# Multiple Choice – Accounting questions

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1. A is a fixed cost; B is a variable cost. During the current year the level of activity has decreased but is still within the relevant range. We would expect that:
a. The cost per unit of A has remained unchanged
b. The cost per unit of A has decreased.
c. The cost per unit of B has decreased.
d. The cost per unit of B has remained unchanged

2. Which costs will change with an increase in activity within the relevant range?
a. Unit variable cost and total variable cost
b. Unit fixed cost and total variable cost
c. Unit fixed cost and total fixed cost
d. Unit fixed cost and unit variable cost

3. Salaries of accounts receivable clerks when one clerical worker is needed for every 750 accounts receivable is an example of a:
a. curvilinear cost
b. fixed cost
c. mixed cost
d. step-variable cost

4. With respect to a fixed cost, an increase in the activity level within the relevant range results in:
a. an unchanged fixed cost per unit.
b. a proportionate increase in total fixed costs.
c. an increase in fixed cost per unit.
d. a decrease in fixed cost per unit.

5. In the standard cost formula Y = a + bX, what does the “Y” represent?
a. total cost
b. total variable cost
c. variable cost per unit
d. total fixed cost

6. In the standard cost formula Y = a + bX, what does the “a” represent?
a. total cost
b. total variable cost
c. variable cost per unit
d. total fixed cost

7. Contribution margin is computed as sales revenue minus:
a. fixed expenses
b. cost of goods manufactured
c. cost of goods sold
d. variable expenses

8. Which of the following approaches to preparing an income statement calculates gross margin?

Approach Approach
A) Yes Yes
B) Yes No
C) No Yes
D) No No
a. Item A
b. Item B
c. Item C
d. Item D

9. The least-squares regression method:
a. is generally less accurate than the scattergraph method.
b. fits a regression line by minimizing the sum of the squared errors from the regression line.
c. can be used only if the fixed cost element is larger than the variable cost element
d. is the only method acceptable under generally accepted accounting principles.

10. Iacono Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for \$127.20 per unit.

Sales volume (units)……………………………….. 5,000 6,000
Cost of sales……………………………………….. \$419,000 \$502,800
Selling and administrative costs…………………… \$186,500 \$202,200

The best estimate of the total contribution margin when 5,300 units are sold is:
a. \$51,410
b. \$146,810
c. \$230,020
d. \$32,330

11. Shipping cost at Junk Food Imports is a mixed cost with variable and fixed components. Past records indicate total shipping cost was \$18,000 for 16,000 pounds shipped and \$22,500 for 22,000 pounds shipped. Assuming that this activity is within the relevant range, if the company plans to ship 18,000 pounds next month, the expected shipping cost is:
a. \$20,400
b. \$18,500
c. \$19,500
d. \$24,000

12. At a volume of 20,000 direct labor hours, Tirso Company incurs \$50,000 in factory overhead costs, including \$10,000 in fixed costs. Assuming that this activity is within the relevant range, if volume increases to 25,000 direct labor hours, Tirso Company would expect to incur total factory overhead costs of:
a. \$62,500
b. \$50,000
c. \$72,500
d. \$60,000

13. A jewelry manufacturer incurred the following costs: 15,000 units produced with costs of \$557,500, and 5,000 units produced with costs of \$292,500. Which cost formula would you estimate using the high-low method?
a. Y=\$160,000+\$26.50X
b. Y=\$265,000+\$37.17X
c. Y=\$265,000+\$58.50X
d. Y=\$160,000+\$17.67X

14. An income statement for Crandall’s Bookstore for the first quarter of the current year is presented below:

Sales…………………………………….. \$800,000
Cost of goods sold……………………… 560,000
Gross margin…………………………… 240,000
Selling……………………………….. \$98,000
Net operating income…………………. \$ 44,000

On average, a book sells for \$50. Variable selling expenses are \$5.50 per book, with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales, with the remainder being fixed.

The cost formula for selling and administrative expenses with “X” equal to the number of books sold is:
a. Y = \$98,000 + \$42X
b. Y = \$84,000 + \$35X
c. Y = \$98,000 + \$35X
d. Y = \$84,000 + \$42X

15. In December, Barkes Corporation, a manufacturing company, reported the following financial data:

Sales………………………………………….. \$270,000
Variable production expense……………….. \$27,000
Fixed production expense…………………… \$42,000
Variable selling expense…………………….. \$28,000
Fixed selling expense………………………… \$43,000

The company had no beginning or ending inventories.

The gross margin for December was:
a. \$201,000
b. \$181,000
c. \$121,000
d. \$32,000

16. Monsivais Corporation, a manufacturing company, has provided the following financial data for February:

Sales \$470,000
Variable production expense \$81,000
Variable selling expense \$11,000
Fixed production expense \$86,000
Fixed selling expense \$73,000

The company had no beginning or ending inventories.

The contribution margin for February was:
a. \$303,000
b. \$40,000
c. \$172,000
d. \$338,000

17. Which of the following statements is correct concerning job-order costing?
a. All the costs appearing on a job cost sheet are actual costs.
b. Job-order costing is mainly used in firms with homogeneous products such as oil refineries.
c. Job-order costing would be appropriate for a textbook publisher
d. Indirect materials are charged to a specific job

18. In a predetermined overhead rate in a job-order costing system that is based on machine-hours, which of the following would be used in the numerator and denominator?

Numerator Denominator
A) Actual manufacturing overhead Actual machine-hours
B) Actual manufacturing overhead Estimated machine-hours
C) Estimated manufacturing overhead Actual machine-hours
D) Estimated manufacturing overhead Estimated machine-hours
a. Item C
b. Item D
c. Item A
d. Item B

19. Job 910 was recently completed. The following data have been recorded on its job cost sheet:

Direct materials…………………………. \$3,193
Direct labor-hours………………………. 21 labor-hours
Direct labor wage rate………………….. \$12 per labor-hour
Machine-hours………………………….. 166 machine-hours

The company applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is \$15 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 910 would be:
a. \$5,935
b. \$3,760
c. \$3,220
d. \$3,445

20. Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. For the month of October, Avery’s estimated manufacturing overhead cost was \$300,000 based on an estimated activity level of 100,000 direct labor-hours. Actual overhead amounted to \$325,000 with actual direct labor-hours totaling 110,000 for the month. How much was the overapplied or underapplied overhead?
a. \$25,000 underapplied
b. \$5,000 overapplied
c. \$5,000 underapplied
d. \$25,000 overapplied

21. Woodman Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Estimated and actual data for direct labor and manufacturing overhead for last year are as follows:

Estimated Actual
Direct labor-hours……………. 600,000 550,000

The manufacturing overhead for Woodman Company for last year was:
a. underapplied by \$40,000
b. underapplied by \$20,000
c. overapplied by \$40,000
d. overapplied by \$20,000

22. Washtenaw Corporation uses a job-order costing system. The following data are for last year:

Estimated direct labor-hours……………………………. 12,000
Actual direct labor-hours………………………………… 11,000

Washtenaw applies overhead using a predetermined rate based on direct labor-hours. What amount of overhead was applied to work in process last year?
a. \$36,960
b. \$42,600
c. \$39,050
d. \$35,750

23. Gallon Corporation had \$24,000 of raw materials on hand on April 1. During the month, the company purchased an additional \$52,000 of raw materials. During April, \$62,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled \$2,000. The debits to the Work in Process account as a consequence of the raw materials transactions in April total:
a. \$52,000
b. \$60,000
c. \$0
d. \$62,000

24. Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of the final product should be classified as:
b. a period cost
c. direct materials

25. Which of the following is NOT a period cost?
a. Salary of a billing clerk.
b. Monthly depreciation of the equipment in a fitness room used by factory workers.
c. Insurance on a company showroom, where current and potential customers can view new products.
d. Cost of a seminar concerning tax law updates that was attended by the company’s controller.

26. All of the following are examples of product costs except:
a. rental costs of the factory facility
b. depreciation on the company’s retail outlets.
c. salary of the plant manager
d. insurance on the factory equipment

27. Within the relevant range, as the number of units produced increases:
a. the variable cost per unit remains the same
b. fixed costs in total remain the same
c. variable costs increase in total
d. all of the above

28. Abel Company’s manufacturing overhead is 20% of its total conversion costs. If direct labor is \$38,000 and if direct materials are \$47,000, the manufacturing overhead is:
a. \$21,250
b. \$9,500
c. \$11,750
d. \$152,000

29. Shown below are a number of costs incurred last year at Mecca Publishing Co., a manufacturer of elementary school textbooks:

What is the total of the manufacturing overhead costs above?
a. \$2,500
b. \$500
c. \$6,200
d. \$6,700

30. The information below relates to Derby Manufacturing Company’s operations for a recent month. (Assume that all raw materials are direct materials.)

Purchases of raw materials \$91,000
Direct labor cost \$122,000
Selling costs (total) \$42,000
Raw materials inventory, beginning \$22,000
Work in process inventory, beginning \$27,000
Finished goods inventory, beginning \$42,000
Raw materials inventory, ending \$7,000
Work in process inventory, ending \$35,000
Finished goods inventory, ending \$15,000

What was Derby’s cost of goods manufactured for the month?
a. \$545,000
b. \$568,000
c. \$587,000
d. \$560,000

31. Using the following data for a recent period, calculate the beginning finished goods inventory:

The beginning finished goods inventory was:
a. \$12,000
b. \$24,000
c. \$7,000
d. \$23,000

32. The following inventory balances have been provided for the most recent year:

Beginning Ending
Raw materials \$21,000 \$15,000
Work in process \$18,000 \$29,000
Finished goods \$57,000 \$33,000

The cost of goods manufactured was \$714,000. What was the cost of goods sold?
a. \$714,000
b. \$693,000
c. \$738,000
d. \$733,000

33. Using the following data for July, calculate the cost of goods manufactured:

The cost of goods manufactured was:
a. \$81,000
b. \$96,000
c. \$82,000
d. \$83,000

34. Mendoza, Inc. manufactures and sells aluminum dishes for camping and outdoor enthusiasts through a mail order catalog operation. Large rectangular sheets of aluminum are purchased by Mendoza. These sheets are cut down into smaller squares and are then fed into a machine where they are trimmed down into a circular shape. These aluminum circles are then fed into a stamping machine where they are formed into plates and bowls. After production, the dishes are shipped to warehouses where they are packed and then shipped to customers.
Which of the following terms could be used to correctly describe the cost of the aluminum sheets?
a. period cost
b. conversion cost
c. fixed cost
d. direct cost

35. Demeglio Corporation reported the following data for the month of September:

If the raw materials purchased during September totaled \$63,000, what was the cost of the raw materials used in production for the month?
a. \$67,000
b. \$64,000
c. \$63,000
d. \$59,000

Solution Preview
Answers have a “+” in front of them (or are BOLD in the attachment)

1. A is a fixed cost; B is a variable cost. During the current year the level of activity has decreased but is still within the relevant range. We would expect that:
a. The cost per unit of A has remained unchanged
b. The cost per unit of A has decreased.
c. The cost per unit of B has decreased.
+ d. The cost per unit of B has remained unchanged

2. Which costs will change with an increase in activity within the relevant range?
a. Unit variable cost and total variable cost
b. Unit fixed cost and total variable cost
+ c. Unit fixed cost and total fixed cost
d. Unit fixed cost and unit variable cost

3. Salaries of accounts receivable clerks when one clerical worker is needed for every 750 accounts receivable is an example of a:
a. curvilinear cost
b. fixed cost
c. mixed cost
+ d. step-variable cost

4. With respect to a fixed cost, an increase in the activity level within the relevant range results in:
a. an unchanged fixed cost per unit.
b. a proportionate increase in total fixed costs.
c. an increase in fixed cost per unit.
+ d. a decrease in fixed cost per unit.

5. In the standard cost formula Y = a + bX, what does the “Y” represent?
+ a. total cost
b. total variable cost
c. variable cost per unit
d. total fixed cost

6. In the standard cost formula Y = a + bX, what does the “a” represent?
a. total cost
b. total variable cost
c. variable cost per unit
+ d. total fixed cost

7. Contribution margin is computed as sales revenue minus:
a. fixed expenses
b. cost of goods manufactured
c. cost of goods sold
+ d. variable expenses

8. Which of the following approaches to preparing an income statement calculates gross margin?

Approach Approach
A) Yes Yes
B) Yes No
C) No Yes
D) No No
a. Item A
+ b. Item B
c. Item C
d. Item D

9. The least-squares regression method:
a. is generally less accurate than the scattergraph method.
+ b. fits a regression line by minimizing the sum of the squared errors from the regression line.
c. can be used only if the fixed cost element is larger than the variable cost element
d. is the only method acceptable under generally accepted accounting principles.

10. Iacono Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for \$127.20 per unit.

Sales volume (units)……………………………….. 5,000 6,000
Cost of sales……………………………………….. \$419,000 \$502,800
Selling and administrative costs…………………… \$186,500 \$202,200

The best estimate of the total contribution margin when 5,300 units are sold is:
a. \$51,410
+ b. \$146,810
c. \$230,020
d. \$32,330

11. Shipping cost at Junk Food Imports is a mixed cost with variable and fixed components. Past records indicate total shipping cost was \$18,000 for 16,000 pounds shipped and \$22,500 for 22,000 pounds shipped. Assuming that this activity is within the relevant range, if the company plans to ship 18,000 pounds next month, the expected shipping cost is:
a. \$20,400
b. \$18,500
+ c. \$19,500
d. \$24,000

12. At a volume of 20,000 direct labor hours, Tirso Company incurs \$50,000 in factory overhead costs, including \$10,000 in …

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