D196 PRACTICE QUESTIONS AND VERIFIED
ANSWERS
Manufacturing Overhead Budget - Answers - Which budget should include all
production costs other than those for direct materials and direct labor?
Accounts receivable - Answers - Which account is a common asset account?
Balance Sheet - Answers - On which financial statement would you see the valuation of
a company's asset account?
Preparing Reports - Answers - What is the final step in the accounting cycle?
Preparing financial statements - Answers - Which of the following is not an example of a
transaction?
Statement of Cash Flows - Answers - On which financial statement would you see cash
flows from financing activities?
SEC - Answers - Whose job is it to make sure that investors are provided with full and
fair information about publicly traded companies?
It distinguishes between current and long-term assets. - Answers - How does a
classified balance sheet provide useful information to a decision maker?
Uncontrollable costs should not be included in the performance evaluation measure of a
profit center manager. - Answers - In some companies, the performance measure for
profit center managers is heavily influenced by cost allocations downwards from
organizational units (such as company headquarters). Why is this a mistake?
Raw materials to make a product. - Answers - Which is an examples of a product cost?
Manufacturing Overhead - Answers - Which label is given to the cost of wages for
factory supervisors?
60% - Answers - A company reports the following data:
Price/unit = $20
Variable costs/unit = $12
Fixed costs = $12,000
Given this data, what is the variable cost ratio?
Actual costs exceed applied costs. - Answers - If overhead is underapplied, which
statement is true?
,Selling costs - Answers - Which of the following is NOT an example of a cost driver?
Marketing expense - Answers - Which item is a period cost?
Process Costing - Answers - Which overhead allocation method should be used for a
trash bag manufacturer?
Variable Costs - Answers - For the relevant range, which costs are approximately linear
within a certain range of production?
Cost-Volume-Profit Analysis - Answers - Which of the following focuses on how a
company's activity levels impact profits?
Job Order Costing - Answers - Which overhead allocation method should be used for an
automobile repair shop?
Factory supervisor wages, security guard wages, maintenance staff wages - Answers -
What are examples of indirect labor?
The grease used on machines that manufacture products - Answers - What is an
example of an indirect material?
Income taxes - Answers - Which of the following is NOT an operating expense
$175,000 - Answers - A company reports the following data:
Total sales rev = $275,000
Number of units sold = 25,000 units
Variable costs = $100,00
If the company is operating at its break-even points, what is the company's total
contribution margin?
As an expense - Answers - How are period costs reported on an income statement?
Advertising costs - Answers - Which item in an example of a controllable cost?
Assets increases; Liability increases - Answers - A company purchases equipment with
a note payable.
How does this transaction affect the paying company's accounting equation?
Increase expense - Answers - What is the impact of paying employee wages on the
accounting equation?
Owner's equity - Answers - Which account is summarized on the balance sheet?
, $75,000 COGS on income statement - Answers - A retail company purchased inventory
costing $100,000. By the end of the year, inventory costing $75,000 had been sold.
How is the cost of inventory reported in the financial statements?
Clothing Store - Answers - Which of the following is an example of a merchandising
company?
Manufacturing costs other than direct labor and direct materials - Answers - Actual
manufacturing overhead includes which of the following?
Large commercial and industrial construction,
Healthcare organization,
and Car manufacturing companies - Answers - Activity-based costing could be used by
which of the following companies?
Manufacturing overhead - Answers - How are the wages of production supervisors
classified in a manufacturing company?
Administrative expense - Answers - Which of the following is not an example of a cost
driver?
Cost of saws and hammers in constructing a house - Answers - What is not an example
of direct materials?
Less has been spent than anticipated for the level of achieved production - Answers -
Which best describes overapplied overhead?
An ABC (activity-based costing) system helps to provide more accurate product costing
and better decision making - Answers - Which statement is true with respect to activity-
based (ABC) systems?
Sales - Answers - What is the first budget that is prepared in a manufacturing business?
Costs, Revenue, Assets - Answers - What does a manager have control over in an
investment center?
The cost variance is favorable - Answers - If budgeted costs are higher than actual
costs, which statement is true?
Purchasing land - Answers - For purpose of cash flow classification in the statement of
cash flows, which item is an investing activity?
Balance Sheet
Statement of Cash Flows
ANSWERS
Manufacturing Overhead Budget - Answers - Which budget should include all
production costs other than those for direct materials and direct labor?
Accounts receivable - Answers - Which account is a common asset account?
Balance Sheet - Answers - On which financial statement would you see the valuation of
a company's asset account?
Preparing Reports - Answers - What is the final step in the accounting cycle?
Preparing financial statements - Answers - Which of the following is not an example of a
transaction?
Statement of Cash Flows - Answers - On which financial statement would you see cash
flows from financing activities?
SEC - Answers - Whose job is it to make sure that investors are provided with full and
fair information about publicly traded companies?
It distinguishes between current and long-term assets. - Answers - How does a
classified balance sheet provide useful information to a decision maker?
Uncontrollable costs should not be included in the performance evaluation measure of a
profit center manager. - Answers - In some companies, the performance measure for
profit center managers is heavily influenced by cost allocations downwards from
organizational units (such as company headquarters). Why is this a mistake?
Raw materials to make a product. - Answers - Which is an examples of a product cost?
Manufacturing Overhead - Answers - Which label is given to the cost of wages for
factory supervisors?
60% - Answers - A company reports the following data:
Price/unit = $20
Variable costs/unit = $12
Fixed costs = $12,000
Given this data, what is the variable cost ratio?
Actual costs exceed applied costs. - Answers - If overhead is underapplied, which
statement is true?
,Selling costs - Answers - Which of the following is NOT an example of a cost driver?
Marketing expense - Answers - Which item is a period cost?
Process Costing - Answers - Which overhead allocation method should be used for a
trash bag manufacturer?
Variable Costs - Answers - For the relevant range, which costs are approximately linear
within a certain range of production?
Cost-Volume-Profit Analysis - Answers - Which of the following focuses on how a
company's activity levels impact profits?
Job Order Costing - Answers - Which overhead allocation method should be used for an
automobile repair shop?
Factory supervisor wages, security guard wages, maintenance staff wages - Answers -
What are examples of indirect labor?
The grease used on machines that manufacture products - Answers - What is an
example of an indirect material?
Income taxes - Answers - Which of the following is NOT an operating expense
$175,000 - Answers - A company reports the following data:
Total sales rev = $275,000
Number of units sold = 25,000 units
Variable costs = $100,00
If the company is operating at its break-even points, what is the company's total
contribution margin?
As an expense - Answers - How are period costs reported on an income statement?
Advertising costs - Answers - Which item in an example of a controllable cost?
Assets increases; Liability increases - Answers - A company purchases equipment with
a note payable.
How does this transaction affect the paying company's accounting equation?
Increase expense - Answers - What is the impact of paying employee wages on the
accounting equation?
Owner's equity - Answers - Which account is summarized on the balance sheet?
, $75,000 COGS on income statement - Answers - A retail company purchased inventory
costing $100,000. By the end of the year, inventory costing $75,000 had been sold.
How is the cost of inventory reported in the financial statements?
Clothing Store - Answers - Which of the following is an example of a merchandising
company?
Manufacturing costs other than direct labor and direct materials - Answers - Actual
manufacturing overhead includes which of the following?
Large commercial and industrial construction,
Healthcare organization,
and Car manufacturing companies - Answers - Activity-based costing could be used by
which of the following companies?
Manufacturing overhead - Answers - How are the wages of production supervisors
classified in a manufacturing company?
Administrative expense - Answers - Which of the following is not an example of a cost
driver?
Cost of saws and hammers in constructing a house - Answers - What is not an example
of direct materials?
Less has been spent than anticipated for the level of achieved production - Answers -
Which best describes overapplied overhead?
An ABC (activity-based costing) system helps to provide more accurate product costing
and better decision making - Answers - Which statement is true with respect to activity-
based (ABC) systems?
Sales - Answers - What is the first budget that is prepared in a manufacturing business?
Costs, Revenue, Assets - Answers - What does a manager have control over in an
investment center?
The cost variance is favorable - Answers - If budgeted costs are higher than actual
costs, which statement is true?
Purchasing land - Answers - For purpose of cash flow classification in the statement of
cash flows, which item is an investing activity?
Balance Sheet
Statement of Cash Flows
