Question 1: Horton and Sons produces specialty furniture. The company has received an order to create 50 custom tables for a customer. What type of costing method should they use?
- Inventory costing
- Cost of goods sold
- Batch costing
- Job order costing
Question 2: Omega Manufacturing bases its rate on direct labor cost. At the beginning of the year, the company made the following estimates:
Direct labor-hours: 30,000
Machine-hours: 5,000
Materials overhead cost: $486,000
Direct labor cost: $270,000
What is the predetermined overhead rate?
Question 3: Omega Manufacturing had a total applied manufacturing overhead of $486,000 budgeted direct labor cost was $270,000. Their actual manufacturing overhead was $350,000 and actual direct labor cost was $300,000. Which of the following would best describe the overhead?
- Overestimated
- Mixed
- Underapplied
- Overapplied
Question 4: A sporting goods company manufactures sports shoes in batches. Why should a job order costing system be implemented for the production of the shoes?
- To find the total cost of doing a run of the shoes
- To find the exact cost per unit for each run of the shoes
- To find if manufacturing the shoes will be profitable
- To let managers decide if making the shoes is worth the cost
Question 5: Depont Enterprises uses the job order costing system. They have received their first product order and need to make entries to the accounts. How should the flow of costs be recorded for their first job?
- Work in process inventory, finished goods inventory, job cost record, cost of goods sold
- Work in process inventory, finished goods inventory, costs of goods sold, job cost record
- Job cost record, work in process inventory, finished goods inventory, cost of goods sold
- Job cost record, work in process inventory, cost of goods sold, finished goods inventory
Question 6: John knows that 1,000 widgets are needed in the upcoming job order. What type of document does he need to fill out in order to put the widgets into production?
- Materials requisition
- Job cost record
- Direct materials requisition
- Subsidiary ledger
Question 7: Under a job order costing system, how are accumulated costs treated when a company finishes a job?
- Accumulated costs are recorded as overhead on the income statement
- Accumulated costs are assigned to batches and transferred to Work in Process Inventory (WIP)
- Accumulated costs are moved from Work in Process Inventory (WIP) to finished goods inventory
- Accumulated costs are recorded as cost of goods sold on the income statement
Question 8: Why do organizations prepare specific strategic budgets?
- They show how many resources are needed to implement a business strategy
- They help identify where the main focus should be placed in an organization
- They give managers detailed information on costs in a company
- They allow managers to create more detailed plans
Question 9: Seaside Software Company is a decentralized company with management taking control at different levels. When looking at information flow, what type of budget should be implemented?
- Bottom-up budget
- Strategic budget
- Participative budget
- Top-down budget
Question 10: Sara's Cake Company uses the following materials in its cakes:
1 cup flour
0.25 cups sugar
2 eggs
0.25 cups cocoa powder
Here are the costs for each of the items:
Flour: $0.50 per cup
Sugar: $0.20 per cup
Eggs: $0.25 per egg
Cocoa: $0.80 per cup
What is the standard materials cost of a single cake?
- $2.25 per cake
- $1.25 per cake
- $1.05 per cake
- $1.00 per cake
Question 11: Sara's Cake Company needs to figure out what her labor cost is for baking each cake. She currently pays the following an hour:
$10 base hourly rate for bakers
$14 base hourly rate for sales representatives
$2 in payroll taxes per hour
$2 in health and fringe benefits per hour
It takes the following time to to bake a cake:
Mixing: 15 minutes
Baking: 1 hour
Frosting: 15 minutes
What is the standard cost for labor for baking a cake?
- $42 per cake
- $36 per cake
- $21 per cake
- $15 per cake
Question 12: Which one of the following budgets is the last component before creating budgeted (pro-forma) financial statements?
- Sales budget
- Direct labor budget
- Production budget
- Cash budget
Question 13: When creating a master budget, which one of the following is not directly related to manufacturing?
- Manufacturing overhead budget
- Cash budget
- Sales and administrative budget
- Sales budget
Question 14: B&B Used Car Sales likes to keep a minimum cash balance of $25,000. Last year, the company had sales of $225,000. Of those sales, $100,000 were made on account. The company made a gross profit of $75,000. At the end of the year, it had a cash deficit of $32,000. How much cash would B&B need to borrow in short-term loans to cover the cash requirements?
- $25,000
- $32,000
- $43,000
- $57,000
Question 15: Which of the following statements describes pro-forma financial statements?
- They are based on estimations of future investment
- They are based on estimations of future operations
- They are a combination of actual and estimated operations
- They are a combination of past and current operations
Question 16: Which of the following would be considered a goal of budget planning?
- To have management set budget goals through a top-down approach
- To define realistic goals that will contribute to the financial well-being of the company
- To analyze the financial and operation amounts for a specific project
- To decide the cost of the direct materials needed for production
Question 17: Hansen Company has prepared a budgeted income statement. Reported were the following amounts.
1. Sales revenue - $350,000
2. Cost of goods sold - $175,000
3. Variable operating expenses - $55,000
4. Fixed operating expenses - $11,000
What is the gross profit amount?
- $109,000
- $164,000
- $175,000
- $284,000