000.;Instructions;Calculate the following variances for March for Riggins, Inc.;(a) Materials price variance;(b) Materials quantity variance;(c) Labor price variance;(d) Labor quantity variance;This problem consists of four independent mini-problems. Omit headings other than those already given.;A. Dryer Manufacturing produces and sells containers designed to hold liquid beverages. The sales budget for 2011 is as follows;1st quarter ? 90,000 units 3rd quarter ? 135,000 units;2nd quarter ? 120,000 units 4th quarter ? 105,000 units;Dryer desires an ending inventory equal to 10% of the next quarter's sales. January 1, 2011 inventory is 9,000 units. Unit sales during the 1st quarter of 2012 are estimated at 90,000 units.;Instructions: Compute required production for the year, showing quarterly data.;B. Parker Manufacturers is preparing its direct labor budget for the second quarter of 2011 from the following budgeted production figures: April?70,000 units, May?100,000 units, and June?110,000 units. Each unit requires 2 hour of direct labor. The hourly wage rates are expected to be $14 in April and May and $16 in June.;Instructions: Prepare a direct labor budget for the quarter, showing monthly data.;C. Carson's Widget Works makes 70% of its sales on credit. Experience shows that 60% of the credit customers pay in the month of sale, 30% within the following month, the rest in the next month. Total sales for May, June, July, and August are estimated at $210,000, $240,000, $300,000, and $250,000, respectively.;Instructions: Determine budgeted cash receipts for July and August.. John's Sporting Goods is preparing its annual cash budget, showing quarterly data, for 2011. A $20,000 cash balance is desired at the end of each quarter. Borrowings and repayments are in $1,000 increments at 12% annual interest. The company borrows at the beginning of a quarter based on the estimated deficiency. Interest is paid only when principal is repaid at the end of a quarter with excess cash. The maximum amount of principal was repaid in the second quarter. The cash balance on December 31, 2010 is $21,000. Total receipts and disbursements, other than borrowings and principal or interest payments, are estimated at;Quarter 1 Quarter 2 Quarter 3 Quarter 4;Disbursements: $226,000 $226,000 $244,000 $260,000;Receipts: 216,000 230,000 245,000 253,000;Instructions: Prepare a schedule of estimated borrowings and repayments of principal and interest for 2008 and its quarters.;1. Which of the following is not likely to be a fixed cost?;A. direct materials;B. rent;C. depreciation;D. salary of the human resources director;2. Costs incurred in the past which are not relevant to present decisions are;A. fixed costs.;B. sunk costs.;C. opportunity costs.;D. indirect costs.;3. Managerial accounting;A. is primarily directed at external users of accounting information.;B. is required by taxing authorities such as the IRS.;C. must follow GAAP.;D. is optional.;4. Which of the following is most likely to make use of Spruce Company?s managerial accounting information?;A. the IRS;B. an individual contemplating an investment in Spruce Company;C. a company that is one of Spruce?s main competitors;D. the production manager of Spruce?s plant in Minnesota;5. Ice Box Company manufactures refrigerators. Which of the following items is most likely to be an indirect material cost for Ice Box Company?;A. Factory supervisor?s salary;B. Lubricant for refrigerator door hinges;C. Glass shelves for the refrigerators;D. Refrigerator motors;6. Which of the following accounts does not appear on the balance sheet?;A. Raw Materials Inventory;B. Finished Goods Inventory;C. Work in Process Inventory;D. Cost of Goods Manufactured;7. Which of the following lists presents the accounts in the order in which product;costs flow?;A. Raw Materials Inventory, Finished Goods Inventory, Work in Process;Inventory, Cost of Goods Sold;B. Cost of Goods Sold, Work in Process Inventory, Raw Materials Inventory;Finished Goods Inventory;C. Raw Materials Inventory, Work in Process Inventory, Finished Goods;Inventory, Cost of Goods Sold;D. Work in Process Inventory, Finished Goods Inventory, Cost of Goods;Sold, Raw Materials Inventory;8. The balance in the Finished Goods Inventory account on July 1, 2007, was;$34,000 and the June 30, 2008, balance in the Finished Goods Inventory account was $41,000. If the cost of goods manufactured was $200,000, what was the cost of goods sold?;A. $285,000;B. $193,000;C. $207,000;D. $278,000;9. Which of the following describes the differences between job-order and process costing?;A. Job-order costing is used in financial accounting while process costing is used in managerial accounting.;B. Job-order costing can only be used by manufacturers, service enterprises must use process costing.;C. Job-order costing is voluntary while process costing is mandatory.;D. Job-order costing traces costs to jobs while process costing traces costs to;departments and averages the costs among the units worked on during the period.;10. Which of the following costs is not added to the Work in Process account in a process;costing system?;A. manufacturing overhead;B. direct materials;C. direct labor;D. advertising;11. Conversion costs are;A. often assumed to be added at the beginning of the production process in each department.;B. the sum of the direct materials and direct labor costs.;C. impossible to measure for any particular department.;D. often assumed to be added evenly throughout the process within the department.;12. The equivalent units are calculated by;A. taking the units needed to complete the beginning inventory, adding the units started and taking the equivalent units in ending inventory.;B. taking the units completed plus the equivalent units in ending inventory.;C. taking the total units to account for and subtracting the equivalent units in beginning inventory.;D. taking the units started plus the equivalent units in ending inventory.;13. Department A began the period with 45,000 units. During the period the department received another 30,000 units from the prior department and completed 60,000 units during the period. The remaining units were 75% complete. The amount of equivalent units in Department A?s work-in-process inventory at the end of the period is;A. 30,000.;B. 22,500.;C. 15,000.;D. 11,250.;14. Which of the following costs is least likely to be a variable cost?;A. sales commissions;B. direct labor;C. indirect materials;D. supervisory salaries;15. Which of the following components are included in a mixed cost?;A. a sunk cost and an opportunity cost;B. a fixed cost and a variable cost;C. a manufacturing cost and a selling cost;D. a product cost and a period cost;16. Which of the following is not a method that is used to estimate variable and fixed costs?;A. account analysis;B. high low method;C. east-west method;D. regression analysis;17. Kari?s Kookies has total costs of $5,000 when 2,000 units are produced and $11,000 when 5,000 units are produced. What is the variable cost per unit?;A. $2.50;B. $2.20;C. $2.00;D. $0.50;18. Which of the following items appears on a contribution margin income statement but not on a GAAP income statement?;A. Sales;B. Gross margin;C. Net income;D. Contribution margin;19.. Which of the following is not a reason that companies allocate costs?;A. to calculate the full cost of products for financial reporting purposes;B. to discourage managers from using external suppliers;C. to reduce the frivolous use of company resources;D. to provide information needed by managers to make appropriate decisions;20. The cost objective is the;A. reason for allocating the cost.;B. calculation based on budgeted amounts.;C. product, service, or department that is to receive the allocation.;D. maximum amount to be allocated to any single department.;21. An allocation base;A. is the minimum amount to be allocated to a cost object.;B. coordinates the manufacturing overhead costs as they are incurred.;C. will always be less than the variable costs for a product.;D. relates the cost pool to the cost objectives.;22. When deciding between two alternatives, the preferred alternative always has;A. no opportunity costs.;B. greater revenues than the other alternatives.;C. less expense than the other alternatives.;D. greater incremental profit than the other alternatives;23. A company is trying to decide whether to keep or drop the sporting goods department in its department store. If the segment is dropped, the manager will be fired. The manager's salary, in relation to the decision to keep or drop the sporting goods department, is;A. avoidable and therefore relevant;B. not avoidable and therefore relevant;C. sunk and therefore not relevant;D. the same for all alternatives and therefore not relevant;24. Common costs;A. are fixed costs that are not directly traceable to an individual product line.;B. normally not avoidable.;C. Both A and B are true.;D. Neither A nor B is true.;25. The formal documents that quantify a company?s plans for achieving its goals are called;A. variance reports.;B. budgets.;C. exception logs.;D. cost of production reports.;26. Managerial accounting stresses accounting concepts and procedures that are;relevant to preparing reports for;A. taxing authorities.;B. internal users of accounting information.;C. external users of accounting information.;D. the Securities and Exchange Commission (SEC).;27. The goal of managerial accounting is to provide information that managers need for;A. planning.;B. control.;C. decision making.;D. All of the above answers are correct.;28. The last step in the planning and control process is to;A. implement the plan.;B. construct the plan.;C. make decisions based on the evaluation of the results.;D. compare actual results to the planned results.;29. Which of the following is not a difference between financial accounting and managerial accounting?;A. Financial accounting is primarily concerned with reporting the past, while;managerial accounting is more concerned with the future.;B. Managerial accounting uses more nonmonetary information than is used in;financial accounting.;C. Managerial accounting is primarily concerned with providing information for external users while financial accounting is concerned with internal users.;D. Financial accounting must follow GAAP while managerial accounting is not required to follow GAAP.;30. Which of the following costs does not change when the level of business activity changes?;A. total fixed costs;B. total variable costs;C. total direct materials costs;D. fixed costs per unit;31. Opportunity costs are;A. considered to be fixed costs in the short term.;B. another term for sunk costs.;C. able to be controlled by most effective managers.;D. the value of benefits foregone when one decision is selected over another.;32. When work is completed on a job, costs for the completed job are found in which of the following accounts?;A. Raw Materials Inventory;B. Work in Process Inventory;C. Finished Goods Inventory;D. Cost of Goods Sold;33. In a process costing system, when raw materials are put into process, the cost of the items is moved from;A. Work in Process to Finished Goods.;B. Finished Goods to Cost of Goods Sold.;C. Raw Materials to Work in Process.;D. Finished Goods to Work in Process;34. Conversion costs are;A. often assumed to be added at the beginning of the production process in each department.;B. the sum of the direct materials and direct labor costs.;C. impossible to measure for any particular department.;D. often assumed to be added evenly throughout the process within the department.;35. The value of benefits foregone by selecting one decision alternative over another is a(n);A. sunk cost.;B. incremental benefit.;C. differential revenue.;D. opportunity cost.;36. Which of the following is a direct cost of a specific department in a retail store?;A. company president?s salary;B. rent on the store;C. utilities for the store;D. cost of the department?s inventory;37. You have tickets to go to Mexico (Cancun specifically) over spring break. Just this week your best friend informs you that s/he is getting married over spring break and would like you to be in the wedding as an attendant. Which of the following is a sunk cost that should not be relevant to your decision as to whether be in the wedding or go on the trip to Mexico?;A. The cost of the airline tickets to Mexico;B. The amount of refund you could get on the airline tickets to Mexico;C. The cost of the clothing you will have to buy/rent to be in the wedding.;D. The fact that you have never been anywhere for Spring Break and were really looking forward to going to Mexico;38 The Walter Jewelry Company produces a bracelet which normally sells for $79.95. The company produces 1,500 units annually but has the capacity to produce 2,000 units. A special order for manufacturing and selling 200 bracelets at $49.95 has been received which would not disrupt current operations. Current costs for the bracelet are as follows;Direct materials $17.00;Direct labor 14.50;Variable overhead 4.00;Fixed overhead 5.00;Total $40.50;In addition, the customer would like to add a monogram to each bracelet which would require an additional $2 per unit in additional labor costs and Walter Company would also have to purchase a piece of equipment to create the monogram which would cost $1,600. This equipment would not have any other uses.;With regard to this special order only;A. incremental revenues will exceed incremental costs by $2,490.;B. incremental revenues will exceed incremental costs by $890.;C. incremental revenues will exceed incremental costs by $2,890;D. incremental revenues will exceed incremental costs by $1,290;39. From a decision-making standpoint, the allocated cost should measure the;A. sunk cost of the equipment involved.;B. variable costs of the goods purchased.;C. opportunity cost of using a company resource.;D. product cost of the goods produced;40. The type of costs which are affected by the manager?s decisions and for which the manager should be held accountable are;A. indirect costs.;B. controllable costs.;C. basis costs.;D. pooled costs.;41. When activity based costing is implemented, the initial outcome is normally that;A. the cost of all products will be higher.;B. The cost of all products will be lower;C. The cost of low volume products will be higher and the cost of high volume products will be lower;D. The cost of low volume products will be lower and the cost of high volume products will be higher.;42. Which of the following is not generally true when a company compares ABC and traditional costing?;A. ABC uses more cost drivers.;B. ABC allocates cost based solely on production volume.;C. ABC is more expensive.;D. ABC is less likely to undercost complex, low-volume products.;43. The product, service, or department that is to receive the cost allocation is called the;A. cost-plus recipient.;B. cost object.;C. terminal.;D. pool for manufacturing overhead.;44. A cost pool is;A. not necessary in cost-plus contracts.;B. useful when separating mixed costs into their fixed and variable components.;C. allocated using a single allocation base.;D. a method of allocating costs among service departments.;45. Which one of the following is not a benefit of budgeting?;a. It facilitates the coordination of activities.;b. It provides definite objectives for evaluating performance.;c. It provides assurance that the company will achieve its objectives.;d. It requires all levels of management to plan ahead on a recurring basis.;46. If budgets are to be effective, all of the following must be present except;a. acceptance at all levels of management.;b. research and analysis in setting realistic goals.;c. stockholders' approval of the budget.;d. sound organizational structure.;47. A budget is most likely to be effective if;a. it is used to assess blame when things do not occur according to plans.;b. it is not used to evaluate a manager's performance.;c. employees and managers at the lower levels do not get involved in the budgeting process.;d. it has top management support.;48. If there were 60,000 pounds of raw materials on hand on January 1, 120,000 pounds are desired for inventory at January 31, and 360,000 pounds are required for January production, how many pounds of raw materials should be purchased in January?;a. 300,000 pounds;b. 480,000 pounds;c. 240,000 pounds;d. 420,000 pounds;49. In a production budget, total required production units are the budgeted sales units plus;a. beginning finished goods units.;b. desired ending finished goods units.;c. desired ending finished goods units plus beginning finished goods units.;d. desired ending finished goods units minus beginning finished goods units.;50. Wynne Company has a weighted-average unit contribution margin of $25 for its two products, Regular and Deluxe. Expected sales for Wynne are 60,000 Regular and 40,000 Deluxe. Fixed expenses are $2,200,000.;How many Regulars would Wynne sell at the break-even point?;a. 35,200;b. 44,000;c. 52,800;d. 66,000


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