CLASS / COURSE: Cost Accounting

QUESTION DESCRIPTION:

1. Which of the following is NOT a step in the decision-making process?
a. Explore workable alternatives
b. Determine relevant cost and revenue data
c. . Consider appropriate non-financial factors
d. Make a decision

2. Which of the following is NOT a consideration when determining
whether to continue making a part or to buy that part?

a. Timing of the cash receipts and expenditures
b. Opportunity cost
c. Impact on employees
d. Sunk cost

                                                           

3. Contribution margin is calculated by deducting:
a. variable costs from revenue.
b. variable costs and controllable fixed costs from revenue.
c. variable costs and common costs from revenue.
d. fixed costs from revenue.
A031 Principles of Accounting II -Page 8·11

 

4. A segment of a business probably should be discontinued if:
__a.
its common costs exceed its contribution margin.

__b.
its contribution margin exceeds its controllable fixed costs
and its common costs.

__c.

it cannot produce a contribution margin.
__d. it has a net loss.

5. When direct costing is used, cost of goods sold reflects:

a. both variable and fixed manufacturing costs.

b.' variable manufacturing costs and variable selling and
administrative expenses.

c. variable manufacturing costs only.

d. fixed manufacturing costs only.

 

6. On an income statement prepared with a direct costing approach, the
excess of sales over the cost of goods sold, based on variable costs only, is
referred to as the:

a. marginal gross profit on sales.
b. manufacturing margin.
c. marginal income on sales.

d. contribution margin.

 

7. Fixed manufacturing costs are written off as current expenses of the
period in which they occurred when using costing.

a.direct

b. standard

c. absorption

d. differential

8. Which inventory costing system is NOT acceptable for financial reporting
purposes?

a. Absorption costing
b. Direct costing
c. Standard costing
d. Variable costing

9. Which of the following would NOT be relevant to a decision about
whether to continue making a part or whether to buy it from an outside
supplier?

a. Alternative uses for the plant where the part was produced
if the part is purchased

b. A fee previously spent for design ofthe part

c. The variable costs of making the part

__d. The number of additional employees needed to make the part

 

 

10. A company has sales of $100,000, ending finished goods inventory of
$9,000, variable manufacturing costs of $50,000, and fixed manufacturing
costs of $28,000 for the year. Assuming the company uses direct costing,

the manufacturing margin for the year is:

a. $22,000.
b. $31,000.
c $59,000.
d. $13,000.

11. A segment of a business reported a contribution margin of $36,000 and
controllable fixed costs of $12,000. If the segment had been eliminated, the
company-wide net income would have been:

a. $12,000 higher.
b. $24,000 lower.
c $36,000 lower.
d. $24,000 higher.

12. If a decision must be made to close a warehouse, non-refundable prepaid
rent on the warehouse is a(n) cost.

__3. opportunity

__b. common

c. sunk
d. variable

 

13. When the balance in ending finished goods inventory increases, net
income under absorption costing is:

a. lower than under direct costing.

b. higher than under direct costing.

c. the same under direct costing.

d. unaffected by the increase.

14. Which of the following is the first step in the decision-making process?

a. Evaluate the cost and revenue data
b. Identify workable alternatives
c. Define the problem
d. Consider appropriate nonfinancial factors

15. Which of the following is NOT a consideration regarding a special order?
a. If the company has sufficient capacity

b. If the special order jeopardized sales to existing customers
c. Federal laws regarding the price
d. Whether employee morale would be affected

 

16. Which of the following cost amounts can be found in a firm's accounting
records?
a. Opportunity costs
b. Differential costs
c. Incremental costs
d. Sunk costs

17. Costs that are not directly traceable to a specific segment of a business are
called costs.

a. sunk
b. common
c. fixed
d. incremental

18. Which of the following is NOT true of the direct costing procedure?
__a. Variable and fixed costs are considered as part of the cost of
goods manufactured.

__b. The cost of goods sold, based solely on variable costs, is
subtracted from net sales to arrive at the manufacturing
margin.

c. Variable selling expenses are deducted from the
manufacturing margin.

d. Variable administrative expenses are deducted from the
manufacturing margin.

 

19. Data for a firm's first year of operation is given below. The firm uses
absorption costing.
Units produced (no work in process) 6,000
Units sold 5,000
Units in ending inventory of finished goods 1,000
Sales price for each unit $75
Variable manufacturing costs for each unit
manufactured $30
Variable selling and admin. expenses for each unit sold $16
Fixed manufacturing costs for the year $90,000
Fixed selling and admin. expenses for the year $65,000

 

The cost of the goods sold for the year is:

a. $270,000.
b. $225,000.
c. $150,000.
d. $45,000.

 

20. Data for a firm's first year of operation is given below. The firm uses
direct costing.
Units produced (no work in process) 6,000
Units sold 5,000
Units in ending inventory of finished goods 1,000
Sales price for each unit $75
Variable manufacturing costs for each unit manufactured $30
Variable selling and admin. expenses for each unit sold $16
Fixed manufacturing costs for the year $90,000
Fixed selling and admin. expenses fOf the year $65,000

The cost of the goods sold for the year is:
__a. $270,000.
__b. $225,000.
__c. $150,000.
__d. $45,000

 

SOLUTION DESCRIPTION: Answers are in attached file to the solution

SUBJECTS / CATEGORIES:
1. Finance
2. Financial Management
3. Accounting
4. Corporate Finance
5. Economics