1)

How much of the indirect advertising costs will be allocated to the Shoes Department if
newspaper ad space is the activity driver?
a. $2,480
b. $4,000
c. $4,340
d. $1,520

2) A company incurred $40,000 of common fixed costs and $60,000 of common variable costs. 

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These costs are to be allocated to Departments A and B. Data on capacity provided and capacity 

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used are as follows:

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Assume that common fixed costs are to be allocated to Departments A and B on the basis of 
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capacity provided and that common variable costs are to be allocated to Departments A and B on 
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the basis of capacity used. The fixed and variable costs allocated to Department A are
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  a.  Fixed: $20,000
Variable: $37,500
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b.  Fixed: $25,000
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Variable: $30,000
c.  Fixed: $25,000
Variable: $37,500
d.  Fixed: $20,000
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Variable: $30,000
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3) If the allocation is for product costing, the allocation of variable support department
costs would be calculated as
a. Budgeted rate x Actual usage.
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b. Actual rate x Actual usage.

c. Actual rate x Budgeted usage.
d. Budgeted rate x Budgeted usage.

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 4) Gerald Company manufactures books. Manufacturing a book takes 10 units of A1 and
1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200
units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The
ending inventory of A1 is planned to decrease 500 units in each of the next two months,
and the A2 inventory is expected to increase 5 units in each of the next two months.

Based on this information, the number of units of A1 that needs to be purchased by

Gerald during the first month is
a. 10,500 units.
b. 10,000 units.
c. 1,000 units.
d. 9,500 units.

5) The split-off point can best be defined as

a. the point at which a secondary product is recovered in the course of
manufacturing a primary product.

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b. the point in the production process where no further processing is needed.
c. the point at which you can get more of one product and less of another

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product.
d. the point at which joint products become separate and identifiable.

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6) Which of the following would be the most appropriate base for allocating the costs of
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the maintenance department?
a. square feet
b. number of employees
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c. direct labor hours

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d. machine hours
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7) Which of the following departments is NOT a support department?

a. health services
b. food services
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c. security
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d. bottling

8) Which of the following is NOT a component of the master budget?

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a. Budget to Actual Variance Analysis

b. Capital Budget
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c. Cost of Goods Sold Budget

d. Sales Budget

9) A common cost occurs

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a. when different resources are used to produce one output.

b. when the same resource is used in the output of two or more outputs.
c. when a resource is used by two or more companies.
d. when only one product or service is benefited.

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 10) Fixed support department costs should be allocated based on
a. current budgeted usage of service.
b. current actual usage of service.
c. practical capacity of user departments.
d. all of these.

11) Joint costs are allocated because of

a. financial reporting requirements.
b. tax reporting requirements.
c. IMA requirements.
d. financial reporting requirements and tax reporting requirements.

12) If production was budgeted at 400 units and the actual production was 420 units,
what would be the static budget variance for materials if the actual cost of materials was
$4,150 and the budgeted cost per unit is $10?
a. $150 U

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b. $100 F
c. $200 U

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d. $50 F

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13) Participative budgeting has which of the following potential problems?
a. rs e
encourages individual behavior that is in basic conflict with the goals of
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the organization
b. building slack into a budget
c. managers take action that will improve performance in the short run but
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has long-term consequences

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d. using budgets as a part of performance evaluations could lead to unethical

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behavior

14) Examples of producing departments include all of the following EXCEPT

a. accounting.
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b. mixing.
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c. packaging.
d. molding.
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15) Month Sales

April $200,000
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May $250,000
June $150,000
July $100,000
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Finished goods inventory as of March 31 4000 units

The company has a selling price of $10 per unit and expects to maintain ending
inventories equal to 20 percent of the next month's sales.

How many units are expected to be produced in April?

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 a. 20,000 units
b. 25,000 units
c. 19,000 units
d. 21,000 units

16) The cost of crude oil used in producing gasoline products is an example of
a. a by-product.
b. joint costs.
c. joint products.
d. common cost allocation.

17) Which of the following would generally be a by-product?

a. canned fish
b. cow hides
c. pineapples
d. hamburger

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18) In a merchandising organization, the merchandise purchases budget replaces what

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budget from a manufacturing firm?
a. the pro-forma income statement

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b. the production budget
c. rs e
the cost of goods sold budget
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d. the administrative expense budget

19) Canceco Company produces and sells pillows. It expects to sell 10,000 pillows in the
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year 2012 and had 1,000 pillows in finished goods inventory at the end of 2011. Canceco
aC s

would like to complete operations in the year 2012 with at least 1,250 completed pillows
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in inventory. There is no ending work-in-process inventory. The pillows sell for $5 each.

Refer to Figure 8-1. What would be the total sales for the year 2012?
a. $55,000
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b. $51,250
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c. $50,000
d. $56,250
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20)
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Utter Company does not divide costs into fixed and variable components. Personnel costs
are allocated based on the number of employees, and maintenance costs are allocated
based on machine hours.

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 Predetermined overhead rates for fabrication and assembly are based on direct labor
hours.

What is the amount of maintenance costs allocated to the Assembly Department using the
direct method? (Round amounts to dollars.)
a. $48,000.
b. $38,160.
c. $28,800.
d. $14,400.

21) Activity-based budgeting is most useful when

a. production processes are simple.
b. diverse products are produced.
c. volume levels are stable.
d. output is homogeneous.

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22) Judy's Company has a sales budget for next month of $150,000. Cost of goods sold is
expected to be 40 percent of sales. All goods are purchased in the month used and paid

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for in the month following purchase. The beginning inventory of merchandise is $5,000,
and an ending inventory of $6,000 is desired. Beginning accounts payable is $38,000.

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The cost of goods sold for next month is expected to be
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a. $40,000.
b. $60,000.
c. $89,000.
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d. $90,000.
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23) Oriental Lamp Company manufactures lamps. The estimated number of lamp sales
for the last three months of 2011 are as follows:

Month Sales
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October 10,000
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November 14,000
December 13,000
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Finished goods inventory at the end of September was 3,000 units. Ending finished goods
inventory is budgeted to equal 25 percent of the next month's sales. Oriental Lamp
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expects to sell the lamps for $25 each. January 2011 sales is projected at 16,000 lamps.

Refer to Figure 8-2. How many lamps should be produced in November?

a. 13,750 lamps
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b. 10,500 lamps
c. 11,000 lamps
d. 14,000 lamps

24) A budget that is developed around one particular level of activity is

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 a. a continuous budget.
b. a static budget.
c. an incremental budget.
d. none of these.

25) Suppose that a sawmill processes logs into four grades of lumber totaling 500,000
board feet as follows at a joint cost of $300,000:

Grade Board Feet Final Sales Value

First and second 75000 56250
No. 1 common200000 180000
No. 2 common100000 105000
No. 3 common125000 127500
What amount of joint costs will be allocated to first and second using the physical units
method?
a. $36,000

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b. $45,000
c. $225,000

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d. $300,000

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26) Which of the following is NOT a component of the Cash Budget?
a. rs e
Cash Disbursements
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b. Cash excess or deficiency
c. Financing
d. Sales forecast
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27) Jordan Manufacturing Company expects to incur the following per unit costs for 1,000 units of 
production:
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is
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What is the total amount of direct labor included in the direct labor budget?
a. $28,500
b. $7,500
c. $6,000
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d. $6

28) Staff Company allocates common Building Department costs to producing departments (P1 
and P2) based on space occupied, and it allocates common Personnel Department costs based 
on the number of employees. Space occupancy and employee data are as follows:

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 Buildin Personn Dept. Dept.
g el P1 P2
Space occupied 2,000 ft. 10,000 120,000 70,000
ft. ft. ft.
Employees 6 10 80 50

If Staff Company uses the sequential allocation method and the support department with
the highest percentage of interdepartmental services is allocated first, the ratio
representing the portion of Personnel Department costs allocated to Department P2 is
a. 50/130.
b. 50/140.
c. 90/140.
d. 50/146.

29) Which of the following is a financial budget?

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a. budgeted balance sheet
b. cost of goods sold budget

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c. production budget
d. marketing expense budget

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30) Oaks Company has two support departments, Maintenance Department (MD) and Personnel 
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Department (PD), and two producing departments, P1 and P2. The Maintenance Department 
costs of $30,000 are allocated on the basis of standard service used. The Personnel Department 
costs of $4,500 are allocated on the basis of number of employees. The direct costs of 
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Departments P1 and P2 are $9,000 and $15,000, respectively.
aC s
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ed d
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Using the sequential method, if the support department with the highest percentage of
interdepartmental service is allocated first, the cost of the Maintenance Department
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allocated to Department P1 is
a. $30,000.
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b. $4,500.
c. $20,000.
d. $18,000.
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31) Which of the following methods allocates support department costs?

a. reciprocal allocation method
b. sequential allocation method
c. direct allocation method
d. all of these

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 32) Wilson and Lewis, a large law firm, utilizes an internal centralized printing center to
serve its three departments: Individuals, Corporate, Trust. The costs of the printing
department include fixed costs of $69,190 and variable costs of $0.04 per page. Total
estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use
130,000; Corporate will use
165,000 and 35,000 from the trust area.

Refer to Figure 7-3. If the Corporate Department used 190,000 pages, what would be the
printing charges for the Corporate Department? (round to the nearest cent)
a. $39,900
b. $7,600
c. $42,195
d. $47,500

33) Rust Company has two support departments (S1 and S2) and two producing

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departments (X and Y). Department S1 serves Departments S2, X, and Y in the following
percentages, respectively: 10%, 35%, 55%. Department S2 serves Departments S1, X,

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and Y in the following percentages, respectively: 6%, 50%, and 44%. Direct department
costs for S1, S2, X, and Y are $15,000, $8,000, $105,000, and $97,500, respectively.

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What are the total costs to be allocated from Department S1?
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a. $15,000
b. $800
c. $15,573
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d. $9,500
aC s
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34) Which of the following industries would most likely have joint costs in production?
a. flour milling
b. dairy products
c. commercial fishing
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d. all of these
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35) Which of the following factors is NOT an advantage of preparing operating budgets?
a. It improves communication and coordination.
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b. It aids in the use of resources and employees by setting a benchmark that

can be used for the subsequent evaluation of performance.
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c. It provides resource information that can be used to improve decision

making.
d. It saves time and resources.
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34
) 

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