cma section c test 1

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CMA Part – 1 Section C (Questions Set 1)

Question 1 of 40 (1C1-LS06)

A manufacturing company has begun work on a batch of units at the beginning of the current period with no work in process at that point. The manufacturing process adds direct materials at the beginning of the process and adds direct labor and factory overhead evenly throughout the process. If the units are considered to be 60% complete in conversion costs at the end of the period, in which of the following accounts are the costs held?

A.    60% of conversion costs are in work-in-process inventory and direct materials costs are in finished goods inventory.

B.     60% of conversion costs are in factory overhead and direct materials costs are in finished goods inventory.

C.     All costs are in work-in-process inventory.

D.    Direct materials costs are in materials inventory and all conversion costs are in work-in-process inventory.

Question 2 of 40 (1C3-AT01)

Ace Inc. estimates its total materials handling costs at two production levels as follows.



What is the estimated total cost for handling 75,000 gallons?

A.    $153,000.

B.     $150,000.

C.     $146,000.

D.    $165,000.

Question 3 of 40 (1C2-CQ12)

Waller Co. uses a weighted-average process-costing system. Material B is added at two different points in the production of shirts, 40% is added when the units are 20% completed, and the remaining 60% of Material B is added when the units are 80% completed. At the end of the quarter, there are 22,000 shirts in process, all of which are 50% completed. With respect to Material B, the ending shirts in process represent how many equivalent units?

A.    11,000 units

B.     22,000 units

C.     4,400 units

D.    8,800 units

Question 4 of 40 (1C4-AT01)

Just-in-time production is also called

A.    Kaizen.

B.     Back flush costing.

C.     Lean manufacturing.

D.    Activity-based management.

Question 5 of 40 (1C4-AT12)

Which of the following is a limitation of a materials requirement planning (MRP) system?

A.    Potential inventory accumulation

B.     Additional inventory on hand to cover orders should product be damaged or lost

C.     Relies on demand forecasts

D.    Minimizes machine setup time

Question 6 of 40 (1C3-AT03)

In determining next year's overhead application rates, a company desires to focus on manufacturing capacity rather than output demand for its products. To derive a realisitic application rate, the denominator activity level should be based on

A.    maximum capacity.

B.     normal capacity.

C.     master-budget (expected annual) capacity.

D.    practical capacity.

Question 7 of 40 (1C3-CQ04)

Patterson Corporation expects to incur $70,000 of factory overhead and $60,000 of general and administrative costs next year. Direct labor costs at $5 per hour are expected to total $50,000. If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 20 hours of direct labor?

A.    $260

B.     $120

C.     $28

D.    $140

Question 8 of 40 (1C1-AT20)

In a standard cost system, the investigation of an unfavorable material usage variance should begin with the

A.    purchasing manager only.

B.     plant controller only.

C.     production manager only.

D.    production manager and/or the purchasing manager.

Question 9 of 40 (1C4-LS04)

A large semiconductor manufacturer plans to apply the theory of constraints (TOC) methodology to increase production capacity. How could a management accountant bestsupport the initiative?

A.    Design buffer management worksheets to facilitate quantitative analysis.

B.     Provide net profit, ROI, and cash flow data.

C.     Supply activity-based cost data.

D.    Determine outsourcing costs to off-load long-term critical constraints.

Question 10 of 40 (1C1-LS26)

A lumber products company incurs $140,000 in costs to produce 100,000 board-feet of finished lumber that sells for $1/board-foot and 50,000 board-feet of plywood that sells for $0.50/board-foot (sales value at split-off). Using the sales value at split-off method, what is the cost per board-foot for each joint product?

A.    $0.92/board-foot finished lumber; $0.48/board-foot plywood

B.     $0.64/board-foot finished lumber; $0.32/board-foot plywood

C.     $0.82/board-foot finished lumber; $0.44/board-foot plywood

D.    $1.12/board-foot finished lumber; $0.56/board-foot plywood

Question 11 of 40 (1C4-LS10)

Which contemporary productivity approach would a firm most likely use to prevent or overcome mismatches between supply and demand?

A.    Concurrent engineering

B.     Flexible manufacturing

C.     Computer-aided design

D.    Capacity planning

Question 12 of 40 (1C3-AT14)

Variable overhead is applied on the basis of standard direct labor hours. If for a given period the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be

A.    indeterminable since it is not related to the labor efficiency variance.

B.     favorable.

C.     the same amount as the labor efficiency variance.

D.    unfavorable.

Question 13 of 40 (1C5-LS15)

The concept of value added is best described as

A.    activities that convert resources into products and services consistent with external customer requirements.

B.     a series of transactions between employees or between internal customers and internal suppliers to deliver an end product.

C.     activities that can be eliminated with no deterioration in product service, functionality, performance, or quality in the eyes of the end user.

D.    a series of transactions between employees to deliver an end product to external customers and external suppliers.

Question 14 of 40 (1C2-AT21)

Activity-based costing (ABC) can eliminate cost distortions because ABC

A.    uses cost drivers that have a cause-and-effect relationship with the activities performed.

B.     recognizes interactions between different departments.

C.     establishes multiple cost pools.

D.    eliminates product variations.

Question 15 of 40 (1C2-CQ07)

Colt Company uses a weighted-average process cost system to account for the cost of producing a chemical compound. As part of production, Material B is added when the goods are 80% complete. Beginning work-in-process inventory for the current month was 20,000 units, 90% complete. During the month, 70,000 units were started in process, and 65,000 of these units were completed. There were no lost or spoiled units. If the ending inventory was 60% complete, the total equivalent units for Material B for the month was

A.    70,000 units.

B.     90,000 units.

C.     85,000 units.

D.    65,000 units.

Question 16 of 40 (1C3-CQ10)

Clipper Industries manufactures two types of scissors: a basic model, and a more durable fabric model. During the current year, Clipper accumulated the following summary information about its two products:

Using the high-low method, estimate the variable production costs of both the basic model and the fabric model.

A.    $9.78 variable cost rate for basic model, $9.21 variable cost rate for fabric model

B.     $9.12 variable cost rate for basic model, $9.78 variable cost rate for fabric model

C.     $9.21 variable cost rate for basic model, $9.78 variable cost rate for fabric model

D.    $9.12 variable cost rate for basic model, $9.78 variable cost rate for fabric model

Question 17 of 40 (1C3-LS10)

A company's maintenance department painted its tennis ball department, the racquet ball department, and its own department. The maintenance department uses square feet as its cost driver. The departments respectively have 80,000, 20,000, and 1,000 square feet of space. The total maintenance department costs before allocation are $60,000. Using the direct method of allocating service department costs, how much cost is allocated to each department?

A.    Maintenance department: $594; tennis balls: $47,525; racquet balls: $11,881

B.     Maintenance department: $0; tennis balls: $48,000; racquet balls: $12,000

C.     Maintenance department: $594; tennis balls: $35,644; racquet balls: $23,762

D.    Maintenance department: $0; tennis balls: $36,000; racquet balls: $24,000

Question 18 of 40 (1C1-AT11)

Petro-Chem Inc. is a small company that acquires high-grade crude oil from low-volume production wells owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil, and impure distillates. Petro-Chem does not have the technology or capacity to process these products further and sells most of its output each month to major refineries. There were no beginning inventories of finished goods or work-in-process on November 1. The production costs and output of Petro-Chem for November are as follows.



Production and sales:

1. Two Oil, 300,000 barrels produced; 80,000 barrels sold at $20 each.
2. Six Oil, 240,000 barrels produced; 120,000 barrels sold at $30 each.
3. Distillates, 120,000 barrels produced and sold at $15 per barrel.

The portion of the joint production costs assigned to Six Oil based upon physical output would be

A.     $3,636,363.

B.     $3,750,000.

C.     $1,818,181.

D.     $4,800,000.

Question 19 of 40 (1C2-AT07)

The use of activity-based costing normally results in

A.     equalizing set-up costs for all product lines.

B.     lower unit costs for low-volume products than is reported by traditional product costing.

C.     decreased set-up costs being charged to low-volume products.

D.     substantially greater unit costs for low-volume products than is reported by traditional product costing.

Question 20 of 40 (1C1-AT24)

Ardmore Enterprises uses a standard cost system in its small appliance division. The standard cost of manufacturing one unit of Zeb is as follows.



The budgeted variable factory overhead rate is $3 per labor hour, and the budgeted fixed factory overhead is $27,000 per month. During May, Ardmore produced 1,650 units of Zeb compared to a normal capacity of 1,800 units. The actual cost per unit was as follows.



The material price variance for May is

A.     $4,950 favorable.

B.     $14,355 unfavorable.

C.     $14,355 favorable.

D.     $4,950 unfavorable.

Question 21 of 40 (1C3-LS15)

Regarding plant-wide overhead rates, departmental overhead rates, and activity-based costing (ABC) overhead costing, which of the following is true?

A.     Each method uses only one cost driver (allocation base) but multiple cost pools.

B.     Cost drivers (allocation base) for all three methods are selected because of assumed or determined cause-and-effect relationships with costs.

C.     Departmental overhead is the most accurate of the methods.

D.     ABC overhead rates are the best selection for processes that are very homogeneous.

Question 22 of 40 (1C2-CQ14)

The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry White, the firm’s new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Listed below are activity and cost information relating to two of Chocolate Baker’s major products.

Using activity-based costing, which one of the following statements is correct?

A.     The muffins are $1,925 more profitable.

B.     The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous.

C.     The muffins are $2,000 more profitable.

D.     The cheesecakes are $75 more profitable.

Question 23 of 40 (1C1-LS21)

The following information was gathered for the current period of manufacturing production for a firm:

There were 100 units in beginning WIP, which were 20% complete in direct materials (DM) and 30% complete in conversion costs (CC). During the period 2,000 units were started in production and 1,900 were completed. Ending WIP inventory was 70% complete in DM and 60% complete in CC. If the firm uses the FIFO inventory method, what are equivalent units for the period?

A.     DM: 1,900 units; CC: 1,900 units

B.     DM: 2,040 units; CC: 2,020 units

C.     DM: 2,020 units; CC: 1,990 units

D.     DM: 2,000 units; CC: 1,980 units

Question 24 of 40 (1C5-AT04)

The cost of scrap, rework, and spoilage in a product quality cost system is categorized as a(n)

A.     prevention cost.

B.     internal failure cost.

C.     appraisal cost.

D.     external failure cost.

Question 25 of 40 (1C5-LS03)

Appraisal costs include all of the following except

A.     process inspection.

B.     spoilage.

C.     product testing.

D.     inspection.

Question 26 of 40 (1C4-AT14)

Antlers, Inc. produces a single product that sells for $150 per unit. The product is processed through the Cutting and Finishing departments. Additional data for these departments are as follows.



The current production rate is the budgeted rate for the entire year. Direct labor employees earn $20 per hour and the company has a "no layoff" policy in effect. What is the amount of the throughput contribution per unit as computed using the theory of constraints?

A.     $26.67.

B.     $46.67.

C.     $90.00.

D.     $76.67.

Question 27 of 40 (1C5-AT05)

The series of activities in which customer usefulness is added to the product is the definition of

A.     a value chain.

B.     activity-based costing.

C.     process value analysis.

D.     integrated manufacturing.

Question 28 of 40 (1C5-LS09)

Which of the following statements accurately differentiates activity-based costing (ABC) and activity-based management (ABM)?

A.     ABC provides actionable information; ABM is a source of explanatory data.

B.     ABC seeks to change costs and their drivers; ABM focuses on understanding costs and their drivers.

C.     ABC is predominately forward -looking; ABM is primarily historical.

D.     ABC provides information on process, product, and market performance; ABM finds ways to improve them.

Question 29 of 40 (1C3-AT11)

Nash Glassworks Company has budgeted fixed manufacturing overhead of $100,000 per month. The company uses absorption costing for both external and internal financial reporting purposes. Budgeted manufacturing overhead rates for cost allocations for the month of April using alternative unit output denominator levels are shown below.



Actual output for the month of April was 800,000 units of glassware.

When Nash Glassworks Company allocates fixed costs, management will select a capacity level to use as the denominator or volume. All of the following would be appropriate as the capacity level that approximates actual volume levels except

A.     normal capacity.

B.     theoretical capacity.

C.     expected annual capacity.

D.     master-budget capacity.

Question 30 of 40 (1C5-LS18)

Which of the following activities would not be considered as adding value?

A.     Client support services for product fulfillment

B.     Redesign of a product

C.     Rework of defective product

D.     Quality assurance activities

Question 31 of 40 (1C2-AT17)

Kimbeth Manufacturing uses a process cost system to manufacture dust density sensors for the mining industry. The following information pertains to operations for the month of May.



The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.

Costs pertaining to the month of May are as follows:

1. Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240.
2. Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.

Using the weighted-average method, the equivalent unit cost of materials for May is

A.     $4.60.

B.     $4.50.

C.     $4.12.

D.     $5.03.

Question 32 of 40 (1C2-LS05)

A firm wants to study how changing the steps for an operation can lower the overall cost of the operation. Which of the following will help the firm achieve its goals?

A.     Volume analysis for volume-based cost drivers

B.     Relevant range analysis

C.     Activity analysis for activity-based cost drivers

D.     Variable costing

Question 33 of 40 (1C5-LS16)

What purpose does an internal differentiation analysis serve a firm conducting a value-chain analysis that assesses competitive advantage?

A.     Determines sources of profitability and the relative cost of internal processes

B.     Evaluates opportunities for achieving relative cost advantages

C.     Identifies the customer's value perceptions of the firm's products and services

D.     Diagnoses the cost drivers for each value-creating process

Question 34 of 40 (1C2-CQ16)

Baldwin Printing Company uses a job order costing system and applies overhead based on machine hours. A total of 150,000 machine hours have been budgeted for the year. During the year, an order for 1,000 units was completed and incurred the following.

The accountant calculated the inventory cost of this order to be $4.30 per unit. The annual budgeted overhead in dollars was:

A.     $577,500.

B.     $645,000.

C.     $660,000.

D.     $600,000.

Question 35 of 40 (1C5-LS13)

A distinguishing feature of kaizen as a management philosophy is the concept of

A.     continuous improvement.

B.     cycle-time improvements.

C.     lower costs.

D.     design simplicity.

Question 36 of 40 (1C4-LS14)

What is the primary difference between exploiting and elevating a constraint while implementing the theory of constraints?

A.     Exploiting the constraint improves long-term profitability; elevating the constraint boosts short-term profitability.

B.     Exploiting the constraint increases capital investments; elevating the constraint does not.

C.     Exploiting the constraint improves short-term profitability; elevating the constraint looks at long-term profitability.

D.     Exploiting the constraint typically does not increase capital investments; elevating the constraint does.

Question 37 of 40 (1C1-CQ04)

Dremmon Corporation uses a standard cost accounting system. Data for the last fiscal year are as follows:

There were no price, efficiency, or spending variances for the year, and actual selling and administrative expenses equaled the budget amount. Any volume variance is written off to cost of goods sold in the year incurred. There are no work-in-process inventories.

Assuming that Dremmon used absorption costing, the amount of operating income earned in the last fiscal year was

A.     $30,000.

B.     $21,500.

C.     $28,000.

D.     $27,000.

Question 38 of 40 (1C1-LS07)

A company has a beginning material inventory of $50,000, makes purchases of $20,000, and has an ending materials inventory of $30,000. If its beginning work-in-process (WIP) inventory is $100,000 and ending WIP inventory is $60,000 and its conversion costs are $80,000, what is its cost of goods manufactured for the period?

A.     $160,000

B.     $180,000

C.     $360,000

D.     $220,000

Question 39 of 40 (1C4-LS13)

A potential advantage of a firm outsourcing its logistics, warehousing, and shipping is

A.     greater protection of proprietary information.

B.     reduced investments.

C.     increased quality control.

D.     improved employee morale.

Question 40 of 40 (1C4-LS01)

All of the following are examples of items to be found in a just-in-time (JIT) production system except

A.     strong supplier relationships requiring careful screening.

B.     reduced manufacturing lead time and setup time to run smaller batches.

C.     specialized workers stressing work-force expertise.

D.     use of manufacturing cells that group similar processes and minimize handling costs.

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