Chapter 2 quiz Budgeted costs are




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Chapter 2 quiz
1. Budgeted costs are:

a. the costs incurred this year

b. the costs incurred last year

*c. planned or forecasted costs

d. competitor’s costs

2. Cost assignment is:

a. always arbitrary

*b. includes tracing and allocating

c. the same as cost accumulation

d. finding the difference between budgeted and actual costs

3. Which of the following statements about the direct/indirect cost classification is NOT true?

a. Direct costs are always traced.

*b. Direct costs are always allocated.

c. The design of operations affects the direct/indirect classification.

d. The direct/indirect classification depends on the choice of cost object.

4. A manufacturing plant produces two product lines: football equipment and hockey equipment. Direct costs for the football equipment line are the:

a. beverages provided daily in the plant break room

*b. monthly lease payments for a specialized piece of equipment needed to manufacture the football helmet

c. salaries of the clerical staff that work in the company administrative offices

d. utilities paid for the manufacturing plant


5. An understanding of the underlying behavior of costs helps in all of the following EXCEPT:

a. costs can be better estimated as volume expands and contracts

b. true costs can be better evaluated

c. process inefficiencies can be better identified and as a result improved

*d. sales volume can be better estimated

6. 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

7. A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the:

a. average range

b. cost-allocation range

c. cost driver range

*d. relevant range

8. 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


9. When 10,000 units are produced, fixed costs are $14 per unit. Therefore, when 20,000 units are produced fixed costs will:

a. increase to $28 per unit

b. remain at $14 per unit

*c. decrease to $7 per unit

d. total $280,000
Total fixed costs = $14 x 10,000 units = $140,000

$140,000/20,000 units = $7




10. When 10,000 units are produced, variable costs are $6 per unit. Therefore, when 20,000 units are produced:

*a. variable costs will total $120,000

b. variable costs will total $60,000

c. variable unit costs will increase to $12 per unit

d. variable unit costs will decrease to $3 per unit
Total variable costs = $6 x units sold = $6 x 20,000 = $120,000
11. Christi Manufacturing provided the following information for last month:

Sales $10,000

Variable costs 3,000


Fixed costs 5,000

Operating income $2,000


If sales double next month, what is the projected operating income?

a. $4,000

b. $7,000

*c. $9,000

d. $12,000

Sales $10,000 x 2 = $20,000

Variable costs 3,000 x 2 = 6,000


Fixed costs 5,000 5,000

Operating income $2,000 $9,000


12. Wheel and Tire Manufacturing currently produces 1,000 tires per month. The following per unit data apply for sales to regular customers:


Direct materials $20

Direct manufacturing labor 3

Variable manufacturing overhead 6

Fixed manufacturing overhead 10

Total manufacturing costs $39
The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires?

a. $39,000

b. $78,000

*c. $68,000

d. $62,000
Variable costs 2,000 x ($20 + 3 + 6) = $58,000

Fixed costs = $10,000

Total $68,000
13. XIAN Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually. Currently XIAN produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?

a. Total manufacturing costs will increase and unit manufacturing costs will stay the same.

*b. Total manufacturing costs will increase and unit manufacturing costs will decrease.

c. Total manufacturing costs will stay the same and unit manufacturing costs will stay the same.

d. Total manufacturing costs will stay the same and unit manufacturing costs will decrease.
14. For a manufacturing company, direct material costs may be included in:

a. direct materials inventory only

b. merchandise inventory only

c. both work-in-process inventory and finished goods inventory

*d. direct materials inventory, work-in-process inventory, and finished goods inventory accounts
15. Period costs:

*a. are treated as expenses in the period they are incurred

b. are directly traceable to products

c. include direct labor

d. are also referred to as manufacturing overhead costs

16. The following information pertains to the Cannady Corporation:


Beginning work-in-process inventory $ 50,000

Ending work-in-process inventory 48,000

Beginning finished goods inventory 180,000

Ending finished goods inventory 195,000

Cost of goods manufactured 1,220,000
What is cost of goods sold?

a. $1,235,000

*b. $1,205,000

c. $1,218,000

d. $1,222,000
$180,000 + 1,220,000 - 195,000 = $1,205,000

17.


Beginning finished goods, 1/1/20X5 $ 40,000

Ending finished goods, 12/31/20X5 33,000

Cost of goods sold 250,000

Sales revenue 600,000

Operating expenses 120,000
What is cost of goods manufactured for 20X5?

a. $257,000

b. $350,000

*c. $243,000

d. $250,000
$33,000 + 250,000 - 40,000 = $243,000

18. The Singer Company manufactures several different products. Unit costs associated with Product ICT101 are as follows:

Direct materials $ 60

Direct manufacturing labor 10

Variable manufacturing overhead 18

Fixed manufacturing overhead 32

Sales commissions (2% of sales) 4

Administrative salaries 16

Total $140
What are the variable costs per unit associated with Product ICT101?

a. $18


b. $22

c. $88


*d. $92 (60 +10 + 18 +4)
19. (This is the same data as used in question 18 above and should also be used in question 20 below.) The Singer Company manufactures several different products. Unit costs associated with Product ICT101 are as follows:

Direct materials $ 60

Direct manufacturing labor 10

Variable manufacturing overhead 18

Fixed manufacturing overhead 32

Sales commissions (2% of sales) 4

Administrative salaries 16

Total $140

What are the fixed costs per unit associated with Product ICT101?

a. $102


*b. $48 (32 + 16)

c. $52


d. $32

20. What are the inventoriable costs per unit associated with Product ICT101?

*a. $120 (60 +10 + 18+32)

b. $140


c. $50

d. $88


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