1. ACC 349 Final Exam
PLEASE DOWNLOAD THE ANSWERS HERE
1) Why is factory overhead applied to products and jobs by manufacturing
companies?
A. It provides a more accurate cost of the job or products being processed.
B. It allows managers more timely determination of product costs during the
manufacturing process.
C. Because indirect costs are easy to trace to products and jobs.
D. Total actual overhead costs can never be accurately determined for
production.
2) Luca Company overapplied manufacturing overhead during 2006. Which one
of the following is part of the year end entry to dispose of the overapplied amount
assuming the amount is material?
A. An increase to cost of goods sold
B. A decrease to work in process inventory
C. A decrease to applied overhead
D. An increase to finished goods
3) What is the best way to handle manufacturing overhead costs in order to get
the most timely job cost information?
A. The company should determine an allocation rate as soon as the actual costs
are known, and then apply manufacturing overhead to jobs.
B. The company should add actual manufacturing overhead costs to jobs as
soon as the overhead costs are incurred.
C. The company should apply overhead using an estimated rate throughout the
year.
D. The company should account for only the direct production costs.
4) Which of the following would be accounted for using a job order cost system?
A. The production of cans of spinach
B. The production of textbooks

2. C. The production of town homes
D. The pasteurization of milk
5) Which of the following represents the two basic types of cost accounting
systems?
A. Process cost and batch systems
B. Job order and batch systems
C. Job order and job accumulation systems
D. Job order and process cost systems
6) Which one of the following is an important feature of a job order cost system?
A. Each job has characteristics similar to the next.
B. Each job uses similar processes to produce.
C. Each consists of features which distinguish it from the next.
D. Each must be completed before a new product order is accepted.
7) Which of the following is an element of manufacturing overhead?
A. Flour used in manufactured cake mixes
B. Plant manager’s salary
C. Components used in calculators during production
D. Factory workers wages
8) Which one of the following costs would be included in manufacturing overhead
of a lawn mower manufacturer?
A. The wages earned by motor assemblers
B. Depreciation on the testing equipment
C. The cost of the fuel lines that run from the motor to the gas tank
D. The cost of the wheels
9) Managerial accounting
A. places emphasis on special-purpose information

3. B. pertains to the entity as a whole and is highly aggregated
C. is governed by generally accepted accounting principles
D. is concerned with costing products
10) Which would be an appropriate cost driver for the ordering and receiving
activity cost pool?
A. Inspections
B. Machine hours
C. Purchase orders
D. Machine setups
11) A well-designed activity-based costing system starts with
A. analyzing the activities performed to manufacture a product
B. assigning manufacturing overhead costs for each activity cost pool to products
C. computing the activity-based overhead rate
D. identifying the activity-cost pools
12) The first step in activity-based costing is to
A. identify the cost driver that has a strong correlation to the activity cost pool
B. identify and classify the major activities involved in the manufacture of specific
products
C. compute the activity-based overhead rate per cost driver
D. assign manufacturing overhead costs for each activity cost pool to product
13) Which of the following is a nonvalue-added activity?
A. Packaging
B. Inspection
C. Machining
D. Engineering design
14) Which of the following is a value-added activity?

4. A. Inspections
B. Engineering design
C. Inventory storage
D. Machinery repair
15) What sometimes makes implementation of activity-based costing difficult in
service industries is
A. attempting to reduce or eliminate nonvalue-added activities
B. the labeling of activities as value-added
C. that a larger proportion of overhead costs are company-wide costs
D. identifying activities, activity cost plus, and cost drivers
16) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's
overhead costs consist of setting up machines, $800,000; machining, $1,800,000;
and inspecting, $600,000. Information on the two products is:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Mini A using activity-based costing is
A. $1,920,000
B. $1,200,000
C. $1,664,000
D. $1,536,000
17) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's
overhead costs consist of setting up machines, $800,000; machining, $1,800,000;
and inspecting, $600,000. Information on the two products is:
Mini A Maxi B

5. Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Mini A using traditional costing using direct labor hours is
A. $1,920,000
B. $1,200,000
C. $1,670,000
D. $1,536,000
18) Poodle Company manufactures two products, Mini A and Maxi B. Poodle's
overhead costs consist of setting up machines, $800,000; machining, $1,800,000;
and inspecting, $600,000. Information on the two products is:
Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700
Overhead applied to Maxi B using activity-based costing is
A. $2,000,000
B. $1,280,000
C. $1,664,000
D. $1,536,000
19) The cost to produce Part A was $10 per unit in 2005. During 2006, it has
increased to $11 per unit. In 2006, Supplier Company has offered to supply Part
A for $9 per unit. For the make-or-buy decision,
A. differential costs are $2 per unit
B. incremental revenues are $2 per unit

6. C. net relevant costs are $1 per unit
D. incremental costs are $1 per unit
20) Walton, Inc. is unsure of whether to sell its product assembled or
unassembled. The unit cost of the unassembled product is $16, while the cost of
assembling each unit is estimated at $17. Unassembled units can be sold for $55,
while assembled units could be sold for $71 per unit. What decision should
Walton make?
A. Process further; the company will save $16 per unit.
B. Sell before assembly; the company will save $1 per unit.
C. Process further; the company will save $1 per unit.
D. Sell before assembly; the company will save $15 per unit.
21) Max Company uses 10,000 units of Part A in producing its products. A
supplier offers to make Part A for $7. Max Company has relevant costs of $8 a
unit to manufacture Part A. If there is excess capacity, the opportunity cost of
buying Part A from the supplier is
A. $80,000
B. $0
C. $70,000
D. $10,000
22) Disney’s variable costs are 30% of sales. The company is contemplating an
advertising campaign that will cost $22,000. If sales are expected to increase
$40,000, by how much will the company's net income increase?
A. $6,000
B. $18,000
C. $12,000
D. $28,000
23) Hartley, Inc. has one product with a selling price per unit of $200, the unit
variable cost is $75, and the total monthly fixed costs are $300,000. How much is
Hartley’s contribution margin ratio?
A. 266.6%

7. B. 62.5%.
C. 150%.
D. 37.5%
24) Hess, Inc. sells a single product with a contribution margin of $12 per unit and
fixed costs of $74,400 and sales for the current year of $100,000. How much is
Hess’s break-even point?
A. 2,133 units
B. 4,600 units
C. 6,200 units
D. $25,600
25) Orbach Company sells its product for $40 per unit. During 2005, it produced
60,000 units and sold 50,000 units (there was no beginning inventory). Costs per
unit are: direct materials $10, direct labor $6, and variable overhead $2. Fixed
costs are: $480,000 manufacturing overhead, and $60,000 selling and
administrative expenses. The per unit manufacturing cost under absorption
costing is
A. $27
B. $16
C. $26
D. $18
26) Which cost is NOT charged to the product under absorption costing?
A. Fixed administrative expenses
B. Direct materials
C. Variable manufacturing overhead
D. Direct labor
27) Orbach Company sells its product for $40 per unit. During 2005, it produced
60,000 units and sold 50,000 units (there was no beginning inventory). Costs per
unit are: direct materials $10, direct labor $6, and variable overhead $2. Fixed
costs are: $480,000 manufacturing overhead, and $60,000 selling and

8. administrative expenses. The per unit manufacturing cost under variable costing
is
A. $16
B. $26
C. $27
D. $18
28) Which of the following statements is FALSE?
A. A standard cost is more accurate than a budgeted cost.
B. In concept, standards and budgets are essentially the same.
C. The standard cost of a product is equivalent to the budgeted cost per unit of
product.
D. A standard is a unit amount.
29) The difference between a budget and a standard is that
A. a budget expresses what costs were, while a standard expresses what costs
should be
B. a budget expresses a total amount while a standard expresses a unit amount
C. standards are excluded from the cost accounting system, whereas budgets
are generally incorporated into the cost accounting system
D. a budget expresses management's plans, while a standard reflects what
actually happened
30) A standard cost is
A. a cost which is paid for a group of similar products
B. a predetermined cost
C. the historical cost of producing a product last year
D. the average cost in an industry
31) A company developed the following per-unit standards for its product: 2
pounds of direct materials at $6 per pound. Last month, 2,000 pounds of direct

9. materials were purchased for $11,400. The direct materials price variance for last
month was
A. $11,400 favorable
B. $300 favorable
C. $600 unfavorable
D. $600 favorable
32) The per-unit standards for direct labor are 2 direct labor hours at $12 per
hour. If in producing 2,400 units, the actual direct labor cost was $51,200 for
4,000 direct labor hours worked, the total direct labor variance is
A. $1,920 unfavorable
B. $4,000 unfavorable
C. $6,400 unfavorable
D. $6,400 favorable
33) The standard rate of pay is $5 per direct labor hour. If the actual direct labor
payroll was $19,600 for 4,000 direct labor hours worked, the direct labor price
(rate) variance is
A. $400 unfavorable
B. $500 unfavorable
C. $500 favorable
D. $400 favorable
34) Manufacturing overhead costs are applied to work in process on the basis of
A. actual hours worked
B. ratio of actual variable to fixed costs
C. actual overhead costs incurred
D. standard hours allowed
35) If the standard hours allowed are less than the standard hours at normal
capacity, the volume variance

10. A. cannot be calculated
B. will be unfavorable
C. will be greater than the controllable variance
D. will be favorable
36) If the standard hours allowed are less than the standard hours at normal
capacity,
A. the overhead volume variance will be unfavorable
B. the overhead controllable variance will be favorable
C. variable overhead costs will be overapplied
D. variable overhead costs will be underapplied
37) Lewis Hats is planning to sell 600 straw hats. Each hat requires a half pound
of straw and a quarter hour of direct labor. Straw costs $0.20 per pound and
employees of the company are paid $22 per hour. Lewis has 80 pounds of straw
and 40 hats in beginning inventory and wants to have 50 pounds of straw and 60
hats in ending inventory. How many units should Lewis Hats produce in April?
A. 600
B. 580
C. 630
D. 620
38) At January 1, 2004, Barry, Inc. has beginning inventory of 4,000 widgets.
Barry estimates it will sell 35,000 units during the first quarter of 2004 with a 10%
increase in sales each quarter. Barry’s policy is to maintain an ending inventory
equal to 25% of the next quarter’s sales. Each widget costs $1 and is sold for
$1.50. How much is budgeted sales revenue for the third quarter of 2004?
A. $57,525
B. $42,350
C. $63,000
D. $63,525

11. 39) Gottberg Mugs is planning to sell 2,000 mugs and produce 2,200 mugs during
April. Each mug requires 2 pounds of resin and a half hour of direct labor. Resin
costs $1 per pound and employees of the company are paid $12.50 per hour.
Manufacturing overhead is applied at a rate of 120% of direct labor costs.
Gottberg has 2,000 pounds of resin in beginning inventory and wants to have
2,400 pounds in ending inventory. How much is the total amount of budgeted
direct labor for April?
A. $12,500
B. $27,500
C. $13,750
D. $25,000
40) A company must price its product to cover its costs and earn a reasonable
profit in
A. all cases
B. the short run
C. its early years
D. the long run
41) The cost-plus pricing approach's major advantage is
A. it considers customer demand
B. it can be used to determine a product’s target cost
C. that sales volume has no effect on per unit costs
D. it is simple to compute
42) Prices are set by the competitive market when
A. the product is specially made for a customer
B. a product is not easily distinguished from competing products
C. there are no other producers capable of manufacturing a similar item
D. a company can effectively differentiate its product from others
ACC 349 Final Exam

12. PLEASE DOWNLOAD THE ANSWERS HERE