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Multiple Choice Questions related to Cost Accounting.

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1.Under variable costing, which of the following costs would be included in finished goods inventory?

a.Advertising costs

b.Wages of carpenters in a furniture factory

c.Straight-line depreciation on factory equipment

d.Salary of vice-president of finance

2.The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available:




Unit manufacturing costs of the period



Unit operating expenses of the period



What would be the effect on income from operations if absorption costing is used rather than variable costing?

a. $44,000 increase

b.$40,000 decrease

c.$52,000 increase

d.$40,000 increase

3.Production and sales estimates for April are as follows:

Estimated inventory (units), April


Desired inventory (units), April 30


Expected sales volume (units):


Area A


Area B


Area C


Unit sales price


The number of units expected to be manufactured in April is:






4.The Martin Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Martin Company wishes to maintain a desired ending finished goods inventory of 20% of the following month’s sales.

What would be the budgeted production for March?





5.O'Neill Co. has $296,000 in accounts receivable on January 1. Budgeted sales for January are $860,000. O'Neill expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on account, 75% are expected to be collected in the month of sale and the remainder the following month. The January cash collections from sales are:






6.Kidder Company began its operations on March 31 of the current year. Projected manufacturing costs for the first three months of business are $156,800, $195,200, and $217,600, respectively, for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of the estimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes will be paid in November. Three-fourths of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month.

The cash payments for manufacturing in the month of April are:





7.When management seeks to achieve personal departmental objectives that may work to the detriment of the entire company, the manager is experiencing:


b.budgetary slack

c.goal conflict


8.A business operated at 100% of capacity during its first month and incurred the following costs:

Production Costs (5,000 units):    
Direct materials $70,000  
Direct labor 20,000  
Variable factory overhead 10,000  
Fixed factory overhead 2,000 $102,000
Operating expenses:    
Variable operating expenses $17,000  
Fixed operating expenses 1,000 18,000
  Variable Fixed
Unit manufacturing costs of the period $12.00 $5.00
Unit operating expenses of the period 4 1.5

If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the contribution margin that would be reported on the variable costing income statement?





9.Which of the following conditions would cause the break-even point to decrease?

a.Unit variable cost decreases

b.Total fixed costs increase

c.Unit variable cost increases

d.Unit selling price decreases

10.Which of the following would be included in the cost of a product manufactured according to variable costing?

a.Property taxes on factory buildings

b.Direct materials

c.Interest expense

d.Sales commissions

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