WGU D559 Advanced Managerial Accounting: Exam 1
50 questions
1. Which of the following is a period cost?
A. Administrative salaries
B. Direct materials
C. Factory supervisor's salary
D. Factory utilities
Correct Answer: A. Administrative salaries
Rationale: Selling and administrative costs are period costs.
2. Which of the following is a product cost?
A. Depreciation on factory equipment
B. Sales commissions
C. Advertising
D. Office rent for headquarters
Correct Answer: A. Depreciation on factory equipment
Rationale: Factory depreciation is manufacturing overhead.
3. A manufacturer reports direct materials of $45,000, direct labor of $60,000 and manufacturing
overhead of $65,000. What is conversion cost?
A. $105,000
B. $170,000
C. $125,000
D. $110,000
Correct Answer: C. $125,000
Rationale: Conversion cost = direct labor + manufacturing overhead.
4. The high-low method estimates cost behavior using:
A. The periods with the highest and lowest costs
B. The periods with the highest and lowest activity levels
C. All data points
D. Only the most recent period
Correct Answer: B. The periods with the highest and lowest activity levels
Rationale: Activity, not cost, determines the points.
5. Contribution margin is:
A. Sales minus cost of goods sold
B. Sales minus fixed expenses
C. Net income plus fixed expenses minus taxes
D. Sales minus variable expenses
Correct Answer: D. Sales minus variable expenses
Rationale: It covers fixed costs and then provides profit.
6. A product sells for $105 and has variable costs of $42 per unit. What is the contribution
margin ratio?
A. 40.0%
B. 60.0%
C. 150.0%
D. 33.0%
Correct Answer: B. 60.0%
Rationale: CM ratio = ($105 - $42) / $105 = 60.0%.
, 7. Using the high-low method: at 4,000 machine-hours, maintenance cost was $52,000; at 13,000
machine-hours it was $106,000. What is the estimated fixed cost?
A. $52,000
B. $28,000
C. $82,000
D. $78,000
Correct Answer: B. $28,000
Rationale: Variable rate = $6.00; fixed cost = $106,000 - ($6.00 x 13,000) = $28,000.
8. Service firms such as law and consulting practices often use job-order costing because:
A. They produce identical units
B. They have no labor
C. They have only fixed costs
D. Each client engagement is different
Correct Answer: D. Each client engagement is different
Rationale: Costs are tracked by client or case.
9. When a job is completed, its cost is transferred from:
A. Work in Process to Finished Goods
B. Finished Goods to Work in Process
C. Raw Materials to Finished Goods
D. Finished Goods to Raw Materials
Correct Answer: A. Work in Process to Finished Goods
Rationale: COGS is recorded later when it is sold.
10. The predetermined overhead rate is $18 per direct labor-hour. Actual direct labor-hours were
41,000 and actual overhead was $733,000. What is the over- or underapplied overhead?
A. $5,000 underapplied
B. $5,000 overapplied
C. $23,000 overapplied
D. $10,000 overapplied
Correct Answer: B. $5,000 overapplied
Rationale: Applied = $18 x 41,000 = $738,000; actual $733,000 - applied = -$5,000, so overhead is
overapplied.
11. Job 47 used $1,000 of direct materials and $1,000 of direct labor (110 direct labor-hours).
Overhead is applied at $22 per direct labor-hour. What is the total cost of Job 47?
A. $4,420
B. $2,000
C. $2,022
D. $3,420
Correct Answer: A. $4,420
Rationale: $1,000 + $1,000 + (110 x $22) = $4,420.
12. A key difference between job-order and process costing is that process costing:
A. Tracks costs to unique jobs
B. Averages costs over many identical units
C. Does not use overhead
D. Does not use equivalent units
Correct Answer: B. Averages costs over many identical units
Rationale: Job costing tracks each job separately.
50 questions
1. Which of the following is a period cost?
A. Administrative salaries
B. Direct materials
C. Factory supervisor's salary
D. Factory utilities
Correct Answer: A. Administrative salaries
Rationale: Selling and administrative costs are period costs.
2. Which of the following is a product cost?
A. Depreciation on factory equipment
B. Sales commissions
C. Advertising
D. Office rent for headquarters
Correct Answer: A. Depreciation on factory equipment
Rationale: Factory depreciation is manufacturing overhead.
3. A manufacturer reports direct materials of $45,000, direct labor of $60,000 and manufacturing
overhead of $65,000. What is conversion cost?
A. $105,000
B. $170,000
C. $125,000
D. $110,000
Correct Answer: C. $125,000
Rationale: Conversion cost = direct labor + manufacturing overhead.
4. The high-low method estimates cost behavior using:
A. The periods with the highest and lowest costs
B. The periods with the highest and lowest activity levels
C. All data points
D. Only the most recent period
Correct Answer: B. The periods with the highest and lowest activity levels
Rationale: Activity, not cost, determines the points.
5. Contribution margin is:
A. Sales minus cost of goods sold
B. Sales minus fixed expenses
C. Net income plus fixed expenses minus taxes
D. Sales minus variable expenses
Correct Answer: D. Sales minus variable expenses
Rationale: It covers fixed costs and then provides profit.
6. A product sells for $105 and has variable costs of $42 per unit. What is the contribution
margin ratio?
A. 40.0%
B. 60.0%
C. 150.0%
D. 33.0%
Correct Answer: B. 60.0%
Rationale: CM ratio = ($105 - $42) / $105 = 60.0%.
, 7. Using the high-low method: at 4,000 machine-hours, maintenance cost was $52,000; at 13,000
machine-hours it was $106,000. What is the estimated fixed cost?
A. $52,000
B. $28,000
C. $82,000
D. $78,000
Correct Answer: B. $28,000
Rationale: Variable rate = $6.00; fixed cost = $106,000 - ($6.00 x 13,000) = $28,000.
8. Service firms such as law and consulting practices often use job-order costing because:
A. They produce identical units
B. They have no labor
C. They have only fixed costs
D. Each client engagement is different
Correct Answer: D. Each client engagement is different
Rationale: Costs are tracked by client or case.
9. When a job is completed, its cost is transferred from:
A. Work in Process to Finished Goods
B. Finished Goods to Work in Process
C. Raw Materials to Finished Goods
D. Finished Goods to Raw Materials
Correct Answer: A. Work in Process to Finished Goods
Rationale: COGS is recorded later when it is sold.
10. The predetermined overhead rate is $18 per direct labor-hour. Actual direct labor-hours were
41,000 and actual overhead was $733,000. What is the over- or underapplied overhead?
A. $5,000 underapplied
B. $5,000 overapplied
C. $23,000 overapplied
D. $10,000 overapplied
Correct Answer: B. $5,000 overapplied
Rationale: Applied = $18 x 41,000 = $738,000; actual $733,000 - applied = -$5,000, so overhead is
overapplied.
11. Job 47 used $1,000 of direct materials and $1,000 of direct labor (110 direct labor-hours).
Overhead is applied at $22 per direct labor-hour. What is the total cost of Job 47?
A. $4,420
B. $2,000
C. $2,022
D. $3,420
Correct Answer: A. $4,420
Rationale: $1,000 + $1,000 + (110 x $22) = $4,420.
12. A key difference between job-order and process costing is that process costing:
A. Tracks costs to unique jobs
B. Averages costs over many identical units
C. Does not use overhead
D. Does not use equivalent units
Correct Answer: B. Averages costs over many identical units
Rationale: Job costing tracks each job separately.
