## 1. What does the following formula compute?

Beginning Work In Process Inventory + Beginning Raw Materials Inventory + Purchases – Ending Raw Materials Inventory + Direct Labor + Factory Overhead – Ending Work In Process Inventory

a. Direct Materials Used
b. Total Manufacturing Costs for Current Period
c. Cost of Goods Manufactured
d. Cost of Goods Sold

2. Which of the following is constant within a relevant range?
a. Fixed Cost per Unit
b. Variable Cost per Unit
c. Mixed Cost per Unit
d. None of the above

3. As volume increases,
a. total fixed cost increases
b. total fixed cost decreases
c. total variable cost increases
d. total variable cost decreases

4. When using activity-based costing, what information do you need to compute the predetermined overhead rates?

I. expected overhead cost for each activity
II. expected level of the cost driver for each activity
III. actual level of the cost driver for each activity

a. III
b. I and II
c. I and III
d. I, II and III

5. If your company uses traditional costing to allocate overhead based on machine hours, then what do you need to do to allocate overhead?
a. identify the key activities involved in manufacturing your products
b. identify the cost pool associated with each activity
c. multiply your predetermined overhead rate by the actual number of machine hours
d. all of the above

6. Unlike financial accounting, managerial accounting is intended to help
a. employees improve their company’s performance
b. investors understand a company’s past performance
c. equity analysts predict a company’s future performance
d. all of the above

7. Prime costs include
a. all indirect manufacturing costs.
b. nonmanufacturing costs or operating expenses.
c. direct labor and factory overhead.
d. all costs that are easy to trace directly to a specific cost object.

8. Manufacturing costs include
b. costs associated with obtaining sales
c. costs associated with the delivery of the product
d. none of the above

9. Rent on a factory is an example of
a. Direct Labor
b. Direct Materials
c. Fixed Cost

10. The lawyer’s salary is an example of
a. Direct Labor
c. Selling Expense

11. You would debit the Work in Process Inventory account when
a. you purchase raw materials
b. you incur labor costs
c. you sell your products to customers
d. all of the above

12. You would credit the Finished Goods Inventory account when
a. you purchase raw materials
b. you incur labor costs
c. you sell your products to customers
d. none of the above

13. Which of the following is not used to compute the cost of a manufactured product?
a. Direct Materials
b. Direct Labor
d. None of the Above

14. What does the following formula compute?

Sales – Variable Cost

a. Contribution Margin
b. Gross Margin
c. Net Income
d. Operating Income

15. Unlike a contribution margin income statement, a traditional income statement tells you if you have enough sales revenue to
a. break even
b. generate a profit
c. cover fixed costs
d. cover selling, general and administrative expenses

16. The number of units you need to sell to achieve your target profit would decrease if your
a. fixed cost decreased.
b. variable cost per unit increased.
c. selling price per unit decreased.
d. None of the above

17. The amount of sales revenue you need to generate to break even would increase if your
a. fixed cost increased.
b. variable cost per unit decreased.
c. selling price per unit increased.
d. None of the above

18. What budget does the following formula fully compute?

Budgeted Production Units x Per Unit Cost Driver Requirements x Variable Overhead Rate + Fixed Manufacturing Overhead

a. Raw Materials Purchases Budget
c. Ending Inventory Budget
d. Cost of Goods Sold Budget

19. What budget does the following formula fully compute?

Budgeted Unit Sales x (Direct Materials per Unit + Direct Labor per Unit + Variable Overhead per Unit + Fixed Overhead per Unit)

a. Raw Materials Purchases Budget
c. Ending Inventory Budget
d. Cost of Goods Sold Budget

20. A budget prepared at multiple levels of activity is known as a
a. Flexible Budget
b. Static Budget
d. Operating Budget

21. Which variance would tell us the difference between Actual Variable Overhead and Budgeted Variable Overhead?
a. Spending variance
b. Efficiency variance
c. Volume variance
d. Total variance

22. Which variance would tell us the difference between Budgeted Fixed Overhead and Applied Fixed Overhead?
a. Spending variance
b. Efficiency variance
c. Volume variance
d. Total variance

23. A furniture manufacturer only sells 4 products: red chairs, blue chairs, green chairs, and yellow chairs. The only difference between the four types of chairs is the color they are painted. Which product costing method do you recommend that this company use?
a. Activity-Based Costing
c. All of the Above
d. None of the Above

24. Your friend runs a small business that can measure the actual cost of its manufacturing overhead on a timely basis. What product costing method do you recommend that this company use?
a. Actual Costing
b. Normal Costing
c. Standard Costing
d. All of the Above

25. According to Greenberg’s Layers, a company CAN easily combine process costing and _________________ to compute a single product cost amount.
a. activity-based costing
b. normal costing
c. variable costing
d. all of the above

26. According to Greenberg’s Layers, a company CANNOT easily combine traditional costing and _________________ to compute a single product cost amount.
a. absorption costing
b. activity-based costing
c. actual costing
d. job-order costing

27. According to Greenberg’s Layers, a company CANNOT easily combine variable costing and _________________ to compute a single product cost amount.
a. absorption costing
b. activity-based costing
c. actual costing
d. job-order costing

28. For external reporting purposes, your company uses Traditional Costing and Absorption Costing. For internal reporting purposes, your company uses Activity-Based Costing and Variable Costing. Which of the following statements is FALSE?
a. Direct Materials would be the same for external and internal reporting purposes.
b. Direct Labor would be the same for external and internal reporting purposes.
c. Manufacturing Overhead would be the same for external and internal reporting purposes.
d. All of the above

29. How is traditional costing DIFFERENT from activity-based costing?

I. It does not use the same direct materials costs.
II. It does not use the same direct labor costs.
III. It does not use the same manufacturing overhead costs.

a. I and II
b. II and III
c. I, II, and III
d. Only III

30. Which of the following product costing methods do you recommend that a soda manufacturer use for financial reporting?

I. Absorption Costing
II. Variable Costing
III. Job-Order Costing
IV. Process Costing

a. I and III
b. I and IV
c. II and III
d. II and IV

31. The Purchasing Department buys materials and supplies in a factory. The Janitorial Department cleans the factory. The Assembly Department puts together the products made in the factory. The Painting Department paints the products made in the factory. If the Purchasing Department performs no work on behalf of the Janitorial Department, and the Janitorial Department performs a significant amount of work on behalf of the Purchasing Department, then which method would you recommend that the company use to allocate support department costs to the producing departments?
a. Direct Method
b. Reciprocal Method
c. Sequential Method
d. None of the above

32. A corn manufacturer sells corn on the cob, canned corn, and corn ethanol. It takes multiple cobs of corn to create canned corn or corn ethanol, so the cost to create a pound of each product is different. At the split-off point, this manufacturer has boxes of corn that all have the same value. After the split-off point, some of the boxes of corn are sold to groceries as corn on the cob, other boxes of corn are processed further to produce canned corn, and the remaining boxes of corn are processed further to produce corn ethanol. Canned corn and corn ethanol have different further processing costs as well as different sales prices, and we know these amounts. Based on what you know about this company, which method would you recommend that the company use to allocate joint costs to these joint products if management prefers to allocate more joint cost to the more valuable joint products?
a. Physical Units Method
b. Net Realizable Value Method
c. Weighted Average Method
d. Sales-Value-at-Split-Off Method

33. According to Greenberg’s Layers, a company CAN easily combine normal costing and _________________ to compute a single product cost amount.
a. actual costing
b. standard costing
c. variable costing
d. all of the above

34. How is normal costing SIMILAR to actual costing?
a. It uses the same manufacturing overhead costs.
b. It uses the same prime costs.
c. It is used to compute direct materials variances.
d. It is used to compute direct labor variances.

35. Information from the Raw Materials Purchases Budget would be used to prepare the
a. Capital Budget
b. Ending Inventory Budget
c. Production Budget
d. Sales Budget

36. Information from the Capital Budget would be used to prepare the
a. Budgeted Cash Payments
b. Budgeted Cash Receipts
c. All of the Above
d. None of the Above

37. The Direct Labor Budget would be computed using information obtained from the
a. Production Budget
b. Capital Budget
c. Selling, General, & Administrative Expense Budget
d. Cash Budget

38. The Budgeted Statement of Cash Flows obtains information from the
a. Budgeted Balance Sheet
b. Budgeted Income Statement
c. All of the above
d. None of the above

39. The Gross Margin version of the Budgeted Income Statement would be computed using
a. Absorption Costing
b. Variable Costing
c. All of the above
d. None of the above

40. The choice to use Traditional Costing or Activity-Based Costing would NOT impact the
a. Budgeted Income Statement
b. Cost of Goods Sold Budget
c. Ending Inventory Budget
d. Production Budget

41. Because all of the inputs into a budget are estimates, we are ALWAYS using __________________ when we engage in budgeting.
a. Absorption Costing
b. Job-Order Costing
c. Standard Costing

For questions # 42 – 45

The following computer printout estimated overhead costs using regression:

Model 1

Model 2

42. Based on the information provided above,
a. Model 1 is the better model because it has a statistically significant intercept.
b. Model 1 is the better model because it explains more of the variance in Overhead Costs.
c. Model 2 is the better model because it has a statistically significant intercept.
d. Model 2 is the better model because it explains more of the variance in Overhead Costs.
43. Based on the information provided on page 9, the regression equation for Model 2 is
b. Overhead = 7,845,352.46 + 312.52 (Activity Driver 3)
d. Overhead = 6,982,525.22 – 357.89 (Activity Driver 1) + 7,383.17 (Activity Driver 2)
+ 295.09 (Activity Driver 3)

44. Which of the following is FALSE about Model 2 on page 9?
a. Both Activity Driver 1 and Activity Driver 2 are statistically significant.
b. There is a positive correlation between Activity Driver 3 and Overhead Costs.
c. We would have a more accurate model if we dropped Activity Driver 1 from this model.
d. This model explains 42% of the variance in Overhead Costs.

45. If your company used 20,000 of Activity Driver 1 and 300 of Activity Driver 2 and 5,000 of Activity Driver 3, how would you predict Overhead Costs using Model 1 on page 9?
b. Overhead = 7,845,352.46 + 312.52 (5,000)
d. Overhead = 6,982,525.22 – 357.89 (20,000) + 7,383.17 (300) + 295.09 (5,000)

46. Budgets help managers
a. encourage ethical behavior
b. avoid running out of cash
c. motivate employees
d. All of the above

47. A good manager would make sure that his budget does NOT
a. tie incentives to performance measures other than meeting budget targets
b. reduce budget complexity and cycle time
c. shift management’s focus to short-term targets
d. All of the above

48. A manager would obtain greater benefits from budgeting if he did NOT
a. design procedures that allocate resources strategically
b. let the budget become out of date within a few months
c. use the budgeting process to learn about his organization
d. None of the above

49. A company makes two products: tables and chairs. How would a lower than expected variable cost per unit for chairs impact a multi-product Cost-Volume-Profit Analysis for this company?
a. It would decrease the weighted-average unit contribution margin.
b. It would decrease the total break-even units.
c. It would increase the break-even units for tables.
d. It would increase the break-even units for chairs.

50. A company makes two products: tables and chairs. How would a higher than expected fixed cost impact a multi-product Cost-Volume-Profit Analysis for this company?
a. It would increase the weighted-average unit contribution margin.
b. It would decrease the total break-even units.
c. It would decrease the break-even units for tables.
d. It would increase the break-even units for chairs.

51. A company makes two products: tables and chairs. How would a lower than expected selling price per unit for tables impact a multi-product Cost-Volume-Profit Analysis for this company?
a. It would decrease the break-even sales.
b. It would decrease the total break-even units.
c. It would increase the sales mix percent for chairs.
d. It would not change the break-even units for chairs.

For questions # 52 – 53

A management accountant computed the following direct labor variances for his company.

52. Based on the information above, who would the management accountant want to talk to about the \$80 variance?
a. Whoever decided how to assign employees to jobs
b. Whoever is involved with long-run decisions
d. Production manager

53. Based on the information on page 11, what is a potential explanation for the \$50 variance?
a. well-trained workers who make fewer mistakes that need to be corrected
b. rework performed due to inferior quality material that breaks
c. Using lower rank workers paid lower rates
d. Overtime pay due to poor scheduling of production

For questions # 54 – 55

A management accountant computed the following direct material variances for his company.

54. Based on the information above, who would the management accountant want to talk to about the \$100 variance?
a. Whoever decided how to assign employees to jobs
b. Whoever is involved with long-run decisions