1. (TCO A) The variable portion of advertising costs is a (Points : 6)       Conversion YES… Period NO.

       Conversion YES …. Period YES.

       Conversion NO…. Period YES.

       Conversion NO…. Period NO.

Question 2.
2. (TCO A)  Fixed costs expressed on a per-unit basis (Points : 6)       will increase with increases in activity. 

       will decrease with increases in activity. 

       are not affected by activity. 

       should be ignored in making decisions because they cannot change. 

Question 3.
3. (TCO A) Property taxes on a company’s factory building would be classified as a(n) (Points : 6)       sunk cost.

       opportunity cost.

       period cost.

       variable cost.

       manufacturing cost.

Question 4.
4. (TCO A) When the activity level is expected to increase within the relevant range, what effects would be anticipated with respect to each of the following? (Points : 6)       Fixed costs per unit increase and variable costs per unit increase.

       Fixed costs per unit decrease and variable costs per unit do not change.

       Fixed costs per unit do not change and variable costs per unit do not change.

       Fixed costs per unit do not change and variable costs per unit increase.

Question 5.
5. (TCO F) When manufacturing overhead is applied to production, it is added to (Points : 6)       the cost of goods sold account.

       the raw materials account.

       the direct labor account.

       None of the above

Question 6.
6. (TCO F) Under a job-order costing system, the product being manufactured (Points : 6)       is homogeneous.

       passes from one manufacturing department to the next before being completed. 

       can be custom manufactured.

       has a unit cost that is easy to calculate by dividing total production costs by the units produced.

Question 7.
7. (TCO F) The FIFO method only provides a major advantage over the weighted-average method in that (Points : 6)       the calculation of equivalent units is less complex under the FIFO method.

       the FIFO method treats units in the beginning inventory as if they were started and completed during the current period.

       the FIFO method provides measurements of work done during the current period.

       the weighted-average method ignores units in the beginning and ending work-in-process inventories.

Question 8.
8. (TCO B) The contribution margin ratio always increases when the (Points : 6)       break-even point increases./label>

       break-even point decreases.

       variable expenses as a percentage of net sales decrease.

       variable expenses as a percentage of net sales increase.

Question 9.
9. (TCO B) To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following? (Points : 6)       Variable expense per unit

       Variable expense per unit/selling price per unit

       Fixed expense per unit

       (Selling price per unit – variable expense per unit)/selling price per unit

Question 10.
10. (TCO E) Under variable costing, (Points : 6)       net operating income will tend to move up and down in response to changes in levels of production.

       inventory costs will be lower than under absorption costing.

       net operating income will tend to vary inversely with production changes.

       net operating income will always be higher than under absorption costing.

1. (TCO A) The following data (in thousands of dollars) have been taken from the accounting records of Larop Corporation for the just-completed year.



Purchases of raw materials


Direct labor


Manufacturing overhead


Administrative expenses


Selling expenses


Raw materials inventory, beginning


Raw materials inventory, ending


Work-in-process inventory, beginning


Work-in-process inventory, ending


Finished goods inventory, beginning


Finished goods inventory, ending


Prepare a Schedule of Cost of Goods Manufactured statement in the text box below.

(Points : 15)      Question 2.
2. (TCO F) The Indiana Company manufactures a product that goes through three processing departments. Information relating to activity in the first department during June is given below.  Percentage Completed UnitsMaterialsConversionWork in process, June 170,00065%45%Work in process, Jun 3060,00075%65%

The department started 290,000 units into production during the month and transferred 300,000 completed units to the next department.

Required: Compute the equivalent units of production for the first department for June, assuming that the company uses the weighted-average method of accounting for units and costs.

(Points : 20)      Question 3.
3. (TCO B) A cement manufacturer has supplied the following data.

Tons of cement produced and sold


Sales revenue


Variable manufacturing expense


Fixed manufacturing expense


Variable selling and admin expense


Fixed selling and admin expense


Net operating income



  1. Calculate the company’s unit contribution margin.
  2. Calculate the company’s contribution margin ratio.
  3. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company’s net operating income be?

(Points : 25)      Question 4.
4. (TCO E) The Dean Company produces and sells a single product. The following data refer to the year just completed.Selling price$450  Units in beginning inventory0Units produced25,000Units sold22,000  Variable costs per unit: Direct materials$200Direct labor$50Variable manufacturing overhead$30Variable selling and admin$15  Fixed costs: Fixed manufacturing overhead$275,000Fixed selling and admin$230,000

Assume that direct labor is a variable cost.


  1. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.
  2. Prepare an income statement for the year using absorption costing.
  3. Prepare an income statement for the year using variable costing.

(Points : 30)      

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