COST ACCOUNTING QUIZ BEE

Easy
1 Which of the following statements about managerial accountants is false?
A. Managerial accountants more and more are considered "business partners."
B. Managerial accountants often are part of cross-functional teams.
C. An increasing number of organizations are segregating managerial accountants in separate managerial-
accounting departments.
D. In a number of companies, managerial accountants make significant business decisions and resolve
operating problems.
E. The role of managerial accountants has changed considerably over the past decade.
Answer: C
2 Which of the following would not be characterized as a cost object?
A. An automobile manufactured by General Motors.
B. The New York Fire Department.
C. A Burger King restaurant located in Cleveland, Ohio.
D. A Delta Airlines flight from Atlanta to Miami.
E. All of the above are examples of cost objects.
Answer: E
3 A responsibility center that incurs costs (and expenses) and generates revenues is classified as a(n)
A. cost center.
B. revenue center.
C. profit center.
D. investment center.
Answer: C
4 The measurement of the benefit lost by using resources for a given purpose is
A. economic efficiency.
B. opportunity cost.
C. comparative advantage.
D. absolute advantage
E. sunk cost.
Answer: B
5 Product costs appear on the balance sheet:
A. only if goods are partially completed at the end of the period
B. only if goods are unsold at the end of a period.
C. only if goods are partially completed or are unsold at the end of a period.
D. on in merchandising firms.
E. none of the above.
Answer: C
6 The accounting records of Bronco Company revealed the following information:

Raw materials used $60,000

Direct labor 125,000
Manufacturing overhead 360,000
Work-in-process inventory, 1/1 50,000
Finished-goods inventory, 1/1 189,000
Work-in-process inventory, 12/31 76,000
Finished-goods inventory, 12/31 140,000

Bronco's cost of goods manufactured is:

A. $519,000.
B. $522,000.
C. $568,000.
D. $571,000.
E. some other amount.
Answer: A
Solution: 60+125+360+50-76
7 If a company has a degree of operating leverage of 2.0 and sales increase by 25%, then
A. total variable costs will increase by 50%.
B. total variable costs will not change.
 C. profit will increase by 20%.
D. profit will increase by 50%.
E. none of the above.
Answer: D
8 Hamilton, which uses a process-costing system, had a balance in its Work-in-Process account of $68,000 on
January 1. The account was charged with direct materials, direct labor, and manufacturing overhead of
$450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were
still in production at year-end, Hamilton should make a journal entry on December 31 that includes:
A. a debit to Cost of Goods Sold for $432,000.
B. a credit to Finished-Goods Inventory for $432,000.
C. a credit to Work-in-Process Inventory for $432,000.
D. a debit to Finished-Goods Inventory for $86,000.
E. a credit to Work-in-Process Inventory for $86,000.
Answer: C
Solution: 68+450-86
9 Peterson Company has two service departments (Cafeteria and Human Resources) and two production
departments (Machining and Assembly). The number of employees in each department follows.

Cafeteria 40
Human Resources 60
Machining 200
Assembly 300

Peterson uses the direct method of cost allocation and allocates cost on the basis of employees. If Human
Resources cost amounts to $1,800,000, how much of the department's cost would be allocated to
Machining?
A. $600,000.
B. $720,000.
C. $900,000.
D. $1,200,000.
E. Some other amount.
Answer: B
Solution: 200/500=.4*1800000
10 Douglas Corporation recently produced and sold 100,000 units. Fixed costs at this level of activity
amounted to $50,000; variable costs were $100,000. How much cost would the company anticipate if
during the next period it produced and sold 102,000 units?
A. $150,000.
B. $151,000.
C. $152,000.
D. $153,000.
E. Some other amount not listed above.
Answer: C
Solution: 50+102

Average
1 Product Cott has sales of P200,000, a contribution margin of 20%, and a margin of safety of P80,000. What is
Cott’s fixed cost?
a. 16,000
b. 24,000
c. 80,000
d. 96,000
Answer: B
Solution:
Sales 200
Margin of safety (80)
 Breakeven sales 120
CM ratio 20%
Fixed costs 24
2 During the month of January, direct labor cost totaled P17,000 and direct labor cost was 60% of prime cost. If
total manufacturing costs during January were P82,000, the manufacturing overhead was
a. 11,333
b. 53,667
c. 28,333
d. 65,000
Answer: B
Solution:
82=M+L+FOH
L=17
17=60%(M+17)
M=11.333
82=11.333+17=FOH
FOH=53.667
3 Apple Co. has fixed costs of P200,000 and breakeven sales of P1,600,000. What is the projected profit at
P2,400,000 sales?
a. 600,000
b. 300,000
c. 800,000
d. 100,000
Answer:
Solution:

4 Daffe Corporation uses direct labor-hours in its predetermined overhead rate. At the beginning of the year,
the total estimated manufacturing overhead was $165,600. At the end of the year, actual direct labor-hours for
the year were 11,900 hours, manufacturing overhead for the year was overapplied by $10,760, and the actual
manufacturing overhead was $160,600. The predetermined overhead rate for the year must have been closest
to:
A. $14.40
B. $13.92
C. $13.50
D. $14.90
Answer: A
Solution:

Applied manufacturing Actual manufacturing Overapplied manufacturing

− =
overhead overhead overhead

(Applied manufacturing overhead is greater than actual manufacturing overhead when manufacturing
overhead is overapplied.)

Applied manufacturing
− $160,600 = $10,760
overhead

Applied manufacturing overhead = $ 171,360

Applied manufacturing Actual direct Predetermined

= ×
overhead labor-hours overhead rate

$171,360 = 11,900 × Predetermined

 overhead rate
Predetermined overhead rate = $14.40

5 O'Dell sells three products: R, S, and T. Budgeted information for the upcoming accounting period follows.

Product Sales Volume (Units) Selling Price Variable Cost

R 16,000 $14 $9
S 12,000 10 6
T 52,000 11 8

The company's weighted-average unit contribution margin is:

A. $3.00.
B. $3.55.
C. $4.00.
D. $19.35.
E. an amount other than those above.
Answer: B
Solution: (16000*5)+(12000*4)+(52000*3)/80000
6 Walton Corporation wishes to develop a single predetermined overhead rate. The company’s expected annual
fixed overhead is P340,000 and its variable overhead cost per machine hour is P2. The company’s relevant
range is from 200,000 to 600,000 machine hours. Walton expects to operate at 425,000 machine hours for the
coming year. The plant’s theoretical capacity is 850,000. The predetermined overhead rate per machine hour
should be
a. 2.40
b. 2.57
c. 2.80
d. 2.85
Answer: C
Solution:

7 As a consequence of finding a more dependable supplier, George Co. reduced its safety stock of raw
materials by 80%. What is the effect of this safety stock reduction on George’s economic order quantity?
a. 80% decrease
b. 64% decrease
c. 20% decrease
d. No effect
Answer: D
8 Willingham uses a process-costing system for its single product, which is manufactured from Material X
and Material Y. X and Y are introduced to the product as follows:

Material X: Added at the beginning of manufacturing

Material Y: Added at the 75% stage of completion

The company started and completed 40,000 units during the period and had an ending work-in-process
inventory amounting to 8,000 units, 20% complete. Which of the following choices correctly expresses the
total equivalent units of production with respect to Material X and Material Y?
Material X Material Y
A. 46,000 41,600
B. 46,000 46,000
C. 48,000 40,000
D. 48,000 41,600
E. 48,000 46,000
 Answer: C
9 Alamo's customer service department follows up on customer complaints by telephone inquiry. During a
recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls
were for the company's wholesale operation (the remainder were for the retail division), costs allocated to
the retail division should amount to:
a. $0
b. $29
c. $85,260
d. $117,740
Answer: D
Solution: 203/7=29, 7000-2940=4060*29=117740
10 After careful planning, Timing Inc. has decided to switch to a just-in-time inventory system effective on
July 1 of the current year. As of July 1, the corporation has 70 units of product in inventory. It has 1,000
labor hours available for the month of July. These hours could produce 250 units of product. Customer
demand for July is 200 units. If just-in-time principles are correctly followed, how many units should
Timing Inc. plan to produce in July?
a. 200
b. 130
c. 180
d. 250
Answer: B

Difficult
1 A company annually consumes 10,000 units of Part C. The carrying cost of this part is P2 per year and the
ordering costs are P100. The company uses an order quantity of 500 units. By how much could the company
reduce its total costs if it purchased the economic order quantity instead of 500 units?
a. 500
b. 2,000
c. 2,500
d. 0
Answer: A
Solution:

2 Minist Company sells a single product at a selling price of P15.00 per unit. Last year, the company’s sales
revenue was P225,000 and its net operating income was P18,000. If fixed expenses totaled P72,000 for the
year, the break-even point in unit sales was
a. 15,000
b. 9,900
c. 14,100
d. 12,000
Answer: D
Solution:
CM= 18+72=90
CMR= 90/225=.4
CM/unit= 15*.4=6
BEP= 72/6=12
3 Hazelnut Company uses activity-based costing. The company produces two products: coats and hats. The
 annual production and sales volume of coats is 8,000 units and of hats is 6,000 units. There are three activity
cost pools with the following expected activities and estimated total costs:

Activity Cost Pool Estimated Cost Expected Activity Expected Activity Total
Coats Hats
Activity 1 P20,000 100 400 500
Activity 2 37,000 800 200 1,000
Activity 3 91,200 800 3,000 3,800

Using ABC, the cost per unit of coats is approximately

a. 2.40
b. 3.90
c. 6.60
d. 10.59
Answer: C
Solution:

4 Harold Corporation manufactures and sells two products: A and B. The operating results of the company are
as follow:

Product A Product B
Sales in units 2,000 3,000
Sales price per unit P10 P5
Variable costs per unit 7 3

In addition, the company incurred total fixed costs in the amount of P9,000. How many units would the
company have needed to sell to produce a profit of P12,000?
a. 8,750
b. 20,000
c. 10,000
d. 8,400
Answer: A
Solution:
5 As part of a cost study, the cost accountant of Shinly Corporation has recorded the cost of operations at
seven different levels of materials usage. The records show the following:

Kilos of Materials Cost of Operation

80 800
60 480
20 320
120 1,200
140 1,280
40 480
100 1,040

Using the high and low points method, the cost formula may be expressed as

a. Total cost= 320+16x

b. Total cost= 103+8.71x
c. Total cost= 160+8x
d. Total cost= 206+10x
Answer: C
Solution:

6 The following information relates to Mon Corporation for last year:

Sales P500,000
Net operating income 25,000
Degree of operating leverage 5

Sales at Mon are expected to be P600,000 next year. Assuming no change in cost structure, this means that
net operating income for next year should be:
a. 30,000
b. 45,000
c. 50,000
d. 125,000
Answer: A
Solution:

7 The accountant for Ryan, Inc. applies overhead based on machine hours. The budgeted overhead and
machine hours for the year are P260,000 and 16,000, respectively. The actual overhead and machine hours
incurred were P275,000 and 20,000. The cost of goods sold and inventory data compiled for the year is as
follows:

Direct materials P50,000

Cost of goods sold 450,000
Work-in-process (units) 100,000
Finished goods (units) 150,000

What is the amount of over/underapplied overhead for year?

a. 15,000
b. 50,000
c. 65,000
d. 67,000
Answer: B
 Solution: 275-[(260/16)*20]=50
8 During 2002, Thor Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a volume of
80,000 kits, Thor had fixed costs of $1,000,000 and an operating income of $200,000. Due to an adverse
legal decision, Thor’s liability insurance in 2003 will increase by $1,200,000. Assuming the volume and
other costs are unchanged, what should the selling price be in 2003 if Thor is to earn the same operating
income of $200,000?
a. $120
b. $135
c. $150
d. $240
Answer: B
Solution: The selling price in 2003 to earn the same operating income of $200,000 is the selling price in
2002, $120, increased by the amount of the higher liability insurance in 2003, $1,200,000, spread over the
80,000-unit sales volume:
Selling price in 2003 = $120 + ($1,200,000  80,000) = $120 + $15 = $135

9 Treetops worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. Nos. 401 and
402 were completed by year-end, and no. 401 was sold at a profit of 40% of cost. A review of job no. 403's
cost record revealed direct material charges of $20,000 and total manufacturing costs of $25,000. If
Treetops applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have been:
a. $0.
b. $2,000.
c. $3,000.
d. $3,333.
Answer: C
Solution:
20000+x+1.5x=25000
20000+2.5x=25000
x=2000
1.5*2000
10 The College Honor Society sells large pretzels at the home football games. The following information is
available:

Unit Sales Probability

2,000 pretzels .10
3,000 pretzels .15
4,000 pretzels .20
5,000 pretzels .35
6,000 pretzels .20

The pretzels are sold for $2.00 each, and the cost per pretzel is $0.60. Any unsold pretzels are discarded
because they will be stale before the next home game. If 4,000 pretzels are on hand for a game but only
3,000 of them are sold, the operating income is:
a. $5,600
b. $4,200
c. $3,600
d. $900
Answer: C
Solution: Operating income = 3,000($2.00)−4,000($0.60)=$6,000−$2,400 = $3,600

Clincher
1 Which of the following entities would most likely have raw materials, work in process, and finished goods?
A. Exxon Corporation.
 B. Macy's Department Store.
C. Wendy's.
D. Southwest Airlines.
E. Columbia University.
Answer: A
2 Which of the following is not an objective of managerial accounting?
A. Providing information for decision making and planning.
B. Assisting in directing and controlling operations.
C. Maximizing profits and minimizing costs.
D. Measuring the performance of managers and subunits.
E. Motivating managers toward the organization's goals.
Answer: C

3 Athena expects to sell 30,000 athletic uniforms for P80 each in 2019. Direct materials costs are P20, direct
manufacturing labor is P8, and manufacturing overhead is P6 for each uniform. The following inventory
levels apply to 2019:

Beg. Inventory (Units) End. Inventory (Units)

Direct Materials 12,000 9,000

Work-in-Process Invty. 0 0

Finished Goods Invty. 6,000 5,000

How many uniforms need to be produced in 2019?

a. 26,000
b. 34,000
c. 30,000
d. 29,000
Answer: D
Solution: 30+5-6
4 The variable portion of the semi-variable cost of electricity for a manufacturing plant is a

Product Cost Prime Cost Conversion Cost

a. No No Yes
b. Yes Yes No
c. Yes Yes Yes
d. Yes No Yes
Answer: B
5 The following data relate to the Hodges Company for May and August of the current year:

May August
Maintenance hours 10,000 12,000
Maintenance cost $260,000 $300,000

May and August were the lowest and highest activity levels, and Hodges uses the high-low method to
analyze cost behavior. Which of the following statements is true?
a. The variable maintenance cost is $25 per hour.
b. The variable maintenance cost is $25.50 per hour.
c. The variable maintenance cost is $26 per hour.
d. The fixed maintenance cost is $60,000 per month.
Answer: D
Solution:
300-260/12-10=20*12
300-240