CMO1 Pre-Assessment

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June 30, 20131) In an ice cream manufacturing plant, raw materials are added in the mixing and flavoring stage of the production process. Which journal entry reflects the addition of flavoring ingredients in the production process? Choose 1 answer: Debit Work in Process-Mixing credit Raw Materials Debit Raw Materials, credit Work in Process-Mixing Debit Raw Materials, credit Work in Process-Flavoring Debit Work in Process-Flavoring, credit Raw Materials

2) During the month of June, the shaping department transferred 5600 units to the next department that were 100% complete with respect to both materials and conversion. At the end of the month there were 500 partially completed units in process that were 35% complete with respect to materials and 20% complete with respect to conversion. Work in process costs to be accounted for at the beginning of June totaled $9300 for materials and $16400 for conversion. Materials costs totaling $226,000 were added by the department in June. What is the weighted average cost of materials per equivalent unit for June? Choose 1 answer: $47.96 $40.74 $39.65 $43.58

3) Your company uses the FIFO method in its process costing system. In the cutting department in June, units were 80% complete with respect to conversion in the beginning work in process (WIP) inventory and 33% complete with respect to conversion in the ending work in process inventory. Other data for the department for June follows:Conversion UnitsCost

Beginning WIP inventory25000$30000

Units started into production, & costs incurred during the month140000$175000

Completed & transferred out135000

What would be the cost per equivalent unit for conversion cost? Choose 1 answer: $1.21 $1.40 $1.35 $1.64

4) A company began business this year making airplane propellers. At the end of 2005, 750,000 lbs. of raw materials had been used with 400,000 propellers produced. The total value of these propellers was $450,000. The material costs were $200,000 with the rest being conversion costs. There were 20,000 propellers left in WIP at the end of the year (100% complete for materials and 60% complete for conversion costs). What was the total cost accounted for on the production report? Choose 1 answer: $350,000 $250,000 $450,000 $200,000

5) What is the proper journal entry to record issuing raw materials to be used on a job? Choose 1 answer: Finished Goods XXXRaw Materials XXX Raw Materials XXXFinished Goods XXX Raw Materials XXXWork in Process XXX Work in Process XXXRaw Materials XXX

6) Your company uses a predetermined overhead rate based on direct labor to apply manufacturing overhead to jobs. On September 1, the estimates for the month were:Manufacturing overhead$17000

Direct labor hours13,600

During September, the actual results were:Manufacturing overhead$18500

Direct labor hours12,000

What will the cost records for September show? Choose 1 answer: Underapplied overhead of $1500 Overapplied overhead of $1500 Overapplied overhead of $3500 Underapplied overhead of $3500

7) What will be the effect on overhead if a plant is operated at less than capacity and the predetermined overhead rate is based on estimated total units in the allocation base at capacity? Choose 1 answer: Overhead will be underapplied if the plant is operated above capacity. Overhead will be underapplied. Overhead will be overapplied. Overhead applied will be equal to actual overhead.

8) Which two are acceptable treatments for overhead balances remaining at the end of the period? Choose 2 answers: Adjust the overhead allocation percentage. Close out to cost of goods sold. Adjust direct labor expense. Allocate to finished goods.

9) A chemical manufacturer produces a product by boiling a mixture of a chemical compound in a solution. It takes one worker 35 minutes to process one batch of the product. Employees work an 8-hour work day, which includes 1 hour for rest breaks and cleanups. What is the standard labor time to produce one batch of the product? Choose 1 answer:*Note: These options may be rounded. 30 minutes 35 minutes 45 minutes 40 minutes

10) Given the following costs per pound:Raw materials purchased price before discount$3.20

Purchase discount.08

Freight from supplier.33

Materials receiving and handling.07

Selling and administrative overhead standard.13

Factory overhead standard.24

What is the direct materials standard price per pound? Choose 1 answer: $3.76 $3.60 $3.89 $3.52

11) A company manufactures tables with vinyl tops. The standard material cost for the vinyl used per Type-R table is $7.80 based on 6 square feet of vinyl at a cost of $1.30 per square foot. A production run of 1000 tables in January resulted in usage of 6400 square feet of vinyl at a cost of $1.20 per square foot, a total of $7689. What is the quantity variance resulting from the above production run? Choose 1 answer: $120 favorable $480 favorable $520 favorable $640 favorable12) The following labor standards have been established for a particular product:Standard labor hours per unit of output8.3 hours

Standard labor rate$12.10

The following data pertain to operations concerning the product for the last month:Actual hours worked6100 hours

Actual total labor cost$71,370

Actual output900 units

What is the labor efficiency variance for the month? Choose 1 answer: $16,029 favorable $16,577 favorable $19,017 unfavorble $19,017 favorable

13) The following standards for variable manufacturing overhead have been established for a company that makes only one product:Standard hours per unit of output5.6 hours

Standard variable overhead rate$12.00

The following data pertain to operations for the last month:Actual hours worked2,600

Actual variable overhead cost$31,330

Actual output400 units

What is the variable overhead spending variance for the month? Choose 1 answer: $130 unfavorable $163 unfavorable $100 unfavorable $250 favorable

14) What is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance? Choose 1 answer: The mix of workers assigned to the particular job was heavily weighted towards the used of higher paid, experienced individuals. Defective materials caused more labor to be used to produce a standard unit. The workers assigned to the particular job were mostly low paid, unskilled workers. Because of the production schedule, workers from other production areas were assigned to assist this particular process.

15) Which cost pool is used to assign overhead in an activity-based system? Choose 1 answer: Similar-level activities Group-level activities Customer-level activities Organizational monitoring activities

16) How do activity-based costing and the traditional cost system treat idle capacity costs differently? Choose 1 answer: There is no difference in the treatment of the idle capacity costs in the costing methods. Activity-based costing treats idle capacity costs as costs spread evenly over the number of products produced and traditional costing treats idle capacity costs as period costs. Traditional costing ignores idle capacity costs but activity-based costing does NOT ignore idle capacity costs. Activity-based costing treats idle capacity costs as period costs and traditional costing spreads idle capacity costs evenly over the number of products produced.

17) How is the first-stage allocation defined in an activity-based costing system? Choose 1 answer: The process by which overhead costs are assigned to activity cost pools The method used to directly trace costs to activities and cost objects The identification of activities and activity cost pools The assignment of costs to activity cost pools

18) What is the second-stage allocation in an activity-based costing system? Choose 1 answer: The decision to divide costs into activity cost pools The activity rates that are used to apply costs to products and customers The creation of activity cost pools The decision to trace overhead costs to activities and cost objects

19) In the variable costing periods income statement, where should the periods fixed costs be included? Choose 1 answer: In variable costing, you do NOT include the fixed costs in the income statement. The fixed costs are expensed as period costs and NOT included in the value of the inventory. The variable cost as well as the fixed expenses are included in the cost of goods sold. The income statement allows for the allocation of the fixed expenses into the inventory value.

20) When fixed manufacturing expenses are generated n the manufacturing process, how do they impact the net income of both absorption costing and variable costing? Choose 1 answer: In variable costing, the fixed manufacturing expenses is included in the inventory values, unlike absorption costing. In absorption costing, the fixed manufacturing expenses is included in the inventory values, unlike variable costing. In absorption costing, the fixed manufacturing costing is expensed to the period, unlike variable costing. In variable costing, all fixed costs, NOT manufacturing costs, are absorbed into the inventory values, unlike absorption costing.

21) When using absorption costing as compared to variable costing, which action creates a difference in the net income? Choose 1 answer: In variable costing, fixed manufacturing are expensed into the cost of goods sold. In variable costing, the inclusion of the selling and administrative fixed costs increases the value of the inventory. In absorption costing, a higher cost of goods are sold due to the inclusion of the fixed manufacturing expenses with the variable costs. Both methods provide the same net income.

22) Which two statements reflect the advantages of using the variable costing method rather than the absorption costing method? Choose 2 answers: Variable costing reflects total costs of operations. Variable costing better matches fixed expenses to the period in which they are incurred. Variable costing provides managers with information needed to implement cost controls. Variable costing is required in IRS filings.

23) What is an advantage of the absorption cost approach? Choose 1 answer: Absorption costing assigns full costs of production to products. Absorption costing matches fixed costs to the period incurred. Absorption costing ties most closely to cash flows. Absorption costing is well suited to cost volume profit (CVP) analyses.

24) Which statement describes how differential analysis affects decisions? Choose 1 answer: It results in avoidable costs being eliminated from consideration in the decision. It results in costs that differ between alternatives being the only costs that are considered in the decision. It results in costs and benefits that do NOT differ between alternatives being the only costs that are considered in the decision. It results in a greater number of different types of costs being considered in the decision.

25) Given the following:Marginal cost is $14.61.Average fixed cost is $7.19.Average total cost is $25.06Which selling price is closest to the minimum selling price per unit that will result in a contribution to profit? Choose 1 answer: $14.62 $25.07 $21.81 $7.20

26) The following costs are being considered as a firm contemplates acceptance of a special order: total incremental fixed cost of $28,000; total variable cost of $47,000; total sunk cost of $31,000. Which price is closest to the minimum selling price for the special order that will make a positive contribution to profit? Choose 1 answer: $106,001 $75,001 $47,001 $28,001

27) What will be the result of using opportunity costs in the decision analysis? Choose 1 answer: It will result in appropriate consideration of economic benefits. It will result in appropriate consideration of expenses recorded in the firms accounts. It will NOT impact the decision analysis. It will result in appropriate consideration of expenses that are NOT recorded in the firms accounts.

28) Which statement regarding accounting data would consistently support a decision to retain a product line? Choose 1 answer: Contribution margin is greater than traceable variable costs. Contribution margin is greater than traceable fixed costs. Sales revenue is greater than traceable variable costs. Sales revenue is greater than traceable fixed costs.

29) Which benefit should be used as the criterion for whether to accept or reject a special order? Choose 1 answer: The selling price per unit is greater than the marginal cost per unit less the indirect incremental cost per unit. The selling price per unit is greater than the total incremental cost per unit. The selling price per unit is greater than the average fully allocated cost per unit. The selling price per unit is greater than the average fixed cost per unit.

30) A food manufacturer spends $80,000 on raw materials and refining costs. The refined flour can be sold at the split-off point for $100,000 or, with further processing and packaging, as cake meal for $180,000. Incremental costs of further processing the flour to produce cake meal are $10,000, and further packaging costs are $20,000. What is the incremental profit or loss from further processing of the flour into cake meal? Choose 1 answer: $70,000 profit $50,000 profit $150,000 profit $30,000 loss

31) Which two statements reflect benefits of flexible budgets? Choose 2 answers: Flexible budgets account for actual production levels. Flexible budgets allow for revenues and costs to be specified. Flexible budgets facilitate monitoring production levels. Flexible budgets consider overhead costs in determining estimated costs.

32) What is a limitation in a flexible budget system? Choose 1 answer: The analysis of costs is NOT possible when there are fixed costs that do NOT change. The analysis of costs is simple in companies that provide a variety of products and services. The analysis of costs is NOT simple in companies that provide a variety of products and services. The analysis of costs is accurate when there are fixed costs that do NOT change.

33) What represents a profit center as opposed to a cost center? Choose 1 answer: Independent subsidiary Sales division Human resources Accounting department

34) In a segmented reporting statement of a grocery store, which cost component would be a common fixed cost? Choose 1 answer: Store manager Pharmacist Meat freezers Produce manager35) Table:CDsDVDsTotal

Sales400K600K1000K

Variable Costs100400500

Contribution Margin300200500

Traceable Fixed Costs250100350

Segment Margin50100150

Common Fixed Costs100

Net Income50

In the exhibit, what is the net profit margin for the DVD division? Choose 1 answer: 200 300 100 50

36) Company X has two sales divisions with separate product lines. Line 1 has a $500,000 contribution margin and line 2 has a $400,000 contribution margin. Line 1 pays $50,000 rent annually for its sales office and line 2 pays $60,000 rent annually for its sales office. Company X headquarters is located adjacent to line 1 sales office and pays $100,000 annual rent. What is the segment margin for Line 1? Choose 1 answer: $500,000 $400,000 $450,000 $350,000

37) Which is one reason that a firm would use residual income to determine their investment program? Choose 1 answer: The use of residual income encourages the managers in the firm to focus on their particular area of concern. The use of the return on investments is generally more difficult to calculate. Residual income provides a focus on the overall financial betterment of the firm. Segment reporting is generally too difficult to manage.

38) What is an important consideration with transfer pricing? Choose 1 answer: That both divisions in the company be profitable from their point of view in equal proportion. That transfer pricing always be based on the current market price outsid3 of the firm. That the selling and purchasing price falls somewhere in the range of acceptable transfer pricing. That the transfer price always be based on the costs incurred buy the selling entity.

39) What does the absorption costing approach to cost plus pricing rely upon that is considered a disadvantage to this approach? Choose 1 answer: Incremental direct costs Incremental indirect costs Forecast of unit sales Forecasted return on investment

40) Which cost is contained in a quality cost report? Choose 1 answer: Overhead costs Costs of goods sold Prevention cots Variable product costs

41) Which two journal entries correctly identify the flow of conversion costs through a process costing system? Choose 2 answers: Debit Salaries and Wages Payable, credit Work in Process Debit Work in Process, credit Manufacturing Overhead Debit Work in Process, credit Salaries and Wages Payable Debit Salaries and Wages Payable, credit Manufacturing Overhead

42) Which two production processes would be accounted for by a process rather than a job-order costing system? Choose 2 answers: Bricks Condominiums Boats Beer

43) For which two production processes would be appropriate to use a job-order costing system? Apartment construction Commercial aircraft Paper Aluminum

44) Which tow issues are relevant to make or buy decision? Choose 2 answers: Depreciation on owned equipment that would be used in production. Wages of employees who would produce the product internally General overhead costs allocated to the internal production process. Quality control assurance and capabilities of the outside prosducer.1