ACCOUNTING 526 TEST PAPER 2025/2026 QUESTIONS
WITH SOLUTION GRADED A+
✔✔Which of the following costs forms a part of prime cost as well as conversion cost?
a.Manufacturing overhead
b.The cost of direct materials
c.The cost of direct materials and direct labor
d.The cost of direct labor - ✔✔d.The cost of direct labor
✔✔The cost of delivering a product to a customer is an example of:
a.a conversion cost.
b.manufacturing overhead.
c.a prime cost.
d.a period cost. - ✔✔d.a period cost.
✔✔During May, the cost of goods manufactured was $60,000. The beginning finished
goods inventory for the month was $22,000, and the ending finished goods inventory
was $28,000. What was the cost of goods sold for May?
a.$110,000
b.$64,000
c.$32,000
d.$54,000 - ✔✔d.$54,000
28,000-22,000=6,000
60,000-6,000=54,000
✔✔The cost of research and development activities is classified as: - ✔✔administrative
cost.
✔✔Wages paid to a factory supervisor are treated as: - ✔✔a product cost but not as a
direct labor cost.
✔✔Direct material cost and direct labor cost are a part of: - ✔✔product costs.
✔✔Selling and administrative costs are treated as: - ✔✔period costs.
✔✔The following costs were incurred by ABC Company in January:
Direct materials$104,000
Direct labor79,000
Manufacturing overhead65,000
Selling expense25,000
Administrative salaries7,000
Determine ABC's total product cost.
a.$280,000
b.$266,000
,c.$298,000
d.$248,000 - ✔✔d.$248,000
$104,000 + $79,000 + $65,000 = $248,000
✔✔Beta Information Systems designs and installs accounting software. Last month,
Beta had software licensing costs of $11,000, software technicians' costs of $44,000,
and research and development costs of $69,000. Selling expenses totaled $7,800, and
administrative expenses amounted to $9,000. Sales totaled $190,000. Determine the
operating profit of Beta Information Systems.
a.$57,000
b.$66,000
c.$49,200
d.$58,200 - ✔✔c.$49,200
$190,000 - $11,000 - $44,000 - $69,000 - $7,800 - $9,000 = $49,200
✔✔Which of the following items appear on the income statement of a service firm?
a.Manufacturing overhead
b.Gross margin
c.Cost of goods sold
d.Operating expenses - ✔✔d.Operating expenses
✔✔Gross margin is computed as: - ✔✔sales revenue minus cost of goods sold.
✔✔Alpha Company manufactures computers. On July 1, Alpha had $76,000 of
materials in inventory. During the month of July, the company purchased $330,000 of
materials. On July 31, materials inventory equaled $47,000. Determine the cost of direct
materials used in production for the month of July.
a.$406,000
b.$301,000
c.$283,000
d.$359,000 - ✔✔d.$359,000
$76,000 + $330,000 - $47,000 = $359,000
✔✔The cost of goods sold is: - ✔✔the cost of producing the units that were sold during
a time period.
✔✔Which of the following is true of cost of goods sold?
a.It represents the total conversion cost of the goods manufactured.
b.It is an expense that appears on the income statement.
c.It includes all selling and administrative expenses.
d.The balance in this account is transferred to finished goods inventory. - ✔✔b.It is an
expense that appears on the income statement.
, ✔✔Manufacturing firms producing unique products require a: - ✔✔job-order costing
system.
✔✔Which of the following is the formula to compute unit cost under the job-order
costing system?
a.Process Costs ÷ Total Job Costs
b.Total Job Costs + Process Costs ÷ Output
c.Total Job Costs ÷ Output
d.Process Costs - Total Job Costs ÷ Output - ✔✔c.Total Job Costs ÷ Output
✔✔The predetermined overhead rate equals: - ✔✔estimated annual overhead divided
by estimated annual activity level.
✔✔the formula used to calculate applied overhead under normal costing. - ✔✔Applied
Overhead = Predetermined Overhead Rate × Actual Activity Level
✔✔The following information is related to Alpha Company:
Estimated manufacturing overhead costs for the year $249,000
Actual manufacturing overhead costs for the year $198,000
Estimated direct labor hours for the year 49,000
Actual direct labor hours for the year 35,000
Alpha uses normal costing and applies overhead on the basis of direct labor hours.The
predetermined overhead rate of Alpha Company is:
a.$7.1 per hour.
b.$4.0 per hour.
c.$8.8 per hour.
d.$5.1 per hour. - ✔✔d.$5.1 per hour.
$249,000 ÷ 49,000 hours = $5.1 per hour
✔✔A materials requisition form is used to: - ✔✔assign the cost of direct materials to a
job.
✔✔A job-order cost sheet includes information related to: - ✔✔direct materials, direct
labor, and applied overhead.
✔✔Theta Inc. uses normal costing and applies overhead based on direct material costs.
The predetermined overhead rate for the current year is 200% of direct material costs.
During the year, $3,600,000 of direct material costs and $3,800,000 of direct labor costs
were incurred. Theta's applied overhead is:
a.$1,900,000.
b.$1,800,000.
c.$7,200,000.
d.$7,400,000. - ✔✔c.$7,200,000.
WITH SOLUTION GRADED A+
✔✔Which of the following costs forms a part of prime cost as well as conversion cost?
a.Manufacturing overhead
b.The cost of direct materials
c.The cost of direct materials and direct labor
d.The cost of direct labor - ✔✔d.The cost of direct labor
✔✔The cost of delivering a product to a customer is an example of:
a.a conversion cost.
b.manufacturing overhead.
c.a prime cost.
d.a period cost. - ✔✔d.a period cost.
✔✔During May, the cost of goods manufactured was $60,000. The beginning finished
goods inventory for the month was $22,000, and the ending finished goods inventory
was $28,000. What was the cost of goods sold for May?
a.$110,000
b.$64,000
c.$32,000
d.$54,000 - ✔✔d.$54,000
28,000-22,000=6,000
60,000-6,000=54,000
✔✔The cost of research and development activities is classified as: - ✔✔administrative
cost.
✔✔Wages paid to a factory supervisor are treated as: - ✔✔a product cost but not as a
direct labor cost.
✔✔Direct material cost and direct labor cost are a part of: - ✔✔product costs.
✔✔Selling and administrative costs are treated as: - ✔✔period costs.
✔✔The following costs were incurred by ABC Company in January:
Direct materials$104,000
Direct labor79,000
Manufacturing overhead65,000
Selling expense25,000
Administrative salaries7,000
Determine ABC's total product cost.
a.$280,000
b.$266,000
,c.$298,000
d.$248,000 - ✔✔d.$248,000
$104,000 + $79,000 + $65,000 = $248,000
✔✔Beta Information Systems designs and installs accounting software. Last month,
Beta had software licensing costs of $11,000, software technicians' costs of $44,000,
and research and development costs of $69,000. Selling expenses totaled $7,800, and
administrative expenses amounted to $9,000. Sales totaled $190,000. Determine the
operating profit of Beta Information Systems.
a.$57,000
b.$66,000
c.$49,200
d.$58,200 - ✔✔c.$49,200
$190,000 - $11,000 - $44,000 - $69,000 - $7,800 - $9,000 = $49,200
✔✔Which of the following items appear on the income statement of a service firm?
a.Manufacturing overhead
b.Gross margin
c.Cost of goods sold
d.Operating expenses - ✔✔d.Operating expenses
✔✔Gross margin is computed as: - ✔✔sales revenue minus cost of goods sold.
✔✔Alpha Company manufactures computers. On July 1, Alpha had $76,000 of
materials in inventory. During the month of July, the company purchased $330,000 of
materials. On July 31, materials inventory equaled $47,000. Determine the cost of direct
materials used in production for the month of July.
a.$406,000
b.$301,000
c.$283,000
d.$359,000 - ✔✔d.$359,000
$76,000 + $330,000 - $47,000 = $359,000
✔✔The cost of goods sold is: - ✔✔the cost of producing the units that were sold during
a time period.
✔✔Which of the following is true of cost of goods sold?
a.It represents the total conversion cost of the goods manufactured.
b.It is an expense that appears on the income statement.
c.It includes all selling and administrative expenses.
d.The balance in this account is transferred to finished goods inventory. - ✔✔b.It is an
expense that appears on the income statement.
, ✔✔Manufacturing firms producing unique products require a: - ✔✔job-order costing
system.
✔✔Which of the following is the formula to compute unit cost under the job-order
costing system?
a.Process Costs ÷ Total Job Costs
b.Total Job Costs + Process Costs ÷ Output
c.Total Job Costs ÷ Output
d.Process Costs - Total Job Costs ÷ Output - ✔✔c.Total Job Costs ÷ Output
✔✔The predetermined overhead rate equals: - ✔✔estimated annual overhead divided
by estimated annual activity level.
✔✔the formula used to calculate applied overhead under normal costing. - ✔✔Applied
Overhead = Predetermined Overhead Rate × Actual Activity Level
✔✔The following information is related to Alpha Company:
Estimated manufacturing overhead costs for the year $249,000
Actual manufacturing overhead costs for the year $198,000
Estimated direct labor hours for the year 49,000
Actual direct labor hours for the year 35,000
Alpha uses normal costing and applies overhead on the basis of direct labor hours.The
predetermined overhead rate of Alpha Company is:
a.$7.1 per hour.
b.$4.0 per hour.
c.$8.8 per hour.
d.$5.1 per hour. - ✔✔d.$5.1 per hour.
$249,000 ÷ 49,000 hours = $5.1 per hour
✔✔A materials requisition form is used to: - ✔✔assign the cost of direct materials to a
job.
✔✔A job-order cost sheet includes information related to: - ✔✔direct materials, direct
labor, and applied overhead.
✔✔Theta Inc. uses normal costing and applies overhead based on direct material costs.
The predetermined overhead rate for the current year is 200% of direct material costs.
During the year, $3,600,000 of direct material costs and $3,800,000 of direct labor costs
were incurred. Theta's applied overhead is:
a.$1,900,000.
b.$1,800,000.
c.$7,200,000.
d.$7,400,000. - ✔✔c.$7,200,000.
