BA 213 - Test#1 Review

Instructor: Usha Ramanujam

1. Pizza World makes forty-three kinds of pizza for takeout and delivery. Which of
the following could be the constraint at Pizza World?
A) the person who makes the pizza crust.
B) the person who puts toppings on the pizzas.
C) the pizza oven.
D) any of the above could be the constraint.
2. The Standards of Ethical Conduct for Management Accountants developed by the
Institute of Management Accountants contain a policy regarding confidentiality
that requires management accountants to refrain from disclosing confidential
information acquired in the course of their work:
A) except when authorized by management.
B) in all situations.
C) except when authorized by management, unless legally obligated to do so.
D) in all cases not prohibited by law.
3. The Institute of Management Accountants (IMA) has developed ethical standards
for management accountants. What four categories has the IMA classified these
standards into?
A) Reliability, Objectivity, Commitment, and Competence
B) Objectivity, Integrity, Commitment, and Confidentiality
C) Observation, Integrity, Closure, and Competence
D) Competence, Objectivity, Integrity, and Confidentiality
E) Reliability, Understandability, Flexibility, and Integrity
4. Prime cost and conversion cost share what common element of total cost?
A) Direct materials.
B) Direct labor.
C) Variable overhead.
D) Fixed overhead.
5. Wages paid to a timekeeper in a factory are a:
A)
B)
C)
D)

Prime cost Conversion cost

Yes
No
Yes
Yes
No
No
No
Yes

6.

The nursing station on the fourth floor of Central Hospital is responsible for the
care of patients who have undergone orthopedic surgery. The costs of drugs
administered by the nursing station to patients would be classified as:
A) direct costs of the patients.
B) indirect costs of the patients.
C) overhead costs of the nursing station.
D) period costs of the hospital.
Number of
Units
Produced

Unit
Cost

Total Cost

Cost A
1
10
100
1,000

?
?
?
?

$10
$100
$1,000
$10,000

1
10
100
1,000

$5,000
$500
$50
$5

?
?
?
?

Cost B

Which of the above best describes the behavior of Costs A and B?

A) Cost A is fixed, Cost B is variable.
B) Cost A is variable, Cost B is fixed.
C) Both Cost A and Cost B are variable.
D) Both Cost A and Cost B are fixed.
7.

John Johnson decided to leave his former job where he earned $12 per hour to go
to a new job where he will earn $13 per hour. In the decision process, the former
wage of $12 per hour would be classified as a(n):
A) sunk cost.
B) direct cost.
C) fixed cost.
D) opportunity cost.

8.

The following costs were incurred in March:

Direct materials..............................
Direct labor....................................
Manufacturing overhead................
Selling expenses.............................
Administrative expenses................

$21,000
$17,000
$67,000
$16,000
$15,000

Conversion costs during the month totaled:

A) $88,000
B) $38,000
C) $136,000
D) $84,000
9.

The following costs were incurred in February:

Direct materials..............................
Direct labor....................................
Manufacturing overhead................
Selling expenses.............................
Administrative expenses................

$39,000
$18,000
$14,000
$13,000
$29,000

Prime costs during the month totaled:

A) $71,000
B) $32,000
C) $113,000
D) $57,000
10.

In February direct labor was 60% percent of conversion cost. If the manufacturing
overhead cost for the month was $78,000 and the direct materials cost was
$22,000, the direct labor cost was:
A) $52,000
B) $14,667
C) $117,000
D) $33,000

11. Haag Inc. is a merchandising company. Last month the company's cost of goods
sold was $86,000. The company's beginning merchandise inventory was $20,000
and its ending merchandise inventory was $21,000. What was the total amount of
the company's merchandise purchases for the month?
A) $86,000
B) $127,000
C) $87,000
D) $85,000

12.

During February, the cost of goods manufactured was $83,000. The beginning
finished goods inventory was $14,000 and the ending finished goods inventory
was $13,000. What was the cost of goods sold for the month?
A) $83,000
B) $110,000
C) $82,000
D) $84,000

Use the following to answer questions 13-16:

The following data (in thousands of dollars) have been taken from the accounting records
of Karsten Corporation for the just completed year.
Sales.......................................................................
Raw materials inventory, beginning.......................
Raw materials inventory, ending............................
Purchases of raw materials.....................................
Direct labor............................................................
Manufacturing overhead........................................
Administrative expenses........................................
Selling expenses.....................................................
Work in process inventory, beginning....................
Work in process inventory, ending.........................
Finished goods inventory, beginning.....................
Finished goods inventory, ending..........................

$990
$70
$30
$100
$200
$160
$180
$150
$40
$70
$150
$130

Use these data to answer the following series of questions.

13. The cost of the raw materials used in production during the year (in thousands of
dollars) was:
A) $130
B) $170
C) $140
D) $60
14. The cost of goods manufactured (finished) for the year (in thousands of dollars)
was:
A) $530
B) $540
C) $470
D) $570
15. The cost of goods sold for the year (in thousands of dollars) was:
A) $490
B) $450
C) $620
D) $600
16. The net operating income for the year (in thousands of dollars) was:
A) $170
B) $140
C) $500
D) $200
17. Emco Company uses direct labor cost as a basis for computing its predetermined
overhead rate. In computing the predetermined overhead rate for last year, the
company misclassified a portion of direct labor cost as indirect labor. The effect
of this misclassification will be to:
A) understate the predetermined overhead rate.
B) overstate the predetermined overhead rate.
C) have no effect on the predetermined overhead rate.
D) cannot be determined from the information given.
18. The journal entry to record applying overhead during the production process is:
A)
B)
C)
D)

Manufacturing Overhead.....................................
Work In Process.........................................
Finished Goods....................................................
Manufacturing Overhead...........................
Manufacturing Overhead.....................................
Finished Goods..........................................
Work In Process.................................................
Manufacturing Overhead........................

XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

19.

On the Schedule of Cost of Goods Manufactured, the final Cost of Goods

Manufactured figure represents:
A) the amount of cost charged to Work in Process during the period.
B) the amount of cost transferred from Finished Goods to Cost of Goods Sold
during the period.
C) the amount of cost placed into production during the period.
D) the amount of cost of goods completed during the current year whether
they were started before or during the current year.

20. Under a job-order costing system, the dollar amount transferred from Work in
Process to Finished Goods is the sum of the costs charged to all jobs:
A) started in process during the period.
B) in process during the period.
C) completed and sold during the period.
D) completed during the period.
21. A job order cost system uses a predetermined overhead rate based on estimated
activity and estimated manufacturing overhead cost. At the end of the year,
underapplied overhead might be explained by which of the following situations?

A)
B)
C)
D)
22.

23.

Actual activity
Greater than estimated
Greater than estimated
Less than estimated
Less than estimated

Actual manufacturing overhead

costs
Greater than estimated
Less than estimated
Greater than estimated
Less than estimated

Cribb Corporation uses direct labor-hours in its predetermined overhead rate. At

the beginning of the year, the estimated direct labor-hours were 17,900 hours and
the total estimated manufacturing overhead was $341,890. At the end of the year,
actual direct labor-hours for the year were 16,700 hours and the actual
manufacturing overhead for the year was $336,890. Overhead at the end of the
year was:
A) $22,920 underapplied
B) $17,920 overapplied
C) $17,920 underapplied
D) $22,920 overapplied
Crick Corporation uses direct labor-hours in its predetermined overhead rate. At
the beginning of the year, the estimated direct labor-hours were 14,400 hours and
the total estimated manufacturing overhead was $355,680. At the end of the year,
actual direct labor-hours for the year were 15,200 hours and the actual
manufacturing overhead for the year was $350,680. Overhead at the end of the
year was:
A) $24,760 underapplied
B) $24,760 overapplied
C) $19,760 underapplied

d) $19,760 overapplied
Use the following to answer questions 24-26:
Acton Corporation, which applies manufacturing overhead on the basis of machinehours, has provided the following data for its most recent year of operations.
Estimated manufacturing overhead........................ $139,080
Estimated machine-hours.......................................
3,800
Actual manufacturing overhead............................. $137,000
Actual machine-hours............................................
3,780
The estimates of the manufacturing overhead and of machine-hours were made at the
beginning of the year for the purpose of computing the company's predetermined
overhead rate for the year.
24. The predetermined overhead rate is closest to:
A) $36.60
B) $36.41
C) $36.24
D) $36.05
25. The applied manufacturing overhead for the year is closest to:
A) $136,269
B) $138,348
C) $136,987
D) $137,630
26. The overhead for the year was:
A) $732 underapplied
B) $1,348 underapplied
C) $732 overapplied
D) $1,348 overapplied
Use the following to answer questions 27-30:
Chelm Music Company manufactures violins, violas, cellos, and fiddles and uses a joborder cost system.
27. What account should Chelm debit when the workers who carve the wood for the
instruments are paid?
A) Direct Labor
B) Work in Process
C) Manufacturing Overhead
D) Salaries and Wages Receivable

E) Salaries and Wages Expense

28. What account should Chelm debit when the production manager is paid?
A) Direct Labor
B) Work in Process
C) Manufacturing Overhead
D) Salaries and Wages Receivable
E) Salaries and Wages Expense
29. What account should Chelm debit when the president of the company is paid?
A) Direct Labor
B) Work in Process
C) Manufacturing Overhead
D) Salaries and Wages Receivable
E) Salaries and Wages Expense
30. What is one of the accounts that Chelm should credit when goods are sold?
A) Finished Goods
B) Work in Process
C) Cost of Goods Sold
D) Manufacturing Overhead
E) Cost of Goods Manufactured
31. If a company applies overhead to production on the basis of a predetermined rate,
a debit balance in the Manufacturing Overhead account at the end of the period
means that:
A) actual overhead cost was greater than the amount charged to production.
B) actual overhead cost was less than the amount of direct labor cost.
C) more overhead cost has been charged to production than has been charged to
finished goods during the period.
D) actual overhead cost was less than the amount charged to production.