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1. Which of the following is not an example of a product cost at a gym? A. Salary paid to instructors. B. Corporate office rent. C. Supplies D. Utility cost in the gymnasium. 2. Gross margin equals: A. Revenues less product costs. B. Revenues less period costs. C. Revenues less selling and administrative expenses. D. Revenues less depreciation expense. 3. Metal used to make components is an example of: A. Direct Labor B. Variable Manufacturing Overhead C. Direct Materials D. Fixed Manufacturing Overhead 4. Which of the following is not an example of a direct material? A. Steel. B. Packaging Materials. C. Leather. D. Canvas. 5. Which account would not be shown under inventory in a manufacturing firm’s balance sheet? A. Work-in-Process. B. Merchandising Inventory. C. Finished Goods. D. Held on Consignment. 6. Aspen Company has sales of $2,000,000, cost of goods sold of $200,000, and selling and administrative costs of $500,000. Aspen Company’s gross margin is: A. $1,800,000. B. $1,500,000. C. $1,300,000. D. $1,700,000. 7. Suppose Max’s Shuttle Service wants to earn a profit before taxes of $375,000 in the coming year. Max’s selling price is $40, its variable cost per unit is $20, and its fixed costs are $150,000. How many tickets must the company sell? a. 26,520 b. 26,250 c. 18,750 d. 11,250 e. 8 A firm performs CVP analysis for three primary purposes: a. calculating measures that help assess operating risk b. evaluating the profit impact of short-term decision alternatives c. profit planning D. All of the Above 9. Which of the following is most likely a primary user of managerial accounting? a. Tax Authorities. b. Employees. c. Creditors. d. Shareholders. 10. Which of the following is a characteristic of financial accounting? a. Periodicity of reporting is often generated on an as-needed basis. b. Focus is on estimates on future performance. c. Governed by Generally Accepted Accounting Principles (GAAP) d. Information relevance valued most. 11 ABC uses which of the following as the denominator volume when calculating allocations rates: a. Unused capacity. b. Budgeted volume. c. Practical capacity. d. Actual volume. 12. ABC Systems: a. Allows us to estimate to cost of capacity resources consumed by each product accurately when capacity costs are grouped into carefully designed cost pools. b. Frequently uses practical capacity as the denominator value when calculating allocation rates. c. Is an approach in determining product costs. d. All of the above. 13. Which is a characteristic of a “high cost-to-serve” customer? a. Large order sizes. b. Minimal order change requests. c. Require more customization. d. Pay on time. 14. Product planning involves: A. Identifying profitable and unprofitable customers. B. Making appropriate add/drop decisions. C. Taking actions to improve customer profitability. D. Ensuring that in the short-run product prices are set so that they deliver positive profit margins. 15. Suppose a firm’s price per unit is $10, variable cost per unit is $5, total overhead is $15,000,000, and direct labor hours is 7,000,000. The firm allocates overhead using direct labor hours as the allocation basis. What is the firm’s overhead rate? a. $2.41 b. $2.31 c. $2.14 d. $2.16 16. Which is an incorrect statement of a job-costing system? a. Orders are customized. b. Orders are for large quantities. c. Average costing per unit is sufficient in a job shop environment. d. The setting can be described as “discrete” production. 17. Using the following information: Beginning materials inventory = $50,000, Raw materials purchased on account = $20,000, Material issued out to the shop floor = $45,000, the ending balance of materials inventory is: a. $45,000 b. $95,000 c. $65,000 d. $25,000 18. Humprey’s Airlines is considering two different options: install 10 self-service check-in machines which would increase profits by $2,800, or install 3 additional full-service check-in stations which would increase profits by $700. What is the value and opportunity cost of the option of installing the 3 additional full-service check-in stations? A. B. C. D. Value $700 $700 $2,800 $2,800 Opportunity Cost $700 $2,800 $700 $2,800 19. Fixed costs of operating a factory are examples of: a. Unit-level costs. b. Facility-level costs. c. Product-level costs. d. Batch-level costs. e. None of the above. 20. Advertising costs are examples of: a. Unit-level costs. b. Facility-level costs. c. Product-level costs. d. Batch-level costs. e. None of the above. 21. In August, a manufacturing plant produced 100 units of tubes for sale. The total variable costs were $6,000 and the fixed costs for the plant amounted to $5,000. How much is the unit variable cost for the tubes if 130 tubes are produced? a. $60.00 b. $84.61 c. $46.15 d. $110.00 22. The following table presents total cost for three types of cost (x, y, and z) for two three different activity levels in a manufacturing process. Identify which cost type is fixed. Cost: X Y Z 2,000 units $10,000 $15,000 $20,000 3,000 units $11,000 $15,000 $20,000 4,000 units $12,000 $15,000 $20,000 a. b. c. d. X Y Z Y and Z 23. During the current year, Britton’s Bread Bakery reported the following costs: Building rent $60,000 Equipment depreciation $13,000 Supervisor’s salary $50,000 Bread ingredients, per loaf $0.89 Packaging, per loaf $0.07 Britton baked and sold 375,000 loaves of bread during the year. What was the total cost incurred for the year? A. $360,000 B. $123,000 C. $483,000 D. $237,000 24. Which of the following is not a characteristic of managerial accounting? A. Information is used by internal parties. B. Information is subjective, relevant, future-oriented. C. Reports are prepared as needed. D. Information is reported for the company as a whole. 25. Which of the following types of firms would most likely use process costing? A. Superior Auto Body & Repair B. Crammond Custom Cabinets C. Sunshine Soft Drinks D. Jackson & Taylor Tax Service 26. The normal cost for support activity was estimated to be $400,000 for the year and the average usable capacity was estimated to be 20,000 direct labor hours. The actual cost for support activity was $415,000 and actual direct labor hours were 21,000. The activity rate for support activity is: A. $20.00 B. $0.05 C. $20.75 D. $19.05 27. Conversion costs consist of A. all costs of production. B. raw materials and direct labor. C. direct labor and manufacturing overhead. D. raw materials and manufacturing overhead. 28. Which of the following accounts will be treated differently by a process costing system than by a job order costing system? A. Raw Materials Inventory B. Work in Process Inventory C. Finished Goods Inventory D. Cost of Goods Sold 29. When Shasta, Inc. sells 40,000 units, its total variable cost is $96,000. What is its total variable cost when it sells 45,000 units? A. $84,000 B. $96,000 C. $108,000 D. It cannot be determined from the information given. 30. Which of the following is a variable cost? A. A cost that is $20,000 when production is 50,000, and $20,000 when production is 70,000. B. A cost that is $20,000 when production is 50,000, and $28,000 when production is 70,000. C. A cost that is $20,000 when production is 50,000, and $40,000 when production is 70,000. D. A cost that is $40,000 when production is 50,000, and $40,000 when production is 70,000. 31. When Bosco Inc. sells 40,000 units, its total fixed cost is $96,000. What is its total fixed cost when it sells 45,000 units? A. $84,000 B. $96,000 C. $108,000 D. It cannot be determined from the information given. 32. Arnold Corp has a selling price of $20, variable costs of $15 per unit, and fixed costs of $25,000. If Arnold sells 12,000 units, the contribution margin ratio will equal A. $60,000 B. 25% C. 14.6% D. 10.4% 33. Allain Corp has a selling price of $30, and variable costs of $20 per unit. When 12,000 units are sold, profits equaled $70,000. How many units must be sold to break-even? A. 19,000 B. 12,000 C. 14,333 D. 5,000 34. Alfred Corp has a selling price of $25per unit, variable costs of $20 per unit, and fixed costs of $25,000. What sales revenue is needed to break-even? A. $100,000 B. $5,000 C. $125,000 D. $50,000 35. Gavin Inc. currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of $300,000. Gavin is considering increasing the price of its units to $60 per unit. This will not affect costs, but demand is expected to drop 20%. Should Gavin increase the cost of its product? A. Yes, profit will increase $30,000. B. Yes, profit will increase $150,000. C. No, profit will decrease $150,000. D. No, profit will decrease $30,000. 36. Nikko Corp sells two products. Product A sells for $100 per unit, and has unit variable costs of $60. Product B sells for $70 per unit, and has unit variable costs of $50. Currently, Nikko sells three units of product B for every one unit of product A sold. Nikko has fixed costs of $750,000. What is Nikko’s break-even point in units? A. 30,000 units of A and 30,000 units of B B. 7,500 units of A and 22,500 units of B C. 22,500 units of A and 7,500 units of B D. 15,000 units of A and 15,000 units of B 37. Which of the following statements is false? A. Sunk costs are never relevant. B. Sunk costs are costs that occurred in the past. C. To be relevant, a cost must be an opportunity cost. D. To be relevant, a cost must occur in the future. 38. The manager of Jiffy Inc. is trying to decide whether to make or buy a component of the product they sell. Which of the following costs and benefits is not relevant to the decision? A. Direct labor cost involved in making the component. B. The purchase price of the component if it is bought. C. Variable manufacturing overhead involved in making the component. D. The selling price of the product. 39. The law firm of Ginger and Maddux is examining its client base to determine how profitable its regular clients are. Its analysis indicates that Furber, Inc. paid $128,000 in fees last year, but cost the firm $149,000 ($120,000 in billable labor, supplies, and copying, and $29,000 in allocated common fixed costs). If Ginger and Maddux dropped Furber, Inc. as a client, how would profit be affected? A. $0 B. Increase $21,000 C. Decrease $8,000 D. Decrease $128,000 40. Anders Corp produces three products, and is currently facing a labor shortage. The selling price, costs, and labor requirements of the three products are as follows: Anders has unlimited demand for all its products. Which product/s should Anders Corp produce to maximize profit during the labor shortage? A. Product A only B. Product B only C. Product A and B D. Product A, B, and C

1. Which of the following is not an example of a product cost at a gym?
A. Salary paid to instructors.
B. Corporate office rent.
C. Supplies
D. Utility cost in the gymnasium.

2. Gross margin equals:
A. Revenues less product costs.
B. Revenues less period costs.
C. Revenues less selling and administrative expenses.
D. Revenues less depreciation expense.
3. Metal used to make components is an example of:
A. Direct Labor
B. Variable Manufacturing Overhead
C. Direct Materials
D. Fixed Manufacturing Overhead
4. Which of the following is not an example of a direct material?
A. Steel.
B. Packaging Materials.
C. Leather.
D. Canvas.
5. Which account would not be shown under inventory in a manufacturing firm’s
balance sheet?
A. Work-in-Process.
B. Merchandising Inventory.
C. Finished Goods.
D. Held on Consignment.
6. Aspen Company has sales of $2,000,000, cost of goods sold of $200,000, and
selling and administrative costs of $500,000. Aspen Company’s gross margin is:
A. $1,800,000.
B. $1,500,000.
C. $1,300,000.
D. $1,700,000.

7. Suppose Max’s Shuttle Service wants to earn a profit before taxes of $375,000 in
the coming year. Max’s selling price is $40, its variable cost per unit is $20, and its
fixed costs are $150,000. How many tickets must the company sell?
a. 26,520
b. 26,250
c. 18,750
d. 11,250
e.
8 A firm performs CVP analysis for three primary purposes:
a. calculating measures that help assess operating risk
b. evaluating the profit impact of short-term decision alternatives
c. profit planning
D. All of the Above

9. Which of the following is most likely a primary user of managerial accounting?
a. Tax Authorities.
b. Employees.
c. Creditors.
d. Shareholders.
10. Which of the following is a characteristic of financial accounting?
a. Periodicity of reporting is often generated on an as-needed basis.
b. Focus is on estimates on future performance.
c. Governed by Generally Accepted Accounting Principles (GAAP)
d. Information relevance valued most.
11 ABC uses which of the following as the denominator volume when calculating
allocations rates:
a. Unused capacity.
b. Budgeted volume.
c. Practical capacity.
d. Actual volume.
12. ABC Systems:
a. Allows us to estimate to cost of capacity resources consumed by each product
accurately when capacity costs are grouped into carefully designed cost pools.
b. Frequently uses practical capacity as the denominator value when calculating
allocation rates.
c. Is an approach in determining product costs.
d. All of the above.

13. Which is a characteristic of a “high cost-to-serve” customer?
a. Large order sizes.
b. Minimal order change requests.
c. Require more customization.
d. Pay on time.
14. Product planning involves:
A. Identifying profitable and unprofitable customers.
B. Making appropriate add/drop decisions.
C. Taking actions to improve customer profitability.
D. Ensuring that in the short-run product prices are set so that they deliver positive
profit margins.
15. Suppose a firm’s price per unit is $10, variable cost per unit is $5, total overhead
is $15,000,000, and direct labor hours is 7,000,000. The firm allocates overhead
using direct labor hours as the allocation basis. What is the firm’s overhead rate?
a. $2.41
b. $2.31
c. $2.14
d. $2.16
16. Which is an incorrect statement of a job-costing system?
a. Orders are customized.
b. Orders are for large quantities.
c. Average costing per unit is sufficient in a job shop environment.
d. The setting can be described as “discrete” production.

17. Using the following information: Beginning materials inventory = $50,000, Raw
materials purchased on account = $20,000, Material issued out to the shop floor =
$45,000, the ending balance of materials inventory is:
a. $45,000
b. $95,000
c. $65,000
d. $25,000

18. Humprey’s Airlines is considering two different options: install 10 self-service

check-in machines which would increase profits by $2,800, or install 3 additional
full-service check-in stations which would increase profits by $700. What is the
value and opportunity cost of the option of installing the 3 additional full-service
check-in stations?
A.
B.
C.
D.

Value
$700
$700
$2,800
$2,800

Opportunity Cost
$700
$2,800
$700
$2,800

19. Fixed costs of operating a factory are examples of:
a. Unit-level costs.
b. Facility-level costs.
c. Product-level costs.
d. Batch-level costs.
e. None of the above.
20. Advertising costs are examples of:
a. Unit-level costs.
b. Facility-level costs.
c. Product-level costs.
d. Batch-level costs.
e. None of the above.

21. In August, a manufacturing plant produced 100 units of tubes for sale. The total
variable costs were $6,000 and the fixed costs for the plant amounted to $5,000.
How much is the unit variable cost for the tubes if 130 tubes are produced?
a. $60.00
b. $84.61
c. $46.15
d. $110.00

22. The following table presents total cost for three types of cost (x, y, and z) for two
three different activity levels in a manufacturing process. Identify which cost type is
fixed.
Cost:
X
Y
Z
2,000 units
$10,000
$15,000
$20,000
3,000 units
$11,000
$15,000
$20,000
4,000 units
$12,000
$15,000
$20,000
a.
b.
c.
d.

X
Y
Z
Y and Z

23. During the current year, Britton’s Bread Bakery reported the following costs:
Building rent
$60,000
Equipment depreciation
$13,000
Supervisor’s salary
$50,000
Bread ingredients, per loaf
$0.89
Packaging, per loaf
$0.07
Britton baked and sold 375,000 loaves of bread during the year. What was the
total cost incurred for the year?
A. $360,000
B. $123,000
C. $483,000
D. $237,000

24. Which of the following is not a characteristic of managerial accounting?
A. Information is used by internal parties.
B. Information is subjective, relevant, future-oriented.
C. Reports are prepared as needed.
D. Information is reported for the company as a whole.

25. Which of the following types of firms would most likely use process costing?
A. Superior Auto Body & Repair
B. Crammond Custom Cabinets
C. Sunshine Soft Drinks
D. Jackson & Taylor Tax Service

26. The normal cost for support activity was estimated to be $400,000 for the year
and the average usable capacity was estimated to be 20,000 direct labor hours. The
actual cost for support activity was $415,000 and actual direct labor hours were
21,000. The activity rate for support activity is:
A. $20.00
B. $0.05
C. $20.75
D. $19.05

27. Conversion costs consist of
A. all costs of production.
B. raw materials and direct labor.
C. direct labor and manufacturing overhead.
D. raw materials and manufacturing overhead.

28. Which of the following accounts will be treated differently by a process costing
system than by a job order costing system?
A. Raw Materials Inventory
B. Work in Process Inventory
C. Finished Goods Inventory
D. Cost of Goods Sold

29. When Shasta, Inc. sells 40,000 units, its total variable cost is $96,000. What is its
total variable cost when it sells 45,000 units?
A. $84,000
B. $96,000
C. $108,000
D. It cannot be determined from the information given.

30. Which of the following is a variable cost?
A. A cost that is $20,000 when production is 50,000, and $20,000 when production is
70,000.
B. A cost that is $20,000 when production is 50,000, and $28,000 when production is
70,000.
C. A cost that is $20,000 when production is 50,000, and $40,000 when production is
70,000.
D. A cost that is $40,000 when production is 50,000, and $40,000 when production is
70,000.

31. When Bosco Inc. sells 40,000 units, its total fixed cost is $96,000. What is its total
fixed cost when it sells 45,000 units?
A. $84,000
B. $96,000
C. $108,000
D. It cannot be determined from the information given.

32. Arnold Corp has a selling price of $20, variable costs of $15 per unit, and fixed
costs of $25,000. If Arnold sells 12,000 units, the contribution margin ratio will
equal
A. $60,000
B. 25%
C. 14.6%
D. 10.4%

33. Allain Corp has a selling price of $30, and variable costs of $20 per unit. When
12,000 units are sold, profits equaled $70,000. How many units must be sold to
break-even?
A. 19,000
B. 12,000
C. 14,333
D. 5,000

34. Alfred Corp has a selling price of $25per unit, variable costs of $20 per unit, and
fixed costs of $25,000. What sales revenue is needed to break-even?
A. $100,000
B. $5,000
C. $125,000
D. $50,000

35. Gavin Inc. currently sells 15,000 units a month for $50 each, has variable costs of
$20 per unit, and fixed costs of $300,000. Gavin is considering increasing the price of
its units to $60 per unit. This will not affect costs, but demand is expected to drop
20%. Should Gavin increase the cost of its product?
A. Yes, profit will increase $30,000.
B. Yes, profit will increase $150,000.
C. No, profit will decrease $150,000.
D. No, profit will decrease $30,000.

36. Nikko Corp sells two products. Product A sells for $100 per unit, and has unit
variable costs of $60. Product B sells for $70 per unit, and has unit variable costs of
$50. Currently, Nikko sells three units of product B for every one unit of product A
sold. Nikko has fixed costs of $750,000. What is Nikko’s break-even point in units?
A. 30,000 units of A and 30,000 units of B
B. 7,500 units of A and 22,500 units of B
C. 22,500 units of A and 7,500 units of B
D. 15,000 units of A and 15,000 units of B

37. Which of the following statements is false?
A. Sunk costs are never relevant.
B. Sunk costs are costs that occurred in the past.
C. To be relevant, a cost must be an opportunity cost.
D. To be relevant, a cost must occur in the future.

38. The manager of Jiffy Inc. is trying to decide whether to make or buy a
component of the product they sell. Which of the following costs and benefits is not
relevant to the decision?
A. Direct labor cost involved in making the component.
B. The purchase price of the component if it is bought.
C. Variable manufacturing overhead involved in making the component.
D. The selling price of the product.

39. The law firm of Ginger and Maddux is examining its client base to determine
how profitable its regular clients are. Its analysis indicates that Furber, Inc. paid
$128,000 in fees last year, but cost the firm $149,000 ($120,000 in billable labor,
supplies, and copying, and $29,000 in allocated common fixed costs). If Ginger and
Maddux dropped Furber, Inc. as a client, how would profit be affected?
A. $0
B. Increase $21,000
C. Decrease $8,000
D. Decrease $128,000

40. Anders Corp produces three products, and is currently facing a labor shortage.
The selling price, costs, and labor requirements of the three products are as follows:

Anders has unlimited demand for all its products. Which product/s should Anders
Corp produce to maximize profit during the labor shortage?
A. Product A only
B. Product B only
C. Product A and B
D. Product A, B, and C

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