10 exam-style questions with answers and explanations. Tap an answer to check yourself. When you're ready, take the scored version in the free practice test.
A company owns a machine it bought three years ago for $80,000. It could sell the machine today for $12,000 or keep it and use it on a new project. In deciding whether to use the machine on the new project, which amount is relevant?
Correct answer: B - The $12,000 current resale value
Maintenance cost was $46,000 at 8,000 machine hours and $34,000 at 5,000 machine hours. Using the high-low method, what is the variable cost per machine hour?
Correct answer: A - $4.00 per machine hour
A manufacturer incurred direct materials of $50,000, direct labor of $30,000, and manufacturing overhead of $40,000. What is the total conversion cost for the period?
Correct answer: D - $70,000
At the start of the year a company estimated manufacturing overhead of $600,000 and 40,000 direct labor hours. Actual overhead was $610,000 and actual direct labor hours were 42,000. What is the predetermined overhead rate per direct labor hour?
Correct answer: D - $15.00 per direct labor hour
Using weighted-average process costing, a department completed and transferred out 20,000 units and had 5,000 units in ending work in process that are 40% complete as to conversion costs. What are the equivalent units of production for conversion costs?
Correct answer: A - 22,000 units
Which of the following businesses would most appropriately use a process costing system rather than job-order costing?
Correct answer: C - A petroleum refinery producing gasoline
At year-end, a company finds that the manufacturing overhead it applied to production exceeded the actual overhead incurred. Assuming the amount is immaterial, the appropriate treatment is to:
Correct answer: B - Decrease cost of goods sold, because overhead was overapplied
A product sells for $50 per unit with variable costs of $30 per unit, and fixed costs are $200,000 per year. How many units must be sold to break even?
Correct answer: B - 10,000 units
A company has a contribution margin ratio of 25% and fixed costs of $150,000. What sales revenue is required to earn a target operating profit of $90,000?
Correct answer: A - $960,000
A company's degree of operating leverage is 3.0. If sales increase by 8%, by approximately what percentage will operating income increase?
Correct answer: C - 24%
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