1. Which of the following statements is (are) true?
(A). Activity-based costs per unit are greater than volume-based costs per unit.
(B). Volume-based costing has typically resulted in lower gross margins for high volume products and higher gross margins for low volume products.
a. Only A is true.
b. Only B is true.
c. Both A and B are true.
d. Neither A nor B are true.
2. Before prorating the manufacturing overhead costs at the end of 2008, the Cost of Goods Sold and Finished Goods Inventory had applied overhead costs of $57,500 and $20,000 in them, respectively. There was no Work-in-Process at the beginning or end of 2008. During the year, manufacturing overhead costs of $74,000 were actually incurred. The balance in the Applied Manufacturing Overhead was $77,500 at the end of 2008. If the under or overapplied overhead is prorated between Cost of Goods Sold and the inventory accounts, how much will be allocated to the Finished Goods Inventory?
a. $903
b. $1,217
c. $1,283
d. $2,597
3. Materials are added at the beginning of a process in a process costing system. The beginning Work-in-Process Inventory was 30% complete as to conversion costs. Using first-in, first-out (FIFO) process costing, the total equivalent units for material are
a. beginning inventory this period for this process.
b. units started this period in this process.
c. units started this period in this process plus the beginning inventory.
d. units started this period in this process plus 70% of the beginning inventory this period.
4. The Viva Company had 20,000 units in process on December 31, 2008 which was 80% complete as to materials but only 40% complete as to conversion costs. The company's records show 40,000 units were transferred to the Finished Goods Inventory during January 2009. On January 31, 2009, 15,000 units were on hand which were 30% complete as to conversion costs and 60% complete as to materials. What are the equivalent units of production for the conversion costs in January, assuming Viva uses first-in, first-out (FIFO)?
a. 34,000
b. 35,000
c. 36,500
d. 41,500
5. If a company multiplies its predetermined overhead rate by the actual activity level of its allocation base, it is using
a. standard costing.
b. normal costing.
c. actual costing.
d. budget costing.
e. ideal costing.
6. Which of the following statements regarding first-in, first-out (FIFO) process costing is/are true?
(A) First-in, first-out (FIFO) process costing transfers out the costs in beginning inventory before transferring out the costs associated with units started and completed.
(B) First-in, first-out process costing requires one additional step in assigning costs to the units transferred out and the ending Work-in-Process Inventory.
a. A only.
b. B only.
c. Both A and B.
d. Neither A nor B.
7. Activity analysis is one of the first stages in implementing an activity-based costing system. Which of the following steps in "activity analysis" is usually performed first?
a. Classify all activities as value added or nonvalue added.
b. Record, from start to finish, the activities used to complete the product or service.
c. Identify the process objectives that are defined by what the customer wants from the process.
d. Improve the efficiency of all activities and develop plans to eliminate any nonvalue-added activities.
8. Which of the following statements is (are) true regarding product costing?
(A) Twenty cans of paint that are 25% full are equivalent to four cans of paint that are completely full.
(B) The equivalent unit concept refers to the actual amount of work during the period stated in terms of whole units.
a. Only A is true
b. Only B is true.
c. Both A and B are true.
d. Neither A nor B is true.
9. The predetermined overhead rate for manufacturing overhead for 2008 is $4.00 per direct labor hour. Employees are expected to earn $5.00 per hour and the company is planning on paying its employees $100,000 during the year. However, only 75% of the employees are classified as "direct labor." What was the estimated manufacturing overhead for 2008?
a. $60,000
b. $75,000
c. $80,000
d. $93,750
10. The ALG Manufacturing Company has gathered the following information for the month of September:
• 6,000 units in the beginning Work-in-Process Inventory (75% complete as to materials, 1/3 complete with respect to the conversion costs)
• 60,000 units were started into production
• 50,000 units were completed and transferred to the next department
• The ending Work-in-Process Inventory is complete as to materials but only 3/8 complete with respect to conversion costs.
What are the equivalent units of production (EUP) for materials in the month of September assuming ALG uses weighted-average process costing?
a. 52,000
b. 64,500
c. 66,000
d. 61,500
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