James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
Chapter 2 | MAAW's Textbook Table of Contents
1. The traditional inventory valuation methods include
a. absorption
costing and job order costing.
b. direct
costing and process costing.
c. absorption
costing and process costing.
d. direct
costing and job order costing.
e. absorption costing and direct costing.
2. The traditional cost accumulation methods include
a. absorption
costing and direct costing.
b. absorption
costing and job order costing.
c. direct
costing and process costing.
d. job order costing and process costing.
e. direct
costing and job order costing.
3. Normal historical costing must include
a. overhead allocations.
b. full absorption costing.
c. job order costing.
d. activity costing.
e. none of these.
4. In direct or variable costing,
a. only direct
manufacturing costs are assigned to product inventories.
b. all variable manufacturing costs are assigned to product
inventories.
c. all variable costs are assigned to product inventories.
d. costs are assigned to product inventories to obtain proper
matching.
e. none of these.
5. Contribution margin is equal to
a. Sales less variable cost of goods sold.
b. Sales less
gross profit.
c. Sales less variable cost of goods sold and variable
selling & administrative expenses.
d. Sales less manufacturing margin.
e. None of these.
6. Which of the following does not represent a product cost?
a. Indirect
material.
b. Factory
depreciation.
c. Indirect
labor.
d. Abnormal spoilage.
e. Direct
material.
7. Four types of inventory valuation methods include
a. Normal
historical, full absorption, direct and job order.
b. Full absorption, direct, throughput and activity based.
c. Job order, process, backflush and activity based.
d. Throughput, standard, periodic and direct.
e. None of these.
8. Three types of input measurement bases for a cost accounting system include
a. Activity
based, standard and job order.
b. Standard,
full absorption and direct.
c. Full
absorption, pure historical and normal historical.
d. Pure historical, normal historical, and standard.
e. None of
these.
9. Which of the following groups include only cost accumulation methods?
a. Activity
based, backflush and periodic.
b. Job order,
standard and full absorption.
c. Process, backflush and job order.
d. Direct, throughput and backflush.
e. None of
these.
10. Full Absorption costing is
a. a perpetual
inventory method.
b. a cost
accumulation method.
c. an inventory valuation method.
d. basic cost
system.
e. a cost flow
assumption.
11. A manufacturing plant where orders are processed to customer specifications would most likely use
a. Normal
historical costing.
b. Job order costing.
c. Full absorption costing.
d. Process costing.
e. Direct costing.
12. If cost of goods sold can be recorded at the time of sale, then the firm must be using
a. perpetual
inventories.
b. full
absorption costing.
c. normal
historical costing.
d. standard
costing.
e. Either a or d.
13. Activity costing refers to a product costing method that
a. is the same
as direct costing.
b. treats all
costs as variable and allocates them to products on the basis of the
transactions that drive the costs.
c. treats only
manufacturing costs as variable and allocates these costs to products on the
basis of transactions.
d. is a more
accurate product costing method acceptable for external reporting.
e. None of
these.
14. Which of the following methods indicate whether both fixed and variable manufacturing costs are capitalized in the inventory?
a. Either
historical costing or standard costing.
b. Either absorption costing or direct (or variable) costing.
c. Either job order costing or process costing.
d. Periodic or perpetual.
e. FIFO and weighted average.
15. Which of the following methods indicate whether manufacturing costs are accumulated by department or by customer?
a. Either
historical costing or standard costing.
b. Either
absorption costing or direct (or variable) costing.
c. Either job order costing or process costing.
d. Periodic or
perpetual.
e. FIFO and weighted average.
16. Which of the following methods represent cost flow assumptions?
a. Either
historical costing or standard costing.
b. Either
absorption costing or direct (or variable) costing.
c. Either job
order costing or process costing.
d. Periodic or
perpetual.
e. FIFO and weighted average.
17. Which of the groups below tend to need information on a more timely basis, i.e., more often?
a. Outside
investors and creditors.
b. Plant, production and operating managers.
c. Marketing,
product, business and senior managers.
d. The IRS.
e. The SEC.
18. If the dollar amount of work in process inventory increases during a period, then total manufacturing costs will be
a. greater than cost of goods manufactured.
b. less than
cost of goods manufactured.
c. greater than
cost of goods sold.
d. less than
cost of goods sold.
e. equal to cost
of goods manufactured but less than cost of goods sold.
19. If the dollar amounts of the work in process and finished goods inventories do not change during a period, we would expect total manufacturing cost to be
a. less than
cost of goods sold.
b. greater than
cost of goods sold.
c. equal to cost of goods sold.
d. a or b.
e. a, b or c.
| Assume the following information (in thousands of dollars) is given for the Soft Company: | |
|
Inventories: Beginning work in process: |
Sales $750 Direct materials
costs 200 Selling & Administrative costs: Variable
125
|
20. Cost of goods manufactured based on absorption costing is
a. 360
b. 476
c. 478
d. 480
e. 705
21. Cost of goods sold based on absorption costing is
a. 460
b. 480
c. 500
d. 495
e. None of these.
22. Gross profit is
a. 250
b. 270
c. 290
d. 375
e. None of these.
23. Net income before tax based on absorption costing is
a. 25
b. 27
c. 32
d. 30
e. None of these.
24. Cost of goods manufactured based on direct costing is
a. 360
b. 375
c. 385
d. 500
e. None of these.
25. Cost of goods sold based on direct costing is
a. 360
b. 375
c. 385
d. 500
e. None of these.
26. Manufacturing margin is
a. 390
b. 375
c. 265
d. 250
e. None of these.
27. Contribution margin is
a. 390
b. 375
c. 265
d. 250
e. None of these.
28. Net income before tax based on direct costing is
a. 25
b. 27
c. 32
d. 30
e. None of these.
29. Based on the information given in this problem, the following appears to have occurred.
a. The company
produced more than it sold.
b. The company produced less than it sold.
c. The company
produced the same amount that it sold.
d. There is no
logical way to answer this question.
| The following information is given for the Gulf Company: | |
| Beginning finished goods: Variable 40 Fixed 10 Ending finished goods: Variable 50 Fixed 20 |
Sales $1,000 Cost of goods manufactured: Variable 500 Fixed 300 Selling & Administrative costs: Variable 200 Fixed 100 |
No change occurred in the dollar amount of the work in process inventory during the period.
30. Gulf Company’s Gross profit is
a. 510
b. 180
c. 200
d. 220
e. None of these.
31. The Company’s Net income based on absorption costing is
a. 480
b. 200
c. -100
d. -80
e. Some other amount.
32. Gulf Company’s total Contribution margin is
a. 510
b. 320
c. 310
d. 95
e. Some other amount.
33. The Company’s Net income based on direct or variable costing is
a. -90
b. -80
c. -180
d. 120
e. Some other amount.
34. Based on the three generalizations associated with direct and absorption costing net income comparisons,
a. Gulf Company
appears to have sold more output than it produced.
b. Gulf Company appears to have sold less output than it
produced.
c. Gulf Company appears to have sold the same amount of
output it produced.
d. Gulf Company could have sold more or less output than it
produced.
e. There is no indication one way or the other concerning the
relationship between output and sales.
| The following financial results are given for the Max Company: | |
| Sales $840,000 Cost of goods manufactured: Variable 400,000 Fixed 150,000 Selling & Administrative costs: Variable 200,000 Fixed 100,000 |
Beginning finished goods: Variable 20,000 Fixed 10,000 Ending finished goods: Variable 30,000 Fixed 15,000 |
35. Max Company's gross profit is
a. 450,000
b. 535,000
c. 390,000
d. 305,000
e. 250,000
36. Max Company's contribution margin is
a. 450,000
b. 535,000
c. 390,000
d. 305,000
e. 250,000
37. Max Company's Net income under direct costing is
a. $5,000 > net income under absorption costing.
b. $5,000 < net income under absorption costing.
c. $15,000 >
net income under absorption costing.
d. $15,000 < net income under absorption.
e. none of the
above.
38. Max Company's financial results tend to indicate that
a. Max Company produced more products than it sold.
b. Max Company produced fewer products than it sold.
c. Max Company produced the same number of products that it
sold.
d. the relationship between the production of products and
sales is not indicated by the information given.
39. Proper matching is not obtained with direct costing because
a. fixed manufacturing costs are not accounted for in
accordance with GAAP.
b. fixed selling
and administrative costs are not accounted for in accordance with GAAP.
c. Variable
selling costs are not accounted for in accordance with GAAP.
d. a and b. e. a
and c.
40. When using absorption costing, product costs are the same as
a. manufacturing
costs.
b. inventoriable costs.
c. manufacturing, administrative and selling costs.
d. a and b.
e. all of the above.
41. Which of the following statements is conceptually incorrect?
a. All expired
costs represent expenses.
b. All unexpired costs represent assets.
c. All expenses represent expired costs.
d. All assets represent unexpired costs.
e. All assets
represent future benefits.
42. When total manufacturing costs are greater than the cost of goods manufactured
a. the inventory
of finished goods increases.
b. the inventory of finished goods decreases.
c. the inventory of work in process increases.
d. the inventory of work in process decreases.
e. b and d.
43. If total manufacturing costs are equal to the cost of goods manufactured and greater than cost of goods sold
a. the inventory of finished goods increases.
b. the inventory of finished goods decreases.
c. the inventory
of work in process increases.
d. the inventory of work in process decreases.
e. none of these.
44. Which of the following methods provides the greatest amount of incentive for management to produce more inventory than required to satisfy customer demand.
a. direct
costing.
b. absorption costing.
c. job order costing
d. process costing.
e. Historical costing.
| The following information given for the Sola Company: | |
|
Inventories: Beginning work in process: Variable $50 Fixed 30 Ending work in process: Variable 60 Fixed 40 Beginning finished goods: Variable 200 Fixed 80 Ending finished goods: Variable 100 Fixed 40 |
Sales $3,000 Manufacturing costs: Purchases of Direct materials 500 Beginning Direct materials costs 100 Ending Direct materials costs 60 Direct labor costs 400 Variable overhead costs 300 Fixed overhead costs 200 Selling & Administrative costs: Variable 300 Fixed 100 |
45. The cost of goods manufactured based on absorption costing is
a. 1,820
b. 1,440
c. 1,420
d. 1,400
e. Some other amount.
46. The cost of goods sold for absorption costing is
a. 1,400
b. 1,560
c. 1,630
d. 1,960
e. None of these.
47. Before tax net income for absorption costing is
a. 1,160
b. 1,200
c. 1,370
d. 1,040
e. None of the above.
48. The cost of goods sold based on direct costing is
a. 1,200
b. 1,230
c. 1,240
d. 1,330
e. 1,360
49. Contribution margin is
a. 1,670
b. 1,500
c. 1,370
d. 1,340
e. None of these.
50. Before tax net income for direct costing is
a. 930
b. 1,070
c. 1,040
d. 1,370
e. Some other amount.
51. Based on the information given in this problem, the following appears to have occurred.
a. The company
produced more than it sold.
b. The company produced less than it sold.
c. The company
produced the same amount that it sold.
d. There is no
logical way to answer this question.