Awash Valley College

Final exam for the course cost and management Accounting I

Maximum marks 55%
Instructor: Getahun D.
Write your:
Name -----------------------------------------
Id number ----------------------------------
Part I: Multiple Choices (1.5 marks each)
1. The collection of cost data in an organized way, such as in various categories such as materials, labor,
and manufacturing overhead, is called:

A. Cost application C. Cost assignment

B. Cost accumulation D. Cost reporting

2. Cost tracing is ________.

A. The assignment of direct costs to the chosen cost object
B. A function of cost allocation
C. The process of tracking both direct and indirect costs associated with a cost object
D. The process of determining the actual cost of the cost object
3. The three categories of inventories commonly found in many manufacturing companies are:
A. Direct materials, direct labor, and indirect manufacturing costs.
B. Purchased goods, period costs, and cost of goods sold.
C. Direct materials; work in process, and finished goods.
D. LIFO, FIFO, and weighted average.
4. When costs can be traced to a particular cost object in an economically feasible way, the cost is a:
A. Direct cost C. Allocated cost
B. Indirect cost D. Budgeted cost

5. All of the following are classified as product cost except;

A. Wage of machine operator D. Insurance on factory machinery
B. Salary of advertising staff E. None of the above
C. Property tax on production
equipment
6. The dual-rate cost-allocation method classifies costs in each cost pool into a:
A. Budgeted-cost pool and an actual-cost pool
B. Variable-cost sub pool and a fixed-cost sub pool
C. Used-capacity-cost pool and a practical-capacity-cost pool
D. Direct-cost pool and a reciprocal-cost pool

1|Page
7. Prime cost of ABC manufacturing company is Br. 500,000, direct material cost incurred is Br.
350,000 and conversion cost also Br.250, 000. How much is the total direct labor cost and indirect
cost respectively?
A. Br. 200,000 and Br. 50,000 D. 150,000 and 100,000
B. Br. 50,000 and Br.30, 000 E. none
C. Br. 50,000 and Br. 130, 000

8. The cost of lubricants used to grease a production machine in a manufacturing company is an

example of a(n):

A. Period cost C. Indirect material cost.

B. Direct material cost. D. None of the above

9. Prime cost and conversion cost share what common element of total cost?

A. Direct materials. C. Variable overhead.

B. Direct labor. D. Fixed overhead

10. The term that refers to costs incurred in the past that are not relevant to a decision is:

A. Marginal cost. C. Period cost.

B. Indirect cost. D. Sunk cost.

11. Property taxes on a company's factory building would be classified as:

A. Factory overhead cost D. Period cost
B. Direct material cost E. Direct labor cost
C. Opportunity cost
Use the following information for question No. 12 & 13

Fidel manufacturing organization incurred prime cost of $455,000 during the period, direct labor costs
were 3/4 of the prime costs. The conversion cost is 180% of direct labor cost.
12. What is the total Direct labor cost

A. $300,000 D. $341,250
B. $275,000 E. None of the above
C. $250,000

13. What is the total manufacturing overhead costs

A. 175,000 C. 225,000
B. 237,500 D. 273,000

2|Page
 E. None of the above

14. Financial accounting:………………………………………………

A. Focuses on the future and includes activities such as preparing next year's operating
budget
B. Must comply with IFRS (international financial reporting standard)
C. Reports include detailed information on the various operating segments of the business
such as product lines or departments
D. Is prepared for the use of department heads and other employees
15. Tanner Co. management desires cost information regarding their Rawhide brand.
The Rawhide brand is a(n):
A. Cost object. C. Cost assignment.
B. Cost driver. D. Actual cost.

16. When manufacturing overhead is applied to production, it is added to:

A. The Cost of Goods Sold account. D. The Finished Goods inventory

B. The Raw Materials account. account
C. The Work in Process account.

17. Over applied overhead means that:

A. The applied overhead cost was less than the actual overhead cost.
B. The applied overhead cost was greater than the actual overhead cost.
C. The estimated overhead cost was less than the actual overhead cost
D. The estimated overhead cost was less than the applied overhead cost
18. If the factory overhead account has a credit balance, factory overhead is said to be

A. Under applied C. Under absorbed

B. Over applied D. In error

19. A company is more likely to use a job cost system is

A. It manufactures a large volume of similar products
B. Its production is continuous
C. It manufactures products with unique characteristics
D. It uses a periodic inventory system
20. For which of the following would the job order cost system be appropriate?

A. Antique furniture repair shop C. Coal manufacturer

B. Rubber manufacturer D. Computer chip manufacturer

3|Page
21. If the factory overhead account has a credit balance, factory overhead is said to be

A. Under applied C. Under absorbed

B. Over applied D. In error

22. Which one of the following is true?

A. There is no over or under applied using actual costing.
B. Actual & Normal costing will result the same while allocating direct costs.
C. Concept of equivalent unit is introduced in case II of process costing system.
D. Actual & Normal costing will result different result in allocating manufacturing overhead
costs
E. All of the above
23. For the completion of work in process inventory of end of accounting period, additional costs
required are:
A. Direct materials C. Factory overhead E. None of the above
B. Direct labor D. Conversion cost
24. One is feature of process costing system
A. Outputs are manufactured in jobs.
B. Products are not identical to satisfy identification.
C. The system accumulates costs applicable to each specific job.
D. Outputs are produced on continuous flows of goods
25. In allocating costs from support department to operating department, which one of the following
method allows for partial recognition of the services rendered by support departments to other support
departments.
A. Direct method, C. Reciprocal method
B. Step down method D. All of the above
26. Over applied overhead means that:
A. The applied overhead cost was less than the actual overhead cost.
B. The applied overhead cost was greater than the actual overhead cost.
C. The estimated overhead cost was less than the actual overhead cost
D. The estimated overhead cost was less than the applied overhead cost
27. The method that allocates costs by explicitly including all the services rendered among all
support departments is the:
A. Direct method C. Reciprocal method
B. Step-down method D. Sequential method

4|Page
Answer question 28 to 29 based on the following information
Jake's Battery Company has two service departments, Maintenance and Personnel. Maintenance
department costs of $320,000 are allocated on the basis of budgeted maintenance-hours. Personnel
department costs of $80,000 are allocated based on the number of employees. The costs of operating
departments A and B are $160,000 and $240,000, respectively. Data on budgeted maintenance-hours and
number of employees are as follows:

Support department Production department

Maintenance Personnel A B
department department
Budgeted costs $320,000 $80,000 $160,000 $240,000
Budgeted maintenance - 800 960 640
hours
Number of employees 40 - 160 480

28. Using the direct method, what amount of Maintenance Department costs will be allocated to
Department B?
A. $96,000 C. $156,000
B. $128,000 D.$192,000
29. Using the direct method, what amount of Personnel Department costs will be allocated to
Department B?
A. $20,000 C. $48,000
B. $32,000 D.$60,000
Answer Sheet for Multiple choice questions

Q. No. Answer Q. No. Answer

1. 18
2. 19.
3. 20.
4. 21.
5. 22.
6. 23.
7. 24.
8. 25.
9. 26.
10. 27.
11. 28
12.
13.
14.
15.

5|Page
 16.
17.

Part Two Workout Questions

1. The following account balances (in thousands) for the: Addis manufacturing corporation in 2021.
January 1, 2021 December 31, 2021
Direct materials inventory………………………………….85000 75,000
Work-in-process inventory…………………………………67,000 56,000
Finished goods inventory………………………………….96, 000 98,000
Purchases of direct materials………………………………………………232,000
Direct manufacturing labor………………………………………………..95,000
Indirect manufacturing labor……………………………………………….34, 000
Indirect materials……………………………………………………………15,000
Depreciation—plant, building, and equipment…………………………….18, 000
Plant utilities………………………………………………………………...6,000
Repairs and maintenance—plant…………………………………………….5, 000
Equipment leasing costs…………………………………………………….28, 000
Marketing, distribution, and customer-service costs……………………….69, 000
General and administrative costs……………………………………………25,000
Required
A. Prepare a schedule for the cost of goods manufactured for 2021. (3 points)
B. Revenues for 2021 were $550 million. Prepare the income statement for 2021. (3 points)
Bonus
2. Suppose that Akaki General Metal Work Factory manufactures 35 and 37 gauge corrugated sheets.
The general cost pool is disintegrated in to several activity cost pools related to the production of the
two models.

Activity cost pool Budgeted overhead Cost driver Budgeted level of

cost cost driver
Machine setup $150,000 No. of setups 1,200 setups
Quality control 70,000 No. of inspections 500 inspections
Machine depreciation 50,000 Machine hours 50,000 hours
Engineering and design 80,000 Hours in design dept 10,000 hours

6|Page
The two models of the factory’s production have the following requirements.

6000 units of 35 gauge 5000 units of 37 gauge

No. of runs (setup) 500 700
No. of inspections 250 250
Machine hours 20,000 30,000
Hours in design dept 4,500 5,500
Required:
A. Compute activity cost pool rates (3 points)
B. Apply MOH cots to product lines (3 points)
C. Calculate normal product unit cost (2 point)

7|Page