ACC2052 Test#3

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

____ 1. In cost-volume-profit analysis, all costs are classified into the following two categories:
a. mixed costs and variable costs
b. variable costs and fixed costs
c. discretionary costs and sunk costs
d. sunk costs and fixed costs
____ 2. The benefits of comparing actual performance of the operations against planned goals include all of the
following except:
a. preventing unplanned expenditures
b. determining how managers are performing against prior years' actual operating results
c. helping to establish spending priorities
d. providing prompt feedback to employees about their performance relative to the goal
____ 3. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture
of 2,500 units of product are as follows:

Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12

Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity = 10,000 hrs.):

Variable cost @ $2 per hour

Total variable cost, $18,000
Fixed cost @ $.80 per hour
Total fixed cost, $8,000

The amount of the factory overhead volume variance is:

a. $2,000 unfavorable
b. $2,000 favorable
c. $2,500 unfavorable
d. $0
____ 4. If fixed costs are $850,000 and variable costs are 75% of sales, what is the break-even point (dollars)?
a. $3,400,000
b. $2,550,000
c. $1,983,333
d. $1,133,333
____ 5. If a business had sales of $4,000,000, fixed costs of $1,200,000, a margin of safety of 25%, and a contribution
margin ratio of 40%, what was the break-even point?
a. $2,800,000
b. $1,000,000
c. $3,000,000
d. $4,800,000
____ 6. Cost-volume-profit analysis cannot be used if which of the following occurs?
a. Costs cannot be properly classified into fixed and variable costs
b. The per unit variable costs change
c. Per unit sales prices change
d. The total fixed costs change
____ 7. Production and sales estimates for March for the Finneaty Co. are as follows:

Estimated inventory (units), March 1 17,500

Desired inventory (unit), March 31 19,300
Expected sales volume (units):
Area W 6,000
Area X 7,000
Area Y 9,000
Unit sales price $15

The number of units expected to be sold in March is:

a. 22,000
b. 23,800
c. 20,200
d. 1,800
____ 8. McCabe Manufacturing Co.'s static budget at 8,000 units of production includes $40,000 for direct labor and
$4,000 for electric power. Total fixed costs are $23,000. At 9,000 units of production, a flexible budget
would show:
a. variable costs of $49,500 and $25,875 of fixed costs
b. variable costs of $49,500 and $23,000 of fixed costs
c. variable and fixed costs totaling $75,375
d. variable costs of $44,000 and $23,000 of fixed costs
____ 9. The use of standards for nonmanufacturing expenses is:
a. not useful
b. impossible
c. as common as it is for manufacturing costs
d. not as common as it is for manufacturing costs
____ 10. The budgetary unit of an organization which is led by a manager who has both the authority over and
responsibility for the unit's performance is known as a:
a. budgetary area
b. responsibility center
c. managerial department
d. control center
____ 11. Frogue Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $3.00

Actual kilograms of material used 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hrs.
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
 Fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
Maximum plant capacity 15,000 hours
Plant operated during the period 10,000 hours
Units completed during the period 5,000

The direct materials cost variance is:

a. $3,400 unfavorable
b. $3,400 favorable
c. $9,000 favorable
d. $9,000 unfavorable
____ 12. A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times
is termed:
a. master budgeting
b. continuous budgeting
c. zero-based budgeting
d. flexible budgeting
____ 13. Frogue Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $3.00

Actual kilograms of material used 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hours
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
Fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
100% of normal capacity 15,000 hours
Plant operated during the period 10,000 hours
Units completed during the period 5,000

The total factory overhead cost variance is:

a. $3,900 favorable
b. $8,100 favorable
c. $9,900 unfavorable
d. $8,100 unfavorable
____ 14. Below is budgeted production and sales information for Fleming Company for the month of December:

Product XXX Product ZZZ

Estimated beginning inventory 30,000 units 18,000 units
Desired ending inventory 32,000 units 15,000 units
Region I, anticipated sales 320,000 units 260,000 units
Region II, anticipated sales 190,000 units 130,000 units
 The unit selling price for product XXX is $5 and for product ZZZ is $14. Budgeted production for product
XXX during the month is:
a. 512,000 units
b. 510,000 units
c. 572,000 units
d. 542,000 units
____ 15. Agnew Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $1.76

Actual kilograms of material used 61,500
Actual hourly labor rate $20.60
Actual hours of production 8,850
Standard price per kilogram $1.80
Standard kilograms per completed unit 5 kilograms
Standard hourly labor rate $20.00
Standard time per completed unit 3/4 hr.
Actual total factory overhead $64,500
Fixed factory overhead $30,000
Standard fixed factory overhead rate $3.00 per labor hour
Standard variable factory overhead rate $5.00 per labor hour
Maximum plant capacity 10,000 hours
Plant operated during the period 9,000 hours
Units completed during the period 12,000

The direct materials price variance is:

a. $2,700 unfavorable
b. $2,460 unfavorable
c. $2,460 favorable
d. $2,700 favorable
____ 16. Mancini Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units,
estimated beginning inventory is 108,000 units, and desired ending inventory is 90,000 units. The quantities
of direct materials expected to be used for each unit of finished product are given below.

Material A .50 lb. per unit @ $ .60 per pound

Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound

The amount of direct material A purchased during the year is:

a. $186,600
b. $240,000
c. $210,600
d. $181,200
____ 17. The following data relate to direct labor costs for February:

Actual costs 7,700 hours at $13

Standard costs 7,000 hours at $9

What is the direct labor time variance?

a. $6,300 unfavorable
 b. $6,300 favorable
c. $9,100 favorable
d. $9,100 unfavorable
____ 18. Cost behavior refers to the manner in which:
a. a cost is allocated to products
b. a cost is estimated
c. a cost changes as the related activity changes
d. a cost is used in setting selling prices
____ 19. Christiansen and Sons' static budget for 10,000 units of production includes $50,000 for direct materials,
$44,000 for direct labor, utilities of $5,000, and supervisor salaries of $15,000. A flexible budget for 12,000
units of production would show:
a. total variable costs of $136,800
b. the same cost structure in total
c. direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor
salaries of $15,000
d. direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor
salaries of $18,000
____ 20. Wright Corporation began its operations on September 1 of the current year. Budgeted sales for the first three
months of business are $240,000, $300,000, and $420,000, respectively, for September, October, and
November. The company expects to sell 20% of its merchandise for cash. Of sales on account, 70% are
expected to be collected in the month of the sale, 25% in the month following the sale, and the remainder in
the following month. The cash collections from accounts receivable in September are:
a. $134,400
b. $240,000
c. $168,000
d. $192,000
____ 21. If fixed costs are $300,000, the unit selling price is $95, and the unit variable costs are $45, what is the break-
even sales (units)?
a. 6,000 units
b. 14,000 units
c. 3,500 units
d. 3,158 units
____ 22. Frogue Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $3.00

Actual kilograms of material used 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hours
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
Fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
100% of normal capacity 15,000 hours
Plant operated during the period 10,000 hours
Units completed during the period 5,000
 The factory overhead volume variance is:
a. $2,100 favorable
b. $2,100 unfavorable
c. $6,000 favorable
d. $12,000 unfavorable
____ 23. If the wage rate paid per hour differs from the standard wage rate per hour for direct labor, the variance is
termed:
a. variable variance
b. quantity variance
c. volume variance
d. rate variance
____ 24. Which of the graphs in Figure 19-1 illustrates the behavior of a total variable cost?

a. Graph 2
b. Graph 3
c. Graph 4
d. Graph 1
____ 25. The following data relate to direct materials costs for November:

Actual costs 4,600 pounds at $5.50

Standard costs 4,500 pounds at $6.00

What is the direct materials quantity variance?

a. $600 unfavorable
b. $600 favorable
 c. $550 unfavorable
d. $550 favorable
____ 26. Production and sales estimates for June are as follows:

Estimated inventory (units), June 1 8,000

Desired inventory (units), June 30 9,000
Expected sales volume (units):
Area X 3,000
Area Y 4,000
Area Z 5,500
Unit sales price $20

The budgeted total sales for June is:

a. $200,000
b. $270,000
c. $250,000
d. $230,000
____ 27. Below is budgeted production and sales information for Fleming Company for the month of December:

Product XXX Product ZZZ

Estimated beginning inventory 30,000 units 18,000 units
Desired ending inventory 32,000 units 15,000 units
Region I, anticipated sales 320,000 units 260,000 units
Region II, anticipated sales 190,000 units 130,000 units

The unit selling price for product XXX is $5 and for product ZZZ is $14. Budgeted production for product
ZZZ during the month is:
a. 423,000 units
b. 387,000 units
c. 390,000 units
d. 405,000 units
____ 28. Mancini Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units,
estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of
direct materials expected to be used for each unit of finished product are given below.

Material A .50 lb. per unit @ $ .60 per pound

Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound

The amount of direct material C purchased during the year is:

a. $746,400
b. $724,800
c. $758,160
d. $824,400
____ 29. Which of the graphs in Figure 19-1 illustrates the nature of a mixed cost?
 a. Graph 3
b. Graph 4
c. Graph 1
d. Graph 2
____ 30. Kidder Company began its operations on March 31 of the current year. Projected manufacturing costs for the
first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June.
Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs.
Insurance was paid on March 31, and property taxes will be paid in November. Three-fourths of the remainder
of the manufacturing costs are expected to be paid in the month in which they are incurred, with the balance
to be paid in the following month. The cash payments for manufacturing in the month of May are:
a. $156,800
b. $146,400
c. $195,200
d. $166,400
____ 31. The budget that summarizes future plans for the acquisition of fixed assets is the:
a. direct materials purchases budget
b. capital expenditures budget
c. sales budget
d. production budget
____ 32. The cost of available but unused productive capacity is indicated by the:
a. direct labor cost time variance
b. direct labor cost rate variance
c. factory overhead cost volume variance
d. factory overhead cost controllable variance
____ 33. Standards that represent levels of operation that can be attained with reasonable effort are called:
 a. theoretical standards
b. normal standards
c. ideal standards
d. practical standards
____ 34. The following data relate to direct labor costs for the current period:

Standard costs 6,000 hours at $12.00

Actual costs 7,500 hours at $11.60

What is the direct labor rate variance?

a. $15,000 unfavorable
b. $3,000 favorable
c. $2,400 favorable
d. $17,400 unfavorable
____ 35. If a business had a margin of safety ratio of 20%, variable costs of 75% of sales, fixed costs of $240,000, a
break-even point of $960,000, and operating income of $60,000 for the current year, what are the current
year's sales?
a. $1,200,000
b. $1,260,000
c. $1,020,000
d. $1,040,000
____ 36. Frogue Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $3.00

Actual kilograms of material used 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hours
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
Fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
100% of normal capacity 15,000 hours
Plant operated during the period 10,000 hours
Units completed during the period 5,000

The factory overhead controllable variance is:

a. $6,000 favorable
b. $2,100 favorable
c. $6,000 unfavorable
d. $2,100 unfavorable
____ 37. When a business sells more than one product at varying selling prices, the business's break-even point can be
determined as long as the number of products does not exceed:
a. two
b. fifteen
c. there is no limit
 d. three
____ 38. If sales are $820,000, variable costs are 62% of sales, and operating income is $260,000, what is the
contribution margin ratio?
a. 38%
b. 53.1%
c. 62%
d. 32%
____ 39. The process of developing budget estimates by requiring all levels of management to estimate sales,
production, and other operating data as though operations were being initiated for the first time is referred to
as:
a. zero-based budgeting
b. continuous budgeting
c. flexible budgeting
d. master budgeting
____ 40. The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30
for fixed factory overhead) based on 100% capacity of 80,000 machine hours. The standard cost and the
actual cost of factory overhead for the production of 15,000 units during August were as follows:

Actual: Variable factory overhead $360,000

Fixed factory overhead 104,000
Standard: 60,000 hours at $7.50 450,000

What is the amount of the factory overhead controllable variance?

a. $14,000 unfavorable
b. $12,000 unfavorable
c. $12,000 favorable
d. $26,000 unfavorable
____ 41. Costs that remain constant in total dollar amount as the level of activity changes are called:
a. opportunity costs
b. fixed costs
c. mixed costs
d. variable costs
____ 42. Planning for capital expenditures is necessary for all of the following reasons except:
a. fixed assets may fall below minimum standards of efficiency
b. expansion may be necessary to meet increased demand
c. machinery and other fixed assets wear out
d. amounts spent for office equipment may be immaterial
____ 43. The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for
fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the
actual cost of factory overhead for the production of 5,000 units during May were as follows:

Standard: 25,000 hours at $10 $250,000

Actual: Variable factory overhead 202,500
Fixed factory overhead 60,000

What is the amount of the factory overhead volume variance?

a. $12,500 unfavorable
b. $10,000 unfavorable
c. $10,000 favorable
d. $12,500 favorable
____ 44. The first budget customarily prepared as part of an entity's master budget is the:
a. sales budget
b. production budget
c. cash budget
d. direct materials purchases
____ 45. Wright Corporation began its operations on September 1 of the current year. Budgeted sales for the first three
months of business are $240,000, $300,000, and $420,000, respectively, for September, October, and
November. The company expects to sell 20% of its merchandise for cash. Of sales on account, 70% are
expected to be collected in the month of the sale, 25% in the month following the sale, and the remainder in
the following month. The cash collections from accounts receivable in October are:
a. $210,000
b. $288,000
c. $240,000
d. $216,000
____ 46. O'Neill Co. has $296,000 in accounts receivable on January 1, 2000. Budgeted sales for January are
$860,000. O'Neill expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on
account, 75% are expected to be collected in the month of sale and the remainder the following month. The
January cash collections from sales are:
a. $468,000
b. $688,000
c. $812,000
d. $984,000
____ 47. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture
of 2,500 units of product are as follows:

Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12

Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity - 10,000 hrs.):

Variable cost @ $2 per hour

Total variable cost, $18,000
Fixed cost @ $.80 per hour
Total fixed cost, $8,000

The amount of the direct labor time variance is:

a. $1,140 unfavorable
b. $1,200 unfavorable
c. $1,140 favorable
d. $1,200 favorable
____ 48. Favorable volume variances may be harmful when:
a. supervisors fail to maintain an even flow of work
b. production in excess of normal capacity cannot be sold
c. machine repairs cause work stoppages
d. there are insufficient sales orders to keep the factory operating at normal capacity
____ 49. Frogue Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $3.00

Actual kilograms of material used. 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hours
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
Fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
Maximum plant capacity 15,000 hours
Plant operated during the period 10,000 hours
Units completed during the period 5,000

The direct labor cost variance is:

a. $1,310 favorable
b. $1,310 unfavorable
c. $2,290 favorable
d. $2,290 unfavorable
____ 50. The following data relate to direct labor costs for the current period:

Standard costs 9,000 hours at $5.50

Actual costs 8,750 hours at $5.75

What is the direct labor rate variance?

a. $1,438.00 favorable
b. $2,187.50 unfavorable
c. $1,375.00 favorable
d. $2,250.00 unfavorable
____ 51. The following data relate to direct labor costs for the current period:

Standard costs 7,500 hours at $11.60

Actual costs 6,000 hours at $12.00

What is the direct labor time variance?

a. $3,000 favorable
b. $2,400 favorable
c. $17,400 favorable
d. $15,000 unfavorable
____ 52. Production and sales estimates for June are as follows:

Estimated inventory (units), June 1 18,000

Desired inventory (units), June 30 19,000
Expected sales volume (units):
Area X 3,000
 Area Y 4,000
Area Z 5,500
Unit sales price $20

The number of units expected to be manufactured in June is:

a. 10,000
b. 11,500
c. 13,500
d. 12,500
____ 53. Costs that vary in total in direct proportion to changes in an activity level are called:
a. variable costs
b. sunk costs
c. fixed costs
d. differential costs
____ 54. Production estimates for August are as follows:

Estimated inventory (units), August 1 12,000

Desired inventory (units), August 31 9,000
Expected sales volume (units), August 75,000

For each unit produced, the direct materials requirements are as follows:

Direct material A ($5 per lb.) 3 lbs.

Direct material B ($18 per lb.) 1/2 lb.

The number of pounds of materials A and B required for August production is:
a. 234,000 lbs. of A; 39,000 lbs. of B
b. 225,000 lbs. of A; 37,500 lbs. of B
c. 216,000 lbs. of A; 36,000 lbs. of B
d. 216,000 lbs. of A; 72,000 lbs. of B
____ 55. The point where the profit line intersects the left vertical axis on the profit-volume chart represents:
a. the break-even point
b. the total fixed costs
c. the maximum possible operating loss
d. the maximum possible operating income
____ 56. Assuming that the Morrita Desk Co. purchases 8,000 feet of lumber at $5.50 per foot and the standard price
for direct materials is $5.00, the entry to record the purchase and unfavorable direct materials price variance
is:
a. Work in Process 44,000
Direct Materials Price Variance 4,000
Accounts Payable 40,000
b. Direct Materials 40,000
Direct Materials Price Variance 4,000
Accounts Payable 44,000
c. Direct Materials 40,000
Accounts Payable 40,000
d. Direct Materials 44,000
Direct Materials Price Variance 4,000
Accounts Payable 40,000
____ 57. Agnew Corporation uses a standard cost system. The following information was provided for the period that
just ended:
 Actual price per kilogram $1.76
Actual kilograms of material used 61,500
Actual hourly labor rate $20.60
Actual hours of production 8,850
Standard price per kilogram $1.80
Standard kilograms per completed unit 5 kilograms
Standard hourly labor rate $20.00
Standard time per completed unit 3/4 hr.
Actual total factory overhead $64,500
Fixed factory overhead $30,000
Standard fixed factory overhead rate $3.00 per labor hour
Standard variable factory overhead rate $5.00 per labor hour
Maximum plant capacity 10,000 hours
Plant operated during the period 9,000 hours
Units completed during the period 12,000

The factory overhead controllable variance is:

a. $10,500 unfavorable
b. $10,500 favorable
c. $7,500 favorable
d. $7,500 unfavorable
____ 58. Agnew Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $1.76

Actual kilograms of material used 61,500
Actual hourly labor rate $20.60
Actual hours of production 8,850
Standard price per kilogram $1.80
Standard kilograms per completed unit 5 kilograms
Standard hourly labor rate $20.00
Standard time per completed unit 3/4 hr.
Actual total factory overhead $64,500
Fixed factory overhead $30,000
Standard fixed factory overhead rate $3.00 per labor hour
Standard variable factory overhead rate $5.00 per labor hour
Maximum plant capacity 10,000 hours
Plant operated during the period 9,000 hours
Units completed during the period 12,000

The direct labor cost variance is:

a. $5,310 unfavorable
b. $2,310 favorable
c. $2,310 unfavorable
d. $8,310 favorable
____ 59. The graph of a variable cost when plotted against its related activity base appears as a:
a. straight line
b. circle
c. curved line
 d. rectangle
____ 60. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture
of 2,500 units of product are as follows:

Standard Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40

Actual Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12
Factory overhead (100% capacity - 10,000 hrs.):

Variable cost @ $2.08 per hour

Total variable cost, $18,720
Fixed cost @ $.83 per hour
Total fixed cost, $8,320

The amount of direct materials price variance is:

a. $1,875 favorable
b. $1,950 unfavorable
c. $1,875 unfavorable
d. $1,950 favorable
____ 61. A disadvantage of static budgets is that they:
a. start with a clean slate
b. do not show possible changes in underlying activity levels
c. cannot be used by service companies
d. show the expected results of a responsibility center for several levels of activity
____ 62. When management seeks to achieve personal departmental objectives that may work to the detriment of the
entire company, the manager is experiencing:
a. cushions
b. padding
c. budgetary slack
d. goal conflict
____ 63. The three most common cost behavior classifications are:
a. variable costs, product costs, and sunk costs
b. variable costs, period costs, and differential costs
c. fixed costs, variable costs, and mixed costs
d. variable costs, sunk costs, and opportunity costs
____ 64. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture
of 2,500 units of product are as follows:

Standard Costs
Direct materials 2,500 kilograms @ $8
Direct labor 7,500 hours @ $12

Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity = 10,000 hrs.):
 Variable cost @ $2 per hour
Total variable cost, $18,000
Fixed cost @ $.80 per hour
Total fixed cost, $8,000

The amount of the factory overhead controllable variance is:

a. $0
b. $3,000 unfavorable
c. $2,000 unfavorable
d. $3,000 favorable
____ 65. If fixed costs are $500,000 and the unit contribution margin is $40, what is the break-even point if fixed costs
are increased by $80,000?
a. 9,667
b. 12,500
c. 8,333
d. 14,500
____ 66. Scher Corporation sells product G for $150 per unit, the variable cost per unit is $105, the fixed costs are
$720,000, and Scher is in the 25% corporate tax bracket. What are the sales (dollars) required to earn a net
income (after tax) of $40,000?
a. $2,577,777
b. $2,933,400
c. $2,533,350
d. $2,400,000
____ 67. Estimated cash payments are planned reductions in cash from all of the following except:
a. payments for interest or dividends
b. capital expenditures
c. manufacturing and operating expenses
d. notes and accounts receivable collections
____ 68. If fixed costs are $1,200,000, the unit selling price is $200, and the unit variable costs are $120, what is the
amount of sales required to realize an operating income of $200,000?
a. 15,000 units
b. 10,000 units
c. 17,500 units
d. 11,667 units
____ 69. Below is budgeted production and sales information for Fleming Company for the month of December:

Product XXX Product ZZZ

Estimated beginning inventory 30,000 units 18,000 units
Desired ending inventory 32,000 units 15,000 units
Region I, anticipated sales 320,000 units 260,000 units
Region II, anticipated sales 190,000 units 130,000 units

The unit selling price for product XXX is $5 and for product ZZZ is $14. Budgeted sales for the month are:
a. $4,680,000
b. $6,692,000
c. $2,040,000
d. $8,010,000
____ 70. The following data relate to direct materials costs for November:
 Actual costs 4,600 pounds at $5.50
Standard costs 4,500 pounds at $6.00

What is the direct materials price variance?

a. $2,250 unfavorable
b. $2,300 favorable
c. $2,250 favorable
d. $1,700 unfavorable
____ 71. The standard fixed factory overhead rate is based on 100% capacity of 120,000 machine hours for Thompson
Inc. The standard costs and the actual costs of factory overhead for the production of 25,000 units during
March were as follows:

Actual: Factory overhead $950,000

Standard: 100,000 hours at $9.00 900,000

If there was a $60,000 unfavorable volume variance for March, what is the standard fixed factory overhead
cost rate?
a. $3.00
b. $6.67
c. $2.50
d. $.60
____ 72. If the price paid per unit differs from the standard price per unit for direct materials, the variance is termed:
a. price variance
b. variable variance
c. volume variance
d. controllable variance
____ 73. Production estimates for July are as follows:

Estimated inventory (units), July 1 8,500

Desired inventory (units), July 31 10,500
Expected sales volume (units), July 76,000

For each unit produced, the direct materials requirements are as follows:

Direct material A ($5 per lb.) 3 lbs.

Direct material B ($18 per lb.) 1/2 lb.

The total direct materials purchases of materials A and B required for July production is:
a. $1,080,000 for A; $1,296,000 for B
b. $1,125,000 for A; $675,000 for B
c. $1,080,000 for A; $648,000 for B
d. $1,170,000 for A; $702,000 for B
____ 74. Which of the following costs is a mixed cost?
a. Rental costs of $5,000 per month plus $.30 per machine hour of use
b. Straight-line depreciation on factory equipment
c. Electricity costs of $2 per kilowatt-hour
d. Salary of a factory supervisor
____ 75. Production and sales estimates for March for the Finneaty Co. are as follows:

Estimated inventory (units), March 1 17,500

 Desired inventory (unit), March 31 19,300

Expected sales volume (units):

Area M 6,000
Area L 7,000
Area O 9,000
Unit sales price $15

The number of units expected to be manufactured in March is:

a. 23,800
b. 1,800
c. 22,000
d. 20,200
____ 76. A series of budgets for varying rates of activity is termed a(n):
a. flexible budget
b. master budget
c. variable budget
d. activity budget
____ 77. Phipps Co. sells two products, Arks and Bins. Last year Phipps sold 12,000 units of Arks and 28,000 units of
Bins. Related data are:

Unit Selling Unit Variable Unit Contribution

Product Price Cost Margin
Arks $120 $80 $40
Bins 80 60 20

What was Phipps Co.'s sales mix last year?

a. 70% Arks, 30% Bins
b. 30% Arks, 70% Bins
c. 40% Arks, 20% Bins
d. 12% Arks, 28% Bins
____ 78. For January, sales revenue is $600,000; sales commissions are 5% of sales; the sales manager's salary is
$96,000; advertising expenses are $80,000; shipping expenses total 2% of sales; and miscellaneous selling
expenses are $2,100 plus 1/2 of 1% of sales. Total selling expenses for the month of January are:
a. $183,750
b. $223,100
c. $157,100
d. $182,100
____ 79. For February, sales revenue is $700,000; sales commissions are 5% of sales; the sales manager's salary is
$96,000; advertising expenses are $80,000; shipping expenses total 2% of sales; and miscellaneous selling
expenses are $2,100 plus 1/2 of 1% of sales. Total selling expenses for the month of February are:
a. $189,500
b. $185,650
c. $230,600
d. $196,100
____ 80. If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
a. increase or decrease, depending upon the percentage increase in wage rates
b. decrease
c. increase
d. remain the same
____ 81. Which of the graphs in Figure 19-1 illustrates the behavior of a total fixed cost?

a. Graph 3
b. Graph 4
c. Graph 1
d. Graph 2
____ 82. If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 200 units,
and the beginning inventory is 300 units, the number of units set forth in the production budget, representing
total production for the current period, is:
a. 6,900
b. 7,100
c. 7,200
d. 7,000
____ 83. Management accountants usually provide for a minimum cash balance in their cash budgets for which of the
following reasons:
a. stockholders demand a minimum cash balance
b. it is an important way of effectively managing cash
c. it provides a safety buffer for variations in estimates
d. to have funds available for major capital expenditures
____ 84. If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old
and new break-even sales (units) if the unit selling price increases by $5?
a. 6,000 units and 5,250 units
b. 9,000 units and 6,000 units
c. 18,000 units and 15,000 units
d. 9,000 units and 15,000 units
____ 85. Variances from standard costs are usually reported to:
a. creditors
b. suppliers
c. stockholders
d. management
____ 86. Which of the following conditions normally would not indicate that standard costs should be revised?
a. The world price of raw materials increased.
b. Actual costs differed from standard costs for the preceding week.
c. The engineering department has revised product specifications in responding to customer
suggestions.
d. The company has signed a new union contract which increases the factory wages on
average by $2.00 an hour.
____ 87. A formal written statement of management's plans for the future, expressed in financial terms, is a:
a. responsibility report
b. budget
c. performance report
d. gross profit report
____ 88. Agnew Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $1.76

Actual kilograms of material used 61,500
Actual hourly labor rate $20.60
Actual hours of production 8,850
Standard price per kilogram $1.80
Standard kilograms per completed unit 5 kilograms
Standard hourly labor rate $20.00
Standard time per completed unit 3/4 hr.
Actual total factory overhead $64,500
Fixed factory overhead $30,000
Standard fixed factory overhead rate $3.00 per labor hour
Standard variable factory overhead rate $5.00 per labor hour
Maximum plant capacity 10,000 hours
Plant operated during the period 9,000 hours
Units completed during the period 12,000

The direct labor time variance is:

a. $3,000 favorable
b. $5,310 favorable
c. $3,000 unfavorable
d. $5,310 unfavorable
____ 89. Which of the following budgets provides the starting point for the preparation of the direct labor cost budget?
a. Production budget
b. Sales budget
c. Direct materials purchases budget
d. Cash budget
____ 90. If fixed costs are $250,000, the unit selling price is $20, and the unit variable costs are $16, what is the break-
even sales (units) if the variable costs are decreased by $2?
a. 62,500 units
b. 41,667 units
c. 83,333 units
d. 12,500 units
____ 91. Phipps Co. sells two products, Arks and Bins. Last year Phipps sold 12,000 units of Arks and 28,000 units of
Bins. Related data are:
 Unit Selling Unit Variable Unit Contribution
Product Price Cost Margin
Arks $120 $80 $40
Bins 80 60 20

What was Phipps Co.'s total unit contribution margin?

a. $92
b. $60
c. $26
d. $20
____ 92. Variable costs as a percentage of sales for Leamon Inc. are 70%, current sales are $500,000, and fixed costs
are $150,000. How much will operating income change if sales increase by $60,000?
a. $50,000 decrease
b. $60,000 increase
c. $18,000 increase
d. $18,000 decrease
____ 93. At the end of the fiscal year, variances from standard costs are usually transferred to the:
a. direct labor account
b. cost of goods sold account
c. direct materials account
d. factory overhead account
____ 94. The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for
fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the
actual cost of factory overhead for the production of 5,000 units during May were as follows:

Standard: 25,000 hours at $10 $250,000

Actual: Variable factory overhead 202,500
Fixed factory overhead 60,000

What is the amount of the factory overhead controllable variance?

a. $10,000 unfavorable
b. $2,500 unfavorable
c. $2,500 favorable
d. $10,000 favorable
____ 95. Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service,
such as United Postal Service?
a. Number of trucks in service
b. Number of packages delivered
c. Number of trucks employed
d. Number of miles driven
____ 96. Periodic comparisons between planned objectives and actual performance are reported in:
a. master budgets
b. budgets
c. zero-base reports
d. budget performance reports
____ 97. The standard costs and actual costs for direct materials, direct labor, and factory overhead for the manufacture
of 2,500 units of product are as follows:

Standard Costs
Direct materials 2,500 kilograms @ $8
 Direct labor 7,500 hours @ $12

Actual Costs
Direct materials 2,600 kilograms @ $8.75
Direct labor 7,400 hours @ $11.40
Factory overhead (100% capacity - 10,000 hrs.):

Variable cost @ $2 per hour

Total variable cost, $18,000
Fixed cost @ $.80 per hour
Total fixed cost, $8,000

The amount of the direct materials quantity variance is:

a. $800 unfavorable
b. $875 favorable
c. $800 favorable
d. $875 unfavorable
____ 98. Production and sales estimates for April are as follows:

Estimated inventory (units), April 19,000

Desired inventory (units), April 30 18,000
Expected sales volume (units):
Area A 3,500
Area B 4,750
Area C 4,250
Unit sales price $20

The number of units expected to be manufactured in April is:

a. 13,500
b. 10,000
c. 11,500
d. 12,500
____ 99. Frogue Corporation uses a standard cost system. The following information was provided for the period that
just ended:

Actual price per kilogram $3.00

Actual kilograms of material used. 31,000
Actual hourly labor rate $18.10
Actual hours of production 4,900 labor hours
Standard price per kilogram $2.80
Standard kilograms per completed unit 6 kilograms
Standard hourly labor rate $18.00
Standard time per completed unit 1 hr.
Actual total factory overhead $34,900
Fixed factory overhead $18,000
Standard fixed factory overhead rate $1.20 per labor hour
Standard variable factory overhead rate $3.80 per labor hour
Maximum plant capacity 15,000 hours
Plant operated during the period 10,000 hours
Units completed during the period 5,000
 The direct labor rate variance is:
a. $490 unfavorable
b. $1,800 unfavorable
c. $1,800 favorable
d. $490 favorable
____ 100. Principal components of a master budget include which of the following?
a. Production budget
b. Sales budget
c. Capital expenditures budget
d. All of the above