Exam: 061400RR - Cost Concepts and Types of Costing

Exam: 061400RR - Cost Concepts and Types of Costing

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Questions 1 to 20: Select the best answer to each question. Note that a question and its answers may be split across a
page break, so be sure that you have seen the entire question and all the answers before choosing an answer.

1. If a company wants to decrease its total quality cost, it would usually be best to spend more money on
A. internal and external failure.
B. appraisal and external failure.
C. prevention and internal failure.
D. prevention.

2. At the beginning of December, Sneeden Corporation had $32,000 of raw materials on hand. During
the month, the Corporation purchased an additional $71,000 of raw materials. During December,
$75,000 of raw materials was requisitioned from the storeroom for use in production. What are the total
credits entered in the Raw Materials account during the month of December?
A. $75,000
B. $71,000
C. $32,000
D.
$103,000

3. Which of the following is classified as a direct labor cost?
A. Neither wages of assembly-line workers nor a factory supervisor
B. Wages of a factory supervisor but not assembly line workers
C. Wages of assembly-line workers but not a factory supervisor
D. Both wages of assembly-line workers and a factory supervisor

4. Under the FIFO method, unit costs would
A. result from costs in the beginning inventory being added in with current period costs.
B. contain some element of cost from the prior period.
C. not include costs incurred to complete beginning inventory.
D. not contain some elements of cost from the prior period.

5. Supply costs at Chobot Corporation's chain of gyms are listed below:
Client-Visits Supply Cost
January
12,183
$26,642
February
12,408
$26,853

March

12,232

$26,675

April
May
June
July
August
September

12,579
12,527
12,608
12,143
12,005
11,944

$26,054
$26,988
$27,064
$26,585
$26,454
$26,393

Management believes that supply cost is a mixed cost that depends on client-visits. Use the high-low
method to estimate the variable and fixed components of this cost. Compute the variable component first,
rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest
whole dollar. These estimates would be closest to which value?
A.$1.01 per client-visit; $14,330 per month
B.$0.99 per client-visit; $14,607 per month
C.$2.18 per client-visit; $26,745 per month
D. $1.04 per client-visit; $13,949 per month

6. In describing the cost equation, Y = a + bX, what is "a"?
A.The total fixed cost
B.The independent variable level of activity
C.The variable cost per unit of activity
D. The dependent variable cost

7. Dubey Surgical Hospital uses the direct method to allocate service department costs to operating
departments. The hospital has two service departments, Telecommunications and Administration, and
two operating departments, Surgery and Recovery.

Telecommunications Department costs are allocated on the basis of the number of
telecommunications ports in departments and Administration Department costs are allocated on the
basis of employees. The total Surgery Department cost after service department allocations is closest
to which value?
A.
$478,133 B.
$484,059
C.
$481,336
D.
$473,169

8. Which of the following costs, if expressed on a per unit basis, would be expected to decrease as the
level of production and sales increases?

A.Variable manufacturing overhead
B.Fixed manufacturing overhead
C.Sales commissions
D. Direct materials

9. Laurie Corporation uses the FIFO method in its process costing system. Department A is the first
stage of Laurie Corporation's production process. The following information is available for conversion
costs for the month of May for Department A:

How many are the equivalent units of production for conversion costs for the month?
A.44,000 units
B.38,000 units
C.36,000 units
D. 42,000 units

10. Given the cost formula, Y = $7,000 + $1.80X, what would be the total cost for an activity level
of 4,000 units?
A. $200
B. $7,200
C. $7,000
D. $14,200

1. Electrical costs at one of Kantola Corporation's factories are listed below:
Machine-Hours Electrical Cost
February
3,570
$36,405
March
3,580
$36,493
April
3,553
$36,302
May
3,627
$36,833
June
3,625
$36,800
July
3,565
$36,366
August
3,548
$36,237
September
3,542
$36,213
October
3,593
$36,577

Management believes that electrical cost is a mixed cost that depends on machine-hours. Use the highlow method to estimate the variable and fixed components of this cost. Compute the variable component
first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the
nearest whole dollar. What would these estimates be closest to?
A. $0.14 per machine-hour; $36,336 per month
B. $7.48 per machine-hour; $9,708 per month
C. $10.19 per machine-hour; $36,470 per month
D. $7.29 per machine-hour; $10,392 per month

2. Adams Corporation makes two products: Product A and Product B. Annual production and sales are
500 units of Product A and 900 units of Product B. The company has traditionally used direct labor-hours
as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours
per unit and Product B requires 0.5 direct labor-hours per unit. The total estimated overhead for next
period is $67,522. The company is considering switching to an activity-based costing system for the
purpose of computing unit product costs for external reports. The new activity-based costing system would
have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with estimated
overhead costs and expected activity as follows:

(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor-hours.)
The overhead cost per unit of Product A under the traditional costing system is closest to which
value?
A. $41.55
B. $21.94
C. $3.56
D. $5.53

13.Pujol Children's Clinic allocates service department costs to operating departments using the stepdown method. The clinic has two service departments, Administration and Information Technology
(IT), and two operating departments, Prenatal and Pediatric. Data concerning those departments are
presented in the chart below.

Administration costs are allocated first on the basis of employees and IT costs are allocated second on
the basis of PCs. The total Pediatric Department cost after allocations is closest to which value?
A.
$361,823 B.
$370,659
C.
$328,202
D.
$370,790

4. What does overapplied manufacturing overhead mean?
A. The estimated manufacturing overhead cost was less than the applied manufacturing overhead cost.
B. The estimated manufacturing overhead cost was less than the actual manufacturing overhead cost.
C. The applied manufacturing overhead cost was less than the actual manufacturing overhead cost.

D. The applied manufacturing overhead cost was greater than the actual manufacturing overhead cost.

15.During October, Beidleman Inc. transferred $52,000 from Work in Process to Finished Goods and
recorded a Cost of Goods Sold of $55,000. The journal entries to record these transactions would
include a

A. credit to Work in Process of $52,000.
B. credit to Finished Goods of $52,000.
C. credit to Cost of Goods Sold of $55,000.
D. debit to Finished Goods of $55,000.

16.The following table presents information about units processed and processing costs incurred
during a recent month in the Refining Department of a manufacturing company.

The beginning work in process inventory included $11,000 of conversion cost. During the month, the
Department incurred an additional $290,000 in conversion costs.
Assuming that the company uses the weighted-average cost method, what is the cost per equivalent unit
for conversion costs for the month in the Blending Department? Round to the nearest cent.
A. $2.53
B. $2.50
C. $2.44
D. $2.55

7. Eagle Company's quality cost report is to be based on the following data:

What would be the total prevention cost appearing on the quality cost report?
A.
$48,000 B.
$77,000 C.
$86,000 D.
$57,000

18.Epolito Corporation incurred $87,000 of actual Manufacturing Overhead costs during
September. During the same period, the Manufacturing Overhead applied to Work in Process was
$89,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs
would include a
A. debit to Work in Process of $89,000.
B. credit to Manufacturing Overhead of $87,000.

C. debit to Manufacturing Overhead of $87,000.
D. credit to Work in Process of $89,000.

9. Job 593 was recently completed. The following data have been recorded on its job cost sheet:

The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined
overhead rate is $14 per machine-hour. What amount would be the total cost recorded on the job cost
sheet for Job 593?
A. $6,705
B. $4,255
C. $3,219
D. $5,249

20. Narver Corporation uses the weighted-average method in its process costing system. Operating data
for the Lubricating Department for the month of October appear below:

What were the equivalent units for conversion costs in the Lubricating Department for October?
A. 47,780
B. 37,100
C. 43,100
D. 44,780

End of exam