Section No.

2
Tuesday 17/8/2021 Cost Accounting (1) Level 2
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Chapter 2 – Part 1
First: MCQs

1) The collection of cost data in an organized way, such as in various categories

such as materials, labor, and manufacturing overhead, is called:
A) cost application
B) cost accumulation
C) cost assignment
D) cost reporting

2) A cost system determines the cost of a cost object by ___ _.

A) accumulating and then assigning costs
B) accumulating costs
C) assigning and then accumulating costs
D) assigning costs

3) When costs can be traced to a particular cost object in an economically

feasible way, the cost is a:
A) direct cost
B) indirect cost
C) allocated cost
D) budgeted cost
4) Cost allocation is _____ _.
A) the process of tracking both direct and indirect costs associated with a cost object
B) the process of determining the opportunity cost of a cost object chosen
C ) the assignment of indirect costs to the chosen cost object
D) made based on material acquisition document

5) A manufacturing plant produces two product lines: golf equipment and

soccer equipment. An example of indirect cost for the soccer equipment line is
the ______ .
A) material used to make the soccer balls
B) labor to shape the leather used to make the soccer ball
C) material used to manufacture the soccer studs
D) property taxes paid on the land and building (plant)
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6) Which one of the following items is a direct cost?
A) Customer-service costs of a multiproduct firm; Product A is the cost object.
B) Printing costs incurred for payroll check processing; payroll check processing is the
cost object.
C)The salary of a maintenance supervisor in a multiproduct manufacturing plant;
Product B is the cost object.
D) Utility costs of the administrative offices; the accounting department is the cost
object.

7) Indirect manufacturing costs _____.

A) can be traced to the product that created the costs
B) can be easily identified with the cost object
C) generally, include the cost of material and the cost of labor
D) may include both variable and fixed costs

8) Which of the following is true of indirect costs?

A) Indirect costs are always considered sunk costs.

B) All indirect costs are included in cost of goods sold.
C) Indirect costs always vary in direct proportion to the level of production.
D) Indirect costs cannot be traced to a particular cost object in an economically
feasible way.
9) Which of the following would be considered an actual cost of a current period?
A) The $25 of materials in a manufactured chair that is ready to be shipped to the
customer
B) The $22 of direct material cost per unit assumed in the actual budget of a
manufacturer of chairs
C) The expected cost of materials for a chair as a result of engineering specifications
D) The average of historical material cost data for a chair manufactured in several
past accounting periods

10) Which of the following is true if the volume of sales increases (within a relevant
range)?
A) total fixed cost increases
B) total variable cost decreases
C) total variable cost increases
D) total fixed cost decreases
Answer: C
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11) Cost behavior refers to .
A) how costs react to a change in the level of activity
B) whether a cost is incurred in a manufacturing, merchandising, or service company
C) classifying costs as either perpetual or period costs
D) whether a particular expense is expensed in the same or the following period
Answer: A
12) Variable costs
A) are always indirect costs
B) increase in total when the actual level of activity increases
C) include most personnel costs and depreciation on machinery
D) are never considered a part of prime cost
Answer: B

13)The most likely cost driver of distribution costs is the _.

A) number of parts within the product
B) number of miles driven
C) number of products manufactured
D) number of production hours
Answer: B

14) Within the relevant range, if there is a change in the level of the cost driver, then
A) total fixed costs and total variable costs will change
B) total fixed costs and total variable costs will remain the same
C) total fixed costs will remain the same and total variable costs will change
D) total fixed costs will change and total variable costs will remain the same
Answer: C

15) Outside the relevant range, variable costs, such as direct material costs _.
A) will decrease proportionately with changes in sales volumes
B) will remain the same with changes in production volumes
C) will not change proportionately with changes in production volumes
D) will increase proportionately with changes in sales volumes
Answer: C
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16) Puritan Apparels is a clothing retailer. Unit costs associated with one of its
products, Product AHF 130, are as follows:
Direct materials $110
Direct manufacturing labor 90
Variable manufacturing overhead 45
Fixed manufacturing overhead 33
Sales commissions (2% of sales) 10
Administrative salaries 28
Total $316

16)What are the variable manufacturing costs per unit associated with ProductAHF
130?
A) $288
B) $200
C) $245
D) $255
Answer:C
Explanation: variable manufacturing costs = $110 + $90 + $45 = $245

17) Puritan Apparels is a clothing retailer. Unit costs associated with one of its
products, Product DCF 130, are as follows:
Direct materials $120
Direct manufacturing labor 40
Variable manufacturing overhead 15
Fixed manufacturing overhead 33
Sales commissions (2% of sales) 5
Administrative salaries 24
Total $237

What are the indirect nonmanufacturing variable costs per unit associated with
Product DCF130?
A) $5
B) $29
C) $160
D) $213
Answer:A
Explanation: Indirect variable costs = Sales commissions = $5
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18) The East Company manufactures several different products. Unit costs associated
with Product ORD105 are as follows:
Direct materials $54
Direct manufacturing labor 8
Variable manufacturing overhead 11
Fixed manufacturing overhead 25
Sales commissions (2% of sales) 5
Administrative salaries 12
Total $115

What is the percentage of the total fixed costs per unit associated with Product ORD105
with respect to total cost?
A) 37%
B) 32%
C) 15%
D) 26%
Answer: B
Explanation: $25 + 12 = $37/115 = 32%

19) When 25,000 units are produced, fixed costs are $21.00 per unit. Therefore, when
20,000 units are produced, fixed costs will _.
A) increase to $26.25 per unit
B) remain at $21.00 per unit
C) decrease to $16.80 per unit
D) total $420,000
Answer: A
Explanation: Fixed costs are $525,000 ($21.00 × 25,000 units). Dividing $525,000 by
20,000 units = $26.25.

20) When 24,000 units are produced, variable costs are $12.00 per unit. Therefore, when
18,000 units are produced _.
A) variable costs will remain at $12.00 per unit
B) variable costs will total $288,000
C) variable unit costs will increase to $16.00 per unit
D) variable unit costs will decrease to $9.00 per unit
Answer: A
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21) Wonderful Products Manufacturing Corp. provided the following information

for last month:

Sales $43,000
Variable costs 14,000
Fixed costs 11,000
Operating income $18,000

If sales reduce to half of the amount in the next month, what is the projected operating
income?
A) $2,000
B) $9,000
C) $18,000
D) $3,500
Answer: D
Explanation: Projected operating income = ($43,000 × 0.5) − ($14,000 × 0.5) −
$11,000 = $3,500.

22) Ridez Manufacturing currently produces 4,000 bicycles per month. The following
per unit data apply for sales to regular customers:

Direct materials $53

Direct manufacturing labor 10
Variable manufacturing overhead 12
Fixed manufacturing overhead 14
Total manufacturing costs $89

The plant has capacity for 6,000 bicycles and is considering expanding production to
5,000 bicycles. What is the per unit cost of producing 5,000 bicycles?
A) $91.80 per unit
B) $111.25 per unit
C) $69.80 per unit
D) $86.20 per unit
Answer: D
Explanation: Cost of producing 5,000 bicycles = [($53 + $10 + $12) × 5,000 units] +($14
× 4,000 units) = 431,000 ÷ 5,000 units = $86.20
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23) The following information pertains to Alleigh's Mannequins:

Manufacturing costs $2,170,000

Units manufactured 31,000
Units sold 28,500 units sold for $90 per unit
Beginning inventory 0 units

What is the amount of gross margin?

A) $1,995,000
B) $2,170,000
C) $2,565,000
D) $570,000
Answer: D
Explanation: 28,500 × ($90 - ($2,170,000 / 31,000)) = $570,000

24) Inventoriable costs are costs of a product that are considered .

A) assets in a company's balance sheet when the costs are incurred and that are
expensed as cost of goods sold only when the product is sold.
B) liabilities in a company's balance sheet when the costs are incurred and that are
expensed only when the product is sold.
C) assets in a company's income statement when the costs are capitalized and that are
expensed as cost of goods sold only when the product is sold.
D) liabilities in a company's income statement when the costs are capitalized and thatare
expensed only when the product is sold.
Answer: A

25) Costs expensed on the income statement in the accounting period incurred are
called .
A) direct costs
B) indirect costs
C) period costs
D) inventoriable costs
Answer: C
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26) Puritan Apparels is a clothing manufacturer. Unit costs associated with

one of itsproducts, Product FGS1156 are as follows:

Direct materials $80

Direct manufacturing labor 40
Variable manufacturing overhead 45
Fixed manufacturing overhead 31
Sales commissions (2% of sales) 7
Administrative salaries 20
Total $223
What are the inventoriable costs per unit associated with Product FGS1156?
A) $196
B) $165
C) $178
D) $143
Answer: A
Explanation: $80 + $40 + $45 + $31 = $196

27) Campus Apparels is a clothing maker. Unit costs associated with one of its
products, Product DCT121, are as follows:
Direct materials $160
Direct manufacturing labor 50
Variable manufacturing overhead 55
Fixed manufacturing overhead 32
Sales commissions (2% of sales) 13
Administrative salaries 17
Total $327

What are the period costs per unit associated with Product DCT121?
A) $33
B) $17
C) $30
D) $100
Answer: C
Explanation: $13 + 17 = $30