FATHER SATURNINO URIOS UNIVERSITY

COST ACCOUNTING & COST MANAGEMENT

Semi-Final Examination

NAME: DATE:
INSTRUCTOR: SECTION/SCHEDULE:

Part I. Multiple Choice Questions. ENCIRCLE the letter of your answer. Solution to problem solving is
required.

1. A primary purpose of using a standard cost system is

a. to make things easier for managers in the production facility.
b. to provide a distinct measure of cost control.
c. to minimize the cost per unit of production.
d. b and c are correct.

2. Which of the following statements regarding standard cost systems is true?

a. Favorable variances are not necessarily good variances.

b. Managers will investigate all variances from standard.
c. The production supervisor is generally responsible for material price variances.
d. Standard costs cannot be used for planning purposes since costs normally change in the
future.

3. A purpose of standard costing is to

a. replace budgets and budgeting.

b. simplify costing procedures.
c. eliminate the need for actual costing for external reporting purposes.
d. eliminate the need to account for year-end underapplied or overapplied manufacturing overhead.

4. Standard costs

a. are estimates of costs attainable only under the most ideal conditions.
b. are difficult to use with a process costing system.
c. can, if properly used, help motivate employees.
d. require that significant unfavorable variances be investigated, but do not require that
significant favorable variances be investigated.

5. The term standard hours allowed measures

a. budgeted output at actual hours.

b. budgeted output at standard hours.
c. actual output at standard hours.
d. actual output at actual hours.

6. Which of the following factors should not be considered when deciding whether to investigate a variance?

a. magnitude of the variance

b. trend of the variances over time
c. likelihood that an investigation will reduce or eliminate future occurrences of the variance
d. whether the variance is favorable or unfavorable

7. At the end of a period, a significant material quantity variance should be

a. closed to Cost of Goods Sold.

b. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods

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 Sold.
c. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.
d. carried forward as a balance sheet account to the next period.

8. A variable overhead spending variance is caused by

a. using more or fewer actual hours than the standard hours allowed for the production
achieved.
b. paying a higher/lower average actual overhead price per unit of the activity base than the
standard price allowed per unit of the activity base.
c. larger/smaller waste and shrinkage associated with the resources involved than expected.
d. both b and c are causes.

9. The variance least significant for purposes of controlling costs is the

a. material quantity variance.

b. variable overhead efficiency variance.
c. fixed overhead spending variance.
d. fixed overhead volume variance.

10. Analyzing overhead variances will not help in

a. controlling costs.
b. evaluating performance.
c. determining why variances occurred.
d. planning costs for future production cycles.

11. A producer of ________ would not use a process costing system.

a. Gasoline
b. potato chips
c. blank videotapes
d. stained glass windows

12. Equivalent units of production are equal to the

a. units completed by a production department in the period.

b. number of units worked on during the period by a production department.
c. number of whole units that could have been completed if all work of the period had
been used to produce whole units.
d. identifiable units existing at the end of the period in a production department.

13. The first step in determining the cost per EUP per cost component under the weighted average method is to

a. add the beginning Work in Process Inventory cost to the current period's production
cost.
b. divide the current period's production cost by the equivalent units.
c. subtract the beginning Work in Process Inventory cost from the current period's
production cost.
d. divide the current period's production cost into the EUP.

14. The FIFO method of process costing will produce the same cost of goods transferred out amount as the
weighted average method when
a. the goods produced are homogeneous.
b. there is no beginning Work in Process Inventory.
c. there is no ending Work in Process Inventory.
d. beginning and ending Work in Process Inventories are each 50 percent complete.

15. The cost of abnormal continuous losses is

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 a. considered a product cost.
b. absorbed by all units in ending inventory and transferred out on an equivalent unit basis.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units past the inspection point.

16. Normal spoilage units resulting from a continuous process

a. are extended to the EUP schedule.

b. result in a higher unit cost for the good units produced.
c. result in a loss being incurred.
d. cause estimated overhead to increase.

17. Long Company transferred 5,500 units to Finished Goods Inventory during September. On September 1, the
company had 300 units on hand (40 percent complete as to both material and conversion costs). On June 30, the
company had 800 units (10 percent complete as to material and 20 percent complete as to conversion costs). The
number of units started and completed during September was:
a. 5,200.
b. 5,380.
c. 5,500.
d. 6,300.

18. Green Company started 9,000 units in February. The company transferred out 7,000 finished units and ended
the period with 3,500 units that were 40 percent complete as to both material and conversion costs. Beginning
Work in Process Inventory units were
a. 500.
b. 600.
c. 1,500.
d. 2,000.

19. Bush Company had beginning Work in Process Inventory of 5,000 units that were 40 percent complete as to
conversion costs. X started and completed 42,000 units this period and had ending Work in Process Inventory of
12,000 units. How many units were started this period?
a. 42,000
b. 47,000
c. 54,000
d. 59,000

20. Dixie Company uses a weighted average process costing system. Material is added at the start of production.
Dixie Company started 13,000 units into production and had 4,500 units in process at the start of the period that
were 60 percent complete as to conversion costs. If Dixie transferred out 11,750 units, how many units were in
ending Work in Process Inventory?
a. 1,250
b. 3,000
c. 3,500
d. 5,750

21. Taylor Company uses a weighted average process costing system and started 30,000 units this month. Taylor
had 12,000 units that were 20 percent complete as to conversion costs in beginning Work in Process Inventory
and 3,000 units that were 40 percent complete as to conversion costs in ending Work in Process Inventory. What
are equivalent units for conversion costs?
a. 37,800
b. 40,200
c. 40,800
d. 42,000

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22. Kerry Company makes small metal containers. The company began December with 250 containers in
process that were 30 percent complete as to material and 40 percent complete as to conversion costs. During the
month, 5,000 containers were started. At month end, 1,700 containers were still in process (45 percent complete
as to material and 80 percent complete as to conversion costs). Using the weighted average method, what are the
equivalent units for conversion costs?
a. 3,450
b. 4,560
c. 4,610
d. 4,910

23. Mehta Company Co. uses a FIFO process costing system. The company had 5,000 units that were 60 percent
complete as to conversion costs at the beginning of the month. The company started 22,000 units this period and
had 7,000 units in ending Work in Process Inventory that were 35 percent complete as to conversion costs. What
are equivalent units for material, if material is added at the beginning of the process?
a. 18,000
b. 22,000
c. 25,000
d. 27,000

24. Julia Company makes fabric-covered hatboxes. The company began September with 500 boxes in process
that were 100 percent complete as to cardboard, 80 percent complete as to cloth, and 60 percent complete as to
conversion costs. During the month, 3,300 boxes were started. On September 30, 350 boxes were in process
(100 percent complete as to cardboard, 70 percent complete as to cloth, and 55 percent complete as to
conversion costs). Using the FIFO method, what are equivalent units for cloth?
a. 3,295
b. 3,395
c. 3,450
d. 3,595

Maxwell Company

Maxwell Company adds material at the start of production. The following production information is available
for June:

Beginning Work in Process Inventory

(45% complete as to conversion) 10,000 units
Started this period 120,000 units
Ending Work in Process Inventory
(80% complete as to conversion) 8,200 units

Beginning Work in Process Inventory Costs:

Material $24,500

Conversion 68,905

Current Period Costs:

Material $ 75,600

Conversion 130,053

25. Refer to Maxwell Company. How many units must be accounted for?

a. 118,200
b. 128,200
c. 130,000
d. 138,200

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26. Refer to Maxwell Company. What is the total cost to account for?

a. $ 93,405
b. $205,653
c. $274,558
d. $299,058

27. Refer to Maxwell Company. How many units were started and completed in the period?

a. 111,800
b. 120,000
c. 121,800
d. 130,000

28. Refer to Maxwell Company. What are the equivalent units for material using the weighted average method?

a. 120,000
b. 123,860
c. 128,360
d. 130,000

29. Refer to Maxwell Company. What are the equivalent units for material using the FIFO method?

a. 111,800
b. 120,000
c. 125,500
d. 130,000

30. Refer to Maxwell Company. What are the equivalent units for conversion using the weighted average
method?
a. 120,000
b. 123,440
c. 128,360
d. 130,000

31. Refer to Maxwell Company. What are the equivalent units for conversion using the FIFO method?

a. 118,360
b. 122,860
c. 123,860
d. 128,360

32. Refer to Maxwell Company. What is the material cost per equivalent unit using the weighted average
method?
a. $.58
b. $.62
c. $.77
d. $.82

33. Refer to Maxwell Company. What is the conversion cost per equivalent unit using the weighted average
method?
a. $1.01
b. $1.05
c. $1.55
d. $1.61

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34. Refer to Maxwell Company. What is the cost of units completed using the weighted average?

a. $237,510
b. $266,742
c. $278,400
d. $282,576

35. Refer to Maxwell Company. What is the cost of all units transferred out using the FIFO method?

a. $204,624
b. $191,289
c. $287,004
d. $298,029

Talmidge Company

The following information is available for Talmidge Company for the current year:

Beginning Work in Process Costs of Beginning Work in Process:

(75% complete) 14,500 units Material $25,100
Started 75,000 units Conversion 50,000
Ending Work in Process Current Costs:
(60% complete) 16,000 units Material $120,000
Abnormal spoilage 2,500 units Conversion 300,000
Normal spoilage 5,000 units
(continuous)
Transferred out 66,000 units

All materials are added at the start of production.

36. Refer to Talmidge Company. What is the cost assigned to normal spoilage using weighted average?
a. $31,000
b. $15,500
c. $30,850
d. None of the responses are correct

37. Refer to Talmidge Company. Using FIFO, what are equivalent units for conversion costs?

a. 72,225
b. 67,225
c. 69,725
d. 78,100

38. Refer to Talmidge Company. Assume that the FIFO EUP cost for material and conversion are $1.50 and
$4.75, respectively. Using FIFO what is the total cost assigned to the units transferred out?
a. $414,194
b. $339,094
c. $445,444
d. $396,975

39. Refer to Talmidge Company. Using FIFO, what is the cost per equivalent unit for conversion costs?

a. $4.46
b. $4.15
c. $4.30
d. $3.84

40. Refer to Talmidge Company. Using FIFO, what is the cost per equivalent unit for material?

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 a. $1.42
b. $1.66
c. $1.71
d. $1.60
Forrest Company

Forrest Company uses a standard cost system for its production process and applies overhead based on direct
labor hours. The following information is available for August when Forrest made 4,500 units:

Standard:
DLH per unit 2.50
Variable overhead per DLH $1.75
Fixed overhead per DLH $3.10
Budgeted variable overhead $21,875
Budgeted fixed overhead $38,750

Actual:
Direct labor hours 10,000
Variable overhead $26,250
Fixed overhead $38,000

41. Refer to Forrest Company. Using the one-variance approach, what is the total overhead variance?

a. $6,062.50 U
b. $3,625.00 U
c. $9,687.50 U
d. $6,562.50 U

42. Refer to Forrest Company. Using the two-variance approach, what is the controllable variance?

a. $5,812.50 U
b. $5,812.50 F
c. $4,375.00 U
d. $4,375.00 F

43. Refer to Forrest Company. Using the two-variance approach, what is the noncontrollable variance?

a. $3,125.00 F
b. $3,875.00 U
c. $3,875.00 F
d. $6,062.50 U

44. Refer to Forrest Company. Using the three-variance approach, what is the spending variance?

a. $4,375 U
b. $3,625 F
c. $8,000 U
d. $15,750 U

45. Refer to Forrest Company. Using the three-variance approach, what is the volume variance?

a. $3,125.00 F
b. $3,875.00 F
c. $3,875.00 U
d. $6,062.50 U

46. Refer to Forrest Company. Using the four-variance approach, what is the variable overhead efficiency
variance?
a. $2,187.50 U
b. $9,937.50 F
c. $2,187.50 F
d. $2,937.50 F

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47. Refer to Forrest Company. Using the four-variance approach, what is the fixed overhead spending variance?

a. $7,000 U
b. $3,125 F
c. $750 U
d. $750 F

48. Refer to Forrest Company. Using the four-variance approach, what is the volume variance?

a. $3,125 F
b. $3,875 F
c. $6,063 U
d. $3,875 U

Rainbow Company

Rainbow Company uses a standard cost system for its production process. Rainbow Company applies overhead
based on direct labor hours. The following information is available for July:

Standard:
Direct labor hours per unit 2.20
Variable overhead per hour $2.50
Fixed overhead per hour
(based on 11,990 DLHs) $3.00

Actual:
Units produced 4,400
Direct labor hours 8,800
Variable overhead $29,950
Fixed overhead $42,300

49. Refer to Rainbow Company Using the four-variance approach, what is the variable overhead spending
variance?
a. $7,950 U
b. $25 F
c. $7,975 U
d. $10,590 U

50. Refer to Rainbow Company Using the four-variance approach, what is the variable overhead efficiency
variance?
a. $9,570 F
b. $9,570 U
c. $2,200 F
d. $2,200 U

51. Refer to Rainbow Company Using the four-variance approach, what is the fixed overhead spending
variance?
a. $15,900 U
b. $6,330 U
c. $6,930 U
d. $935 F

52. Refer to Rainbow Company Using the four-variance approach, what is the volume variance?

a. $6,930 U
b. $13,260 U

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 c. $0
d. $2,640 F

53. Refer to Rainbow Company Using the two-variance approach, what is the controllable variance?

a. $21,650 U
b. $16,480 U
c. $5,775 U
d. $12,080 U

54. Refer to Rainbow Company Using the two-variance approach, what is the noncontrollable variance?

a. $26,040 F
b. $0
c. $6,930 U
d. $13,260 U

55. Refer to Rainbow Company Using the one-variance approach, what is the total variance?

a. $19,010 U
b. $6,305 U
c. $12,705 U
d. $4,730 U

56. A company using very tight (high) standards in a standard cost system should expect that

a. no incentive bonus will be paid.

b. most variances will be unfavorable.
c. employees will be strongly motivated to attain the standards.
d. costs will be controlled better than if lower standards were used.

57. A variable overhead spending variance is caused by

a. using more or fewer actual hours than the standard hours allowed for the production
achieved.
b. paying a higher/lower average actual overhead price per unit of the activity base than the
standard price allowed per unit of the activity base.
c. larger/smaller waste and shrinkage associated with the resources involved than expected.
d. both b and c are causes.

58. The variance least significant for purposes of controlling costs is the

a. material quantity variance.

b. variable overhead efficiency variance.
c. fixed overhead spending variance.
d. fixed overhead volume variance.

59. An unfavorable fixed overhead volume variance is most often caused by

a. actual fixed overhead incurred exceeding budgeted fixed overhead.

b. an over-application of fixed overhead to production.
c. an increase in the level of the finished inventory.
d. normal capacity exceeding actual production levels.

60. In a standard cost system, when production is greater than the estimated unit or denominator level of
activity, there will be a(n)
a. unfavorable capacity variance.
b. favorable material and labor usage variance.
c. favorable volume variance.
d. unfavorable manufacturing overhead variance.

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