Cost Accounting

Question 1. Which of the following statements regarding differential costs is (are) false?

(A). The full cost fallacy occurs when a decision-maker fails to include fixed manufacturingoverhead in the product's cost.

(B). When deciding whether or not to accept a special order, a decision-maker should focus on differential costs instead of full costs.

only A.

only B.

neither A nor B is false.

both A and B are true.

Question 2. Given the following information, compute the total number of units for the period.

Direct labor hours 12,000
Direct labor cost $2.70 per hour
Direct materials cost $75 per unit
Total manufacturing cost $132,600
Fixed overhead cost $36,000
Variable overhead cost 50% of total labor cost

360

432

640

840

Question 3. The Shapely Company uses the high-low method to determine its cost equation. The following information was gathered for 2008:

Machine Hours Direct Labor Costs
Busiest month (June) 14,000 $200,000
Slowest month (December) 6,000 $120,000

If Shapely expects to use 10,000 machine hours next month, what are the estimated direct labor costs?

$160,000

$180,000

$175,000

$150,000

Question 4. Which of the following costs are irrelevant for a special order that will allow an organization to utilize some of its present idle capacity?

Direct materials

Indirect materials

Variable overhead

Unavoidable fixed overhead

Differential sales commission

Question 5. Determining the fixed and the variable components of a mixed cost can be accomplished by several methods. The cost of each method varies in direct relation to its degree of accuracy. Which of the following methods finds the fixed portion of a mixed cost before calculating the variable portion?

Scattergraph.

Highlow method.

Account analysis.

Linear regression.

Engineering approach.

Question 6. The Cost Flow Diagram includes all of the following costs except:

Selling expenses

Direct materials

Direct labor

Fixed manufacturing overhead

Variable manufacturing overhead

Question 7. A company is considering the use of a single-stage cost allocation process. Under what conditions would this choice be justified?

The company has many service departments but only one production department.

The company produces a few products with similar characteristics in a few departments.

The company has no service departments but many production departments.

The company produces a wide selection of products in a single production department.

Question 8. The loan department of a financial corporation makes loans to businesses. The costs of processing these loans are often several thousand dollars. All loans are initially evaluated using the same financial analysis software, but some require outside services such as appraisals and legal services. Which is the most appropriate costing system for the loan department?

job-order costing

process costing

operation costing

batch costing

Question 9. The Wiscow Manufacturing Company recorded overhead costs of $14,182 at an activity level of 4,200 machine hours and $8,748 at 2,300 machine hours. The records also indicated that overhead of $9,730 was incurred at 2,600 machine hours. What is the total estimated cost for 2,600 machine hours using the high-low method to estimate the cost equation?

$9,730

$9,606

$9,106

$8,788

Question 10. Which of the following statements regarding the two-stage cost allocation process is (are) false?

(A) If a company has three cost pools, then it will also have three different cost allocation bases.

(B) The selection of an appropriate cost allocation base is more important for single-stage cost allocation systems than for two-stage cost allocation systems.

Only A is false

Only B is false.

Both A and B are false.

Neither A nor B is false.