Exam: 061400RR – Cost Concepts and Types of Costing
Questions 1 to 20:
1. Given the cost formula, Y = $7,000 + $1.80X, what would be the total cost for an activity level of 4,000 units?
A. $7,200
B. $7,000
C. $200
D. $14,200
2. In describing the cost equation, Y = a + bX, what is “a”?
A. The variable cost per unit of activity
B. The dependent variable cost
C. The independent variable level of activity
D. The total fixed cost
3. Which of the following is classified as a direct labor cost?
A. Neither wages of assembly-line workers nor a factory supervisor
B. Wages of assembly-line workers but not a factory supervisor
C. Wages of a factory supervisor but not assembly line workers
D. Both wages of assembly-line workers and a factory supervisor
4. Tarten Corporation uses the FIFO method in its process costing system. Operating data for the Curing Department for the month of March appear below:
Percent Complete
with Respect lo
Units Conversion
e eg inn ing work in process inventory ………. 9 000 10%
Transferred in from the prior deparinlent di Fh n la March ………. 57 000
Completed and transferred io the next departrnenldurino March 65.01:10
Ending work in process inventory …………………………………………………………………… 000……………. 70%
According to the company’s records, the conversion cost in beginning work in process inventory was $7,470 at the beginning of March. The cost per equivalent unit for conversion costs for March was $8.20. How much conversion cost would be assigned to the units completed and transferred out of the department during March?
A. $533,090
B. $533,000
C.$592,040
D.$525,530
5. Electrical costs at one of Kantola Corporation’s factories are listed below:
Machine-Hours Electrical Cost
February
3,570
$36,405
March
3,580
$36,493
April
3,553
$36,302
May
3,627
$36,833
June
3,625
$36,800
July
3,565
$36,366
August
3,548
$36,237
September
3,542
$36,213
October
3,593
$36,577
Management believes that electrical cost is a mixed cost that depends on machine-hours. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. What would these estimates be closest to?
A. $10.19 per machine-hour; $36,470 per month
B. $7.29 per machine-hour; $10,392 per month
C. $7.48 per machine-hour; $9,708 per month
D. $0.14 per machine-hour; $36,336 per month
6. In November, one of the processing departments at Goodsell Corporation had beginning work in process inventory of $36,000 and ending work in process inventory of $35,000. During the month, $427,000 of costs was added to production and the cost of units transferred out from the department was $428,000. The company uses the FIFO method in its process costing system. In the department’s cost reconciliation report for November, what would be the total cost to be accounted for?
A.$463,000
B.$71,000
C.$890,000
D.$926,000
7. Narver Corporation uses the weighted-average method in its process costing system. Operating data for the Lubricating Department for the month of October appear below:
Percent Complete with UnitS Respect ‘CO Conversion
Beginning viOrli Ii process iriventory . …… ……. ……. . 6.600 CO%
Transferred in from the prior deparIrnent during October r. 40.100
Cdrripleted and transferred Lo the next department during October…. 37,100
Ending work in procesS invenIory 9.1500 80%
What were the equivalent units for conversion costs in the Lubricating Department for October?
A.37,100
B.43,100
C.44,780
D.47,780
8. Oaklis Company has provided the following data for maintenance cost:
Prior Year Current Year Machine Hours 10,000 12,000
Maintenance cost $24,000$27,600
Maintenance cost is a mixed cost with variable and fixed components. The fixed and variable components of maintenance cost are closest to what amounts?
A. $6,000 per year; $2.30 per machine hour
B. $6,000 per year; $1.80 per machine hour
C. $24,000 per year; $2.30 per machine hour
D. $24,000 per year; $1.80 per machine hour
9. In a job-order costing system, the use of indirect materials that have been previously purchased is recorded as a credit to
A. Manufacturing Overhead.
B. Finished Goods inventory.
C. Work in Process inventory.
D. Raw Materials inventory.
10. The following data pertains to activity and utility cost for two recent periods:
Activity level (units) 8,000 5,000 Utility cost $8,000 $6,500
Utility cost is a mixed cost with both fixed and variable components. Using the high-low method, what would be the cost formula for utility cost?
A.Y = $1.25 X
B.Y = $4,000 + $0.50 X
C.Y = $1.00 X
D.Y = $1,500 + $1.25 X
11. Which of the following costs is classified as a prime cost?
A. Both direct materials and indirect materials
B. Direct materials
C. Indirect materials
D. Neither direct materials nor indirect materials
12. Inventoriable costs are also known as
A. product costs.
B. variable costs.
C. fixed costs.
D. conversion costs.
13. There are two acceptable methods for closing out any balance of underapplied or overapplied manufacturing overhead. One method involves allocation of the balance among several accounts, whereas the other closes any balance directly to
A. work in process inventory.
B. finished goods inventory.
C. cost of goods sold.
D. cost of goods manufactured.
14. Laurie Corporation uses the FIFO method in its process costing system. Department A is the first stage of Laurie Corporation’s production process. The following information is available for conversion costs for the month of May for Department A:
Unlis
Work in process, beginning 125% complete with respect to conversion costs), .….
6.000
Started in May
40.000
Corn plete,clin May and transferred lo Department B …………
3-5.000
Work in process, ending (60% complete with respect to conversion costs) ………..
10.000
How many are the equivalent units of production for conversion costs for the month?
A.44,000 units
B.38,000 units
C.36,000 units
D.42,000 units
15. Adams Corporation makes two products: Product A and Product B. Annual production and sales are 500 units of Product A and 900 units of Product B. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.5 direct labor-hours per unit. The total estimated overhead for next period is $67,522. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with estimated overhead costs and expected activity as follows:
Estimated Overhead
Expected Activity
Activity Cost Pool
Costs
Product A
Product B
Total
Activity 1
$ 6,915
300
200
500
Activity 2
24,948
2,100
700
2,800
General Factor
35,659
200
450
650
Total .…………………….
$67,522
(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-hours.) The overhead cost per unit of Product A under the traditional costing system is closest to which value?
A. $3.56
B. $41.55
C. $21.94
D. $5.53
16. Eagle Company’s quality cost report is to be based on the following data:
Quality data gathering, analysis, and reporting._ $59,000
Test and inspection of incoming materials $48,000
Final product testing and inspection $27,000
Depreciation of test equipment $30,000
Cost of field servicing and handling complaints …………… $52,000
Disposal of defective products …………………………… $13,000
Downtime caused by quality problems ,,,, … ,,……………………………………. $52,000
Technical support provided to suppliers.__,…_.._.. ……… $18,000
Returns arising from quality problems 539,000
What would be the total prevention cost appearing on the quality cost report?
A. $77,000
B. $48,000
C. $86,000
D. $57,000
17. In October, one of the processing departments at Ridling Corporation had ending work in process inventory of $39,000. During the month, $252,000 of costs was added to production and the cost of units transferred out from the department was $235,000. The company uses the FIFO method in its process costing system. In the department’s cost reconciliation report for October, what would be the total cost to be accounted for?
A. $548,000
B. $274,000
C. $61,000
D. $526,000
18. A company has several service departments that provide differing amounts of service to each other and to the company’s operating departments. Which of the following statements is true?
A. The step-down method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
B. The direct method will result in the same amount of cost being allocated to each operating department regardless of which service department is allocated first.
C. The direct method and the step-down method will result in the same amount of cost being allocated to each operating department.
D. The direct method is more accurate than the step-down method when service departments provide services to each other.
19. In order to reduce its overall quality costs, on what costs should a company focus most of its efforts?
A.Prevention costs
B.Internal failure costs
C.Appraisal costs
D.External failure costs
20. Index Corporation uses the FIFO method in its process costing system. The first processing department, the Forming Department, started the month with 17,000 units in its beginning work in process inventory that were 10% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $9,010. An additional 76,000 units were started into production during the month and 83,000 units were completed and transferred to the next processing department. There were 10,000 units in the ending work in process inventory of the Forming Department that were 70% complete with respect to conversion costs. A total of $445,915 in conversion costs were incurred in the department during the month. What is the cost per equivalent unit for conversion costs for the month closest to?
A.$5.150
B.$5.050
C.$5.300
D.$5.867
End of exam
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