Part 1 Costing Systems_Sol 14 Aug 2022

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 3/66 Question 3 1.D.2.f tb.proc.c.007_1809 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: medium Bloom Code: 3 This month, the Roasting Department of Java Coffee Company completed and transferred out 75,000 one-pound bags of coffee. The department also had 25,000 units that were 80% complete with respect to conversion costs and no Beginning Work-in-Process. Using the FIFO method, how many equivalent units of production for conversion costs does the department have for the month? 70,000 80,000 Rationale  70,000 Incorrect. When calculating equivalent units of output, make sure to add, not subtract, the equivalent units in Ending Work-in-Process, and multiply by the percent complete, not the complement. Rationale  95,000 Correct. Since there is no beginning Work-in-Process Inventory, the equivalent units of output equal units transferred out plus the equivalent units in Ending Work-in-Process; therefore, the equivalent units of production equals 95,000 (75,000 + (25,000 × 80%)). Rationale  100,000 Incorrect. When calculating equivalent units of output, make sure to calculate the equivalent units of the Ending Work-in-Process. Rationale  80,000 Incorrect. When calculating equivalent units of output, make sure to multiply the units in Ending Work-in-Process by the percent complete, not the complement. 95,000 Correct 100,000 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 6/66 Question 5 1.D.2.f tb.proc.c.004_1809 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: medium Bloom Code: 3 The Cutting Department at the Blanc Company had 4,000 units in Beginning Work-in-Process, 9,000 units transferred out, and 2,000 units in Ending Work- in-Process. How many units were started by Blanc during the month? 11,000 units. 9,000 units Rationale  11,000 units. Incorrect. With units started of 11,000 units, units to account for (Beginning Work-in-Process + Units started) do not equal units accounted for (Units completed + Ending Work-in-Process). Rationale  6,000 units. Incorrect. With units started of 6,000 units, units to account for (Beginning Work-in-Process + Units started) do not equal units accounted for (Units completed + Ending Work-in-Process). Rationale  7,000 units. Correct. In process costing, units to account for (Beginning Work-in-Process + Units started) equals units accounted for (Units transferred out + Ending Work-in-Process). Units accounted for equals 11,000 (9,000 + 2,000); therefore, units started is calculated as follows: Units started + 4,000 = 11,000 Units started = 11,000 − 4,000 = 7,000 Rationale  9,000 units Incorrect. With units started of 9,000 units, units to account for (Beginning Work-in-Process + Units started) do not equal units accounted for (Units completed + Ending Work-in-Process). 7,000 units. Correct 6,000 units. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 9/66 Question 8 1.D.2.c 1C2-LS19 LOS: 1.D.2.c Lesson Reference: Process Costing Difficulty: medium Bloom Code: 3 A company that uses a process costing system inspects its goods at the 60% stage of completion. If the firm's ending work-in-process inventory is 80% complete, how would the firm account for its normal and abnormal spoilage? * Source: Retired ICMA CMA Exam Questions. Both normal and abnormal spoilage costs would be added to the cost of the good units completed during the period. Normal spoilage costs would be added to the cost of the good units completed during the period; in contrast, abnormal spoilage costs would be written off as a loss. Both normal and abnormal spoilage costs would be written off as an expense of the period. Rationale  Both normal and abnormal spoilage costs would be added to the cost of the good units completed during the period. This answer is incorrect. The firm would not account for its normal and abnormal spoilage by adding both normal and abnormal spoilage costs to the cost of the good units completed during the period. Rationale  Normal spoilage costs would be allocated between the cost of good units completed during the period and the ending work-in-process inventory. In contrast, abnormal spoilage costs would be written off as a loss. If a firm has normal and abnormal spoilage, the normal spoilage costs would be allocated between the cost of good units completed during the period and the ending work-in-process inventory. In contrast, abnormal spoilage costs would be written off as a loss. Rationale  Normal spoilage costs would be added to the cost of the good units completed during the period; in contrast, abnormal spoilage costs would be written off as a loss. This answer is incorrect. The firm would not account for its normal spoilage by adding the entire cost to good units completed during the period if there is ending inventory. Rationale  Both normal and abnormal spoilage costs would be written off as an expense of the period. This answer is incorrect. Normal spoilage would not be written off as an expense of the period. Abnormal spoilage, however, will be written off as a loss. Normal spoilage costs would be allocated between the cost of good units completed during the period and the ending work-in-process inventory. In contrast, abnormal spoilage costs would be written off as a loss. Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 12/66 Question 11 1.D.2.b tb.job.oc.044_1809 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 3 Harmony Co. used $31,920 of direct materials, worked 840 direct labor hours, and utilized 560 machine hours to complete a custom fishing boat for a customer. Harmony's direct labor rate is $22.00 per hour and overhead is applied based on machine hours at $34.00 per hour. What is the total manufacturing cost for this custom boat? $78,960 $79,520 Rationale  $78,960 Incorrect. Overhead is incorrectly applied in this calculation. Overhead should be applied using machine hours, not direct labor hours. Rationale  $50,400 Incorrect. This amount is the direct materials plus the direct labor; however, it incorrectly excludes applied overhead. Rationale  $69,440 Correct. The total manufacturing cost equals direct materials plus direct labor plus applied overhead. The total manufacturing cost for the custom boat equals $69,440 ($31,920 + (840 × $22.00) + (560 × $34.00)). Rationale  $79,520 Incorrect. This amount is calculated as direct materials, plus direct labor, plus applied overhead, assuming the direct labor rate is $34.00 per hour; however, the direct labor rate is $22.00 per hour. $69,440 Correct $50,400 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 15/66 Question 13 1.D.2.b tb.job.oc.034_1809 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 4 Elaine's Fine Furniture has just started operations. Elaine's had the following job cost sheets for the month of January. Job Number Start Date End Date Delivery Date Total Cost J1-1 Jan 2 Jan 6 Jan 15 $19,582 J1-2 Jan 4 Jan 14 Jan 19 $10,631 J1-3 Jan 9 Jan 22 Jan 25 $7,526 J1-4 Jan 17 Feb 23 $6,312 J1-5 Jan 18 Jan 29 Feb 14 $3,856 J1-6 Jan 24 Jan 31 Feb 22 $2,033 J1-7 Jan 29 Feb 17 Feb 28 $17,522 J1-8 Jan 30 Feb 25 $10,267 What was the balance in Elaine's Finished Goods Inventory account as of January 31? $34,101 $23,411 Rationale  $37,739 Incorrect. This amount is the total of all jobs started, finished, and delivered in January, which totals Cost of Goods Sold for January, not Finished Goods Inventory. Rationale  $34,101 Incorrect. This amount is the total of all jobs that were started in January and had an end date in February, which totals Work-in-Process Inventory, not Finished Goods Inventory. Rationale  $5,889 Correct. Finished Goods Inventory as of January 31 is the total of all jobs with an end date in January but a delivery date in February, which are jobs J1-5 and J1-6; therefore, the Finished Goods Inventory balance equals $5,889 ($3,856 + $2,033). Rationale  $23,411 Incorrect. This amount is the total of jobs J1-5, J1-6, and J1-7. Make sure to include only those jobs with an end date in January in the Finished Goods Inventory as of January 31. $5,889 Correct $37,739 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 18/66 Question 16 1.D.2.h tb.ab.cost.008_1809 LOS: 1.D.2.h Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: medium Bloom Code: 3 Mandy Appliances manufactures toaster ovens. Each oven contains 15 parts totaling $35 in direct materials. Each oven requires 3 hours of machine time at $15 per machine hour, and 1.5 hours for inspection. The company has the following information regarding activities, activity drivers, and cost per driver units: Activity Activity Driver Cost per Driver Unit Machining Machine hours $3.75/machine hour Materials handling Number of parts $1.20/part Assembly Number of parts $0.85/part Inspection Inspection hours $11.80/inspection hour What is the cost of assembly per toaster oven? $18.00 $11.25 $17.70 Rationale  $18.00 Incorrect. This amount is the cost of materials handling per toaster oven. Make sure to use the correct cost per driver unit and the correct activity in the driver for assembly. Rationale  $12.75 Correct. The cost per driver unit for assembly is $0.85 per part, and each toaster oven has 15 parts; therefore, the cost of assembly per toaster oven is $12.75 ($0.85 × 15). Rationale  $11.25 Incorrect. This amount is the cost of machining per toaster oven. Make sure to use the correct cost per driver unit and the correct activity in the driver for assembly. Rationale  $17.70 Incorrect. This amount is the inspection cost per toaster oven. Make sure to use the correct cost per driver unit and the correct activity in the driver for assembly. $12.75 Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 21/66 Question 19 1.D.3.m 1C2-CQ14 LOS: 1.D.3.m Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: hard Bloom Code: 6 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. Muffins Cheesecake Revenue $53,000 $46,000 Cost of goods sold 26,000 21,000 Delivery Activity Number of deliveries 150 85 Average length of delivery 10 Minutes 15 Minutes Cost per hour for delivery $20.00 $20.00 Using activity-based costing, which one of the following statements is correct? The cheesecakes are $75 more profitable. The muffins are $2,000 more profitable. Rationale  The cheesecakes are $75 more profitable. This answer is incorrect. This answer only considers delivery costs and does not also consider the gross margin on the products. Rationale  The muffins are $2,000 more profitable. This answer is incorrect. This answer did not consider the delivery costs and only considers the gross margin on the products. Rationale  The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous. This answer is incorrect. The cheesecake earns more profit per delivery. Therefore, the cheesecake has a higher profitability as a percentage of sales than the muffins. Rationale  The muffins are $1,925 more profitable. The gross profit for muffins after assigning delivery costs would be calculated as: Gross profit, muffins = revenue − cost of goods sold − assigned delivery costs Gross profit, muffins = $53,000 − $26,000 − assigned delivery costs Gross profit, muffins = $27,000 − assigned delivery costs The assigned delivery costs are calculated as: Assigned delivery costs, muffins = (number of deliveries) × (cost per delivery) Assigned delivery costs, muffins = (150 deliveries) × (10 minutes ÷ 60 minutes) × ($20 per hour) = $500 Gross profit for muffins = $27,000 − $500 = $26,500 The muffins are $1,925 more profitable. Correct The muffins have a higher profitability as a percentage of sales and, therefore, are more advantageous. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 22/66 The gross profit for cheesecake after assigning delivery costs would be calculated as: Gross profit, cheesecake = revenue − cost of goods sold − assigned delivery costs Gross profit, cheesecake = $46,000 − $21,000 − assigned delivery costs Gross profit, cheesecake = $25,000 − assigned delivery costs The assigned delivery costs are calculated as: Assigned delivery costs, cheesecake = (number of deliveries) × (cost per delivery) Assigned delivery costs, cheesecake = (85 deliveries) × (15 minutes ÷ 60 minutes) × ($20 per hour) = $425 Gross profit for cheesecake = $25,000 − $425 = $24,575 The gross profit for cheesecake is $1,925 less than the gross profit for muffins. $26,500 − $24,575 = $1,925.

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 23/66 Question 20 1.D.2.b 1C2-CQ03 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: hard Bloom Code: 5 Loyal Co. produces three types of men's undershirts: T-shirts, V-neck shirts, and athletic shirts. In the Folding and Packaging Department, operations costing is used to apply costs to individual units, based on the standard time allowed to fold and package each type of undershirt. The standard time to fold and package each type of undershirt is as follows. T-shirt 40 seconds per shirt V-neck shirt 40 seconds per shirt Athletic shirt 20 seconds per shirt During the month of April, Loyal produced and sold 50,000 T-shirts, 30,000 V-neck shirts, and 20,000 athletic shirts. If costs in the Folding and Packaging Department were $78,200 during April, how much folding and packaging cost should be applied to each T-shirt? $0.0217. $1.5640. Rationale  $0.0217. This answer is incorrect. This answer represents the cost rate per second, not the cost applied to each T-shirt. Rationale  $0.7820. This answer is incorrect. This answer did not consider that different shirts take different amounts of time to produce and that the costs should be allocated accordingly. Rationale  $0.8689. The folding and packaging cost applied to each T-shirt can be calculated as: Folding and packaging cost applied = (40 seconds) × (cost rate per second) The cost rate per second = ($78,200) ÷ (total seconds) Cost rate per second = ($78,200) ÷ [(50,000 T-shirts) × (40 seconds per shirt) + (30,000 V-neck shirts) × (40 seconds per shirt) + (20,000 athletic shirts) × (20 seconds per shirt)] Cost rate per second = ($78,200) ÷ (2,000,000 seconds +1,200,000 seconds + 400,000 seconds) Cost rate per second = $78,200 ÷ 3,600,000 seconds Cost rate per second = $0.0217222 per second Cost applied to each T-shirt = (40 seconds) × (0.0217222 per second) = $0.8689. Rationale  $1.5640. This answer is incorrect. This answer divided the Folding and Packaging Department costs by the amount of T-shirts. However, the answer did not consider the other shirts that were also produced. $0.8689. Correct $0.7820. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 24/66 Question 21 1.D.2.a tb.job.oc.022_1809 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 What factors should a service company consider when determining whether to use process costing or job order costing? Whether the services are provided continuously. If they are continuous, process costing is appropriate; if they are not continuous, job order costing is appropriate. Whether the services are provided independently of other services. If they are independent, job order costing is appropriate; if they are not, process costing is appropriate. Whether a service is provided or a good is manufactured. If a service is provided, job order costing is appropriate; if a good is manufactured, process costing is appropriate. Rationale  Whether the services are provided continuously. If they are continuous, process costing is appropriate; if they are not continuous, job order costing is appropriate. Incorrect. Continuous production of services is not a factor to consider when determining whether to use process costing or job order costing. Rationale  Whether the services are provided independently of other services. If they are independent, job order costing is appropriate; if they are not, process costing is appropriate. Incorrect. Independence of services is not a factor to consider when determining whether to use process costing or job order costing. Rationale  Whether a service is provided or a good is manufactured. If a service is provided, job order costing is appropriate; if a good is manufactured, process costing is appropriate. Incorrect. This is not a factor to consider when determining whether to use process costing or job order costing because both manufacturing industries and service industries can use either type of costing system. Rationale  Whether the services provided require similar amounts of materials, labor, and overhead. If they require similar inputs, process costing is appropriate; if the inputs are not similar, job order costing is appropriate. Correct. Process costing is appropriate when all services provided require similar amounts of materials, labor, and overhead; while job order costing is appropriate when all services provided require unique inputs. Whether the services provided require similar amounts of materials, labor, and overhead. If they require similar inputs, process costing is appropriate; if the inputs are not similar, job order costing is appropriate. Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 25/66 Question 22 1.D.2.a tb.job.oc.011_1809 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 Which of the following indicates that direct materials have been moved from the storeroom to production? A purchase order. A customer invoice. Rationale  A purchase order. Incorrect. A purchase order means that materials will be added to the materials storeroom because of a purchase of materials. Rationale  A materials requisition slip. Correct. When materials are requisitioned, they are moved from the materials storeroom into production. Rationale  A job order cost sheet. Incorrect. A job order cost sheet accumulates the total of the direct materials, direct labor, and overhead applied to the job. Rationale  A customer invoice. Incorrect. A customer invoice means that the job has been completed and delivered, moving the total cost from Finished Goods Inventory to Cost of Goods Sold. A materials requisition slip. Correct A job order cost sheet. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 26/66 Question 23 1.D.2.b tb.job.oc.031_1809 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 3 Sugar Industries manufactures specialized candy dispensers. One of Sugar's customers ordered 500 candy dispensers, Job 317C, which was started in March and finished on March 31. The job cost sheet for Job 317C as of March 31 shows $1,750 in direct materials, 30 direct labor hours, and 40 machine hours. The labor rate is $18 per direct labor hour and overhead is applied at the rate of $25 per machine hour. What is the cost per candy dispenser as of March 31 for Job 317C? $6.08 $6.94 $4.58 Rationale  $6.08 Incorrect. When calculating applied overhead, make sure to use the correct driver (labor hours or machine hours). Rationale  $6.94 Incorrect. When calculating the amount of direct labor, make sure to use direct labor hours and not machine hours to calculate the total cost. Rationale  $4.58 Incorrect. This amount is the total of the materials plus the labor costs divided by number of units. Make sure to calculate applied overhead and add it to the amount posted to Finished Goods Inventory. Rationale  $6.58 Correct. The total cost of the job is materials plus labor plus overhead. The total cost equals $3,290 ($1,750 + (30 × $18) + (40 × $25)). The cost per unit equals total cost divided by the number of dispensers. The cost per unit = $6.58 per candy dispenser ($3,290 ÷ 500 dispensers). $6.58 Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 27/66 Question 24 1.D.2.b 1C2-LS12 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 4 A promotional department for a retailer uses job order costing. At the beginning of the period Job #154 had a work-in-process (WIP) inventory balance of $5,000. During the current period, Job #154 required $4,000 in direct materials and $6,000 in direct labor. The department has an overhead cost pool of $80,000 for all jobs. (The pool uses labor-hours as a cost-allocation base.) All jobs in the department consumed 10,000 labor-hours. If Job #154 used 1,000 labor-hours and sold for $34,000, what is its gross profit margin? $16,000. $19,000. $23,000. Rationale  $16,000. This answer is incorrect. This answer did not consider the costs in beginning work-in-process. Rationale  $11,000. To calculate the gross profit margin, first calculate the indirect cost rate by dividing the overhead cost by the total cost allocation base ($80,000 ÷ 10,000 = $8/labor-hour). Then multiply the indirect cost rate by the actual units of the allocation base for the job ($8/labor-hour × 1,000 labor-hours = $8,000). This amount plus the beginning work in process and current period direct materials and direct labor costs equals the total costs ($8,000 + $5,000 + $4,000 + $6,000 = $23,000). The gross profit margin is the profit less the total costs ($34,000 − $23,000 = $11,000). Rationale  $19,000. This answer is incorrect. This answer did not consider the overhead for the job. Rationale  $23,000. This answer is incorrect. This answer represents total costs for the job, not the gross profit margin. $11,000. Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 28/66 Question 25 1.D.2.f tb.proc.c.001_1809 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: medium Bloom Code: 3 Wilson Tech's production cost data for the current period is: Beginning Work-in-Process 0 units Units Started 16,000 units Units Transferred Out 9,800 units Ending Work-in-Process 6,200 units Materials are entered at the beginning of the process. The Ending Work-in-Process units are 40% complete as to conversion costs. Using the FIFO method, what are the equivalent units of production for materials? 12,280 units. 6,200 units. Rationale  12,280 units. Incorrect. If materials are entered at the beginning of the process, Ending Work-in-Process is 100%, not 40%, complete with respect to materials. Rationale  16,000 units. Correct. If materials are entered at the beginning of the process, Ending Work-in-Process is 100% complete with respect to materials; therefore, the equivalent units of production equals 16,000 units (9,800 + (6,200 × 100%)). Rationale  9,800 units. Incorrect. Equivalent units of production for materials includes the equivalent units of the units in Ending Work-in-Process as well as the units transferred out. Rationale  6,200 units. Incorrect. Equivalent units of production for materials includes the units transferred out as well as the equivalent units of the units in Ending Work- in-Process. 16,000 units. Correct 9,800 units. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 29/66 Question 26 1.D.2.a tb.job.oc.001_1809 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 Rubins Resources uses a process cost system to track manufacturing costs. Rubins likely makes: Cruise ships. Movies. Rationale  Cruise ships. Incorrect. Process costing is not appropriate when finished products are not identical. Cruise ships would have variation in size and features. Rationale  Movies. Incorrect. Process costing is not appropriate when finished products are not identical. Movies are individual in their length, content, and costs. Rationale  Gears. Correct. Process costing is appropriate for output where all the finished products are identical to each other. Rationale  Custom houses. Incorrect. Process costing is not appropriate when finished products are not identical. Custom houses are individual in their sizes and features. Gears. Correct Custom houses. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 30/66 Question 27 1.D.2.h 1D3-LS57 LOS: 1.D.2.h Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: medium Bloom Code: 3 Young Company is beginning operations, and is considering three alternative ways in which to allocate manufacturing overhead to individual units produced. Young can use a plantwide rate, departmental rates, or activity based costing. Young will produce many types of products in its single plant, and not all products will be processed through all departments. In which one of the following independent situations would reported net income for the first year be the same regardless of which overhead allocation method had been selected? * Source: Retired ICMA CMA Exam Questions. All production costs approach those costs that were budgeted. The sales mix does not vary from the mix that was budgeted. Rationale  All ending inventory balances are zero. If a period begins with no inventory balances, reported net income for the first year would be the same regardless of which overhead allocation method has been selected. Rationale  All manufacturing overhead is a fixed cost. This answer is incorrect. Net income for the first year would not be the same regardless of which overhead allocation method had been selected, even if all manufacturing overhead is a fixed cost. Rationale  All production costs approach those costs that were budgeted. This answer is incorrect. Net income for the first year would not be the same regardless of which overhead allocation method had been selected, even if all production costs approach those costs that were budgeted. Rationale  The sales mix does not vary from the mix that was budgeted. This answer is incorrect. Net income for the first year would not be the same regardless of which overhead allocation method had been selected, even if the sales mix does not vary from the mix that was budgeted. All ending inventory balances are zero. Correct All manufacturing overhead is a fixed cost. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 31/66 Question 28 1.D.2.a tb.job.oc.017_1809 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 A process cost accounting system would most likely be used for: Motion picture production. Custom home building. Rationale  Toy doll production. Correct. A process cost accounting system assumes each product has similar materials, labor, and overhead. Because each toy doll of the same model would have similar materials, labor, and overhead, a toy doll producer would be likely to use process cost accounting. Rationale  Motion picture production. Incorrect. A process cost accounting system assumes each product has similar materials, labor, and overhead. Because each motion picture is unique and requires different inputs, motion picture production would not be likely to use process cost accounting. Rationale  Custom home building. Incorrect. A process cost accounting system assumes each product has similar materials, labor, and overhead. Because each custom home is unique and requires different inputs, a custom home builder would not be likely to use process cost accounting. Rationale  Developing advertising campaigns. Incorrect. A process cost accounting system assumes each product has similar materials, labor, and overhead. Because each advertising campaign is unique and requires different inputs, an advertising company would not be likely to use process cost accounting. Toy doll production. Correct Developing advertising campaigns. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 32/66 Question 29 1.D.2.a tb.job.oc.013_1809 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 Tom worked 40 hours during the week ending February 28. On his time ticket, he recorded the following: Job 123 14 hours Job 124 8 hours Job 125 11 hours Machine maintenance 2 hours Breaks and travel 5 hours On Tom's time ticket, how many hours of labor will be allocated to indirect labor? 5 hours indirect labor. 33 hours indirect labor. Rationale  5 hours indirect labor. Incorrect. All hours that are not allocated to specific jobs, including machine maintenance, are considered indirect labor. Rationale  33 hours indirect labor. Incorrect. Hours that are allocated to specific jobs are considered direct labor, not indirect labor. Rationale  40 hours indirect labor. Incorrect. Hours that are allocated to specific jobs are considered direct labor; hours that are not allocated to specific jobs are considered indirect labor. Rationale  7 hours are indirect labor. Correct. The hours that are not allocated to specific jobs are considered indirect labor. In this example, it is the sum of the machine maintenance and breaks and travel hours, which equals 7 hours (2 hours + 5 hours). 7 hours are indirect labor. Correct 40 hours indirect labor. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 33/66 Question 30 1.D.2.f 1C2-AT14 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: hard Bloom Code: 5 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. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000 The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are: Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240. Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160. Using the first-in, first-out (FIFO) method, the equivalent unit cost of materials for May is: $4.68. $3.98. Rationale  $4.68. This answer is incorrect. This answer divided the material cost by the units started in production instead of the equivalent units for materials. Rationale  $3.98. This answer is incorrect. This answer subtracted beginning inventory material cost from material costs incurred during May. Rationale  $5.03. This answer is incorrect. This answer included beginning inventory costs when calculating the equivalent unit cost of materials for May. Rationale  $4.50. The FIFO approach follows the production flow and assumes that units will be sold in the order in which they were placed in inventory. In order to compute the cost per equivalent unit for materials, it is first necessary to calculate the number of equivalent units with respect to materials. To calculate the equivalent units of production for materials using FIFO, calculate the equivalent units for materials for: 1. units in beginning inventory, 2. products started into production during the month, and, 3. units in ending inventory. $4.50. Correct $5.03. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 34/66 First, the 16,000 units in the beginning inventory would be completed, requiring the addition of 6,400 [(16,000) × (1 − 0.6)] equivalent units for materials. Next, of the 100,000 units started during the month, 76,000 would be completed, requiring 76,000 equivalent units for materials. (92,000 units completed during month − 16,000 units from beginning inventory = 76,000 units) Lastly, of the 100,000 units started, 24,000 would be in the ending inventory, 90% complete with respect to materials, requiring 21,600 [(0.90) × (24,000)] equivalent units for materials. The total equivalent units for materials would be 6,400 + 76,000 + 21,600 = 104,000. The cost of materials used is $468,000. Therefore, the equivalent unit cost for materials = ($468,000 material cost) ÷ (104,000 equivalent units for materials) = $4.50 per unit

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 35/66 Question 31 1.D.2.a ac.job.oc.001_0820 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 Which of the following correctly depicts the flow of inventory costs in a job order cost system? Work-in-Process Inventory, Raw Materials Inventory, Finished Goods Inventory, Cost of Goods Sold Cost of Goods Sold, Work-in-Process Inventory, Raw Materials Inventory, Finished Goods Inventory Rationale  Raw Materials Inventory, Work-in-Process Inventory, Finished Goods Inventory, Cost of Goods Sold Correct. A business would first purchase and store raw materials in Raw Materials Inventory. The raw materials would then be requisitioned into Work-in-Process Inventory where labor and overhead are applied. When the goods are finished, they are transferred from Work-in-Process Inventory to Finished Goods Inventory. Goods that are sold are transferred from Finished Goods Inventory to Cost of Goods Sold. Rationale  Finished Goods Inventory, Work-in-Process Inventory, Cost of Goods Sold This answer is incorrect. Since goods are transferred from Work-in-Process Inventory to Finished Goods Inventory, Finished Goods Inventory would not come before Work-in-Process Inventory when depicting the flow of inventory costs in a job order cost system. Rationale  Work-in-Process Inventory, Raw Materials Inventory, Finished Goods Inventory, Cost of Goods Sold This answer is incorrect. Since goods are transferred from Raw Materials Inventory to Work-in-Process Inventory, Work-in-Process Inventory would not come before Raw Materials Inventory when depicting the flow of inventory costs in a job order cost system. Rationale  Cost of Goods Sold, Work-in-Process Inventory, Raw Materials Inventory, Finished Goods Inventory This answer is incorrect. Since Cost of Goods Sold is the final step in the flow of costs in a job order cost system, it would not come before all other inventory accounts when depicting the flow of inventory costs. In addition, since goods are transferred from Raw Materials Inventory to Work-in- Process Inventory, Work-in-Process Inventory would not come before Raw Materials Inventory when depicting the flow of inventory costs. Raw Materials Inventory, Work-in-Process Inventory, Finished Goods Inventory, Cost of Goods Sold Correct Finished Goods Inventory, Work-in-Process Inventory, Cost of Goods Sold Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 36/66 Question 32 1.D.2.b aq.proc.c.001_0820 LOS: 1.D.2.b Lesson Reference: Process Costing Difficulty: easy Bloom Code: 2 A characteristic of products that use a process cost accounting system and are mass produced in a continuous fashion is: They are grouped in small batches. They are custom produced at the time an order is received. Rationale  They are grouped in small batches. This answer is incorrect. Products that are grouped in small batches generally require different amounts of material, labor, and overhead. This is not a characteristic of products that are mass produced in a continuous fashion. Rationale  They are custom produced at the time an order is received. This answer is incorrect. Products that are custom produced at the time an order is received generally require different amounts of material, labor, and overhead. This is not a characteristic of products that are mass-produced in a continuous fashion. Rationale  The accounting system assumes the products require identical amounts of materials, labor, and overhead. Correct. Process cost accounting assumes each unit requires the same amount of material, labor, and overhead. This is characteristic of products that are mass produced in a continuous fashion. Rationale  Their costs are accumulated on job cost sheets. This answer is incorrect. Accumulating costs on job cost sheets is a characteristic of job order cost accounting, not process cost accounting. The accounting system assumes the products require identical amounts of materials, labor, and overhead. Correct Their costs are accumulated on job cost sheets. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 37/66 Question 33 1.D.2.b tb.job.oc.042_1809 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 4 John at Tim's Toys was working on a custom-made miniature car for a customer. The job, BCB101, was started in March. At the end of March, the job cost sheet for BCB101 showed direct materials of $6,000, direct labor of 200 hours at $75 per hour, and overhead of 80% of direct labor cost. During April, direct materials of $1,700 were added, and John's time ticket showed 50 hours on Job BCB101, 25 hours on Job BCB102, and 40 hours on a new job, BCB103. Job BCB101 was completed on April 29. What is the total cost of Job BCB101 as of April 29? $8,450 $26,450 Rationale  $41,450 Correct. The total cost of Job BCB101 equals direct materials plus direct labor plus overhead applied in March and April. Direct materials = $6,000 + $1,700 = $7,700 Direct labor = (200 + 50) × $75 = $18,750 Overhead applied = $18,750 × 80% = $15,000 Total cost of Job BCB101 = $7,700 + $18,750 + $15,000 = $41,450 Rationale  $33,000 Incorrect. This amount is the total cost applied to Job TBCB101 in March. The total cost of Job BCB101 includes all costs applied in March and April. Rationale  $8,450 Incorrect. This amount is the total cost applied to Job BCB101 in April. The total cost of Job BCB101 includes all costs applied in March and April. Rationale  $26,450 Incorrect. This amount is the total of direct labor and overhead for Job TBCB101. The total cost of a job equals direct materials plus direct labor plus overhead applied. $41,450 Correct $33,000 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 38/66 Question 34 1.D.2.e 1C2-LS02d LOS: 1.D.2.e Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: easy Bloom Code: 2 A company has a method of collecting and organizing cost information in an accounting system, called (1)_______. This system performs (2)_______, which (3)_______ indirect costs and (4)_______ direct costs. (1) cost assignment, (2) cost accumulation, (3) allocates, (4) traces. (1) cost assignment, (2) cost accumulation, (3) traces, (4) allocates. (1) cost accumulation, (2) cost assignment, (3) traces, (4) allocates. Rationale  (1) cost assignment, (2) cost accumulation, (3) allocates, (4) traces. This answer is incorrect. This answer mixed up cost accumulation and cost assignment. Rationale  (1) cost assignment, (2) cost accumulation, (3) traces, (4) allocates. This answer is incorrect. This answer mixed up cost accumulation and cost assignment. Additionally, this answer mixed up allocates and traces. Rationale  (1) cost accumulation, (2) cost assignment, (3) allocates, (4) traces. Cost accumulation collects and organizes cost information in an accounting system. Cost assignment uses both allocation and tracing to assign accumulated costs to a cost object. Indirect relationship costs are allocated and direct relationship costs are traced. Rationale  (1) cost accumulation, (2) cost assignment, (3) traces, (4) allocates. This answer is incorrect. This answer mixed up allocates and traces. (1) cost accumulation, (2) cost assignment, (3) allocates, (4) traces. Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 39/66 Question 35 1.D.2.a 1A4-CQ19 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 4 Playtime Toys estimates that it will sell 200,000 dolls during the coming year. The beginning inventory is 12,000 dolls; the target ending inventory is 15,000 dolls. Each doll requires two shoes which are purchased from an outside supplier. The beginning inventory of shoes is 20,000; the target ending inventory is 18,000 shoes. The number of shoes that should be purchased during the year is: 203,000 shoes. 201,000 shoes. Rationale  203,000 shoes. This answer is incorrect. This answer represents expected production of dolls, not number of shoes to be purchased. Rationale  398,000 shoes. This answer is incorrect. This answer used sales estimate instead of production estimate in the calculation of the number of shoes that should be purchased during the year. Rationale  201,000 shoes. This answer is incorrect. This answer used expected production of dolls, not number of shoes needed for expected production of dolls in the calculation of number of shoes to be purchased. Each doll requires two shoes. Rationale  404,000 shoes. The purchase of shoes is calculated as follows: Purchase of shoes = (production requirement) + (expected ending inventory) − (expected beginning inventory) Production requirement = (2 shoes per doll)(number of dolls) Expected production, dolls = (sales) + (expected ending finished goods inventory) − (expected beginning finished goods inventory) Expected production, dolls = 200,000 dolls + 15,000 dolls − 12,000 dolls = 203,000 dolls. Therefore, the number of shoes to be purchased during the year is calculated as follows: Number of shoes to be purchased = (2 shoes/doll)(203,000 dolls) + 18,000 shoes − 20,000 shoes Number of shoes to be purchased = 406,000 shoes + 18,000 shoes − 20,000 shoes = 404,000 shoes 404,000 shoes. Correct 398,000 shoes. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 40/66 Question 36 1.D.2.f 1C1-LS21d LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: medium Bloom Code: 4 The following information was gathered for the current period of manufacturing production for a firm: DM CC Total Beginning WIP $ 14,000 $ 15,000 $ 29,000 Current Period Costs $240,000 $200,000 $440,000 Total costs $254,000 $215,000 $469,000 There were 100 units in beginning work-in-process (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 first-in, first-out (FIFO) inventory method, what are equivalent units for the period? DM: 2,120 units; CC: 2,090 units. DM: 1,900 units; CC: 1,900 units. DM: 2,040 units; CC: 2,020 units. Rationale  DM: 2,120 units; CC: 2,090 units. This answer is incorrect. This answer used 1,900 as the units started and finished, but only 1,800 units were started and finished. Rationale  DM: 2,020 units; CC: 1,990 units. Compute the number of units in ending inventory = 100 + 2,000 − 1,900 = 200 units. Compute units to account for = 100 units in beginning WIP + 2,000 units started = 2,100 units. Units started and finished = units to account for − ending WIP − beginning WIP completed first = 2,100 − 200 − 100 = 1,800 units. The EU calculation is: DM CC Beginning WIP (100 units) 80 (80%) 70 (70%) Units started and finished (1,800) 1,800 1,800 Ending WIP (200 units) 140 (70%) 120 (60%) Total EU 2,020 1,990 Rationale  DM: 1,900 units; CC: 1,900 units. This answer is incorrect. This answer represents the units completed during the period, but does not consider beginning or ending WIP completion percentages. Rationale  DM: 2,040 units; CC: 2,020 units. This answer is incorrect. This answer represents the equivalent units if the firm uses the weighted-average inventory method, not the first-in, first- out method. DM: 2,020 units; CC: 1,990 units. Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 41/66 Question 37 1.D.3.m tb.ab.cost.032_1809 LOS: 1.D.3.m Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: medium Bloom Code: 3 The Grelle Company applies overhead based on direct labor hours. For 20x4, the company estimated overhead costs to be $500,000 based on estimated direct labor hours of 25,000. The actual direct labor hours were 32,000, and actual overhead was $540,000. What was Grelle's predetermined overhead rate? $15.625 per direct labor hour. $21.60 per direct labor hour. Rationale  $15.625 per direct labor hour. Incorrect. Actual direct labor hours are not used to calculate the predetermined overhead rate. Rationale  $20.00 per direct labor hour. Correct. The predetermined overhead rate is calculated as estimated overhead divided by the estimated base, in this case direct labor hours; therefore, the predetermined overhead rate equals $20.00 per direct labor hour ($500,000 ÷ 25,000 direct labor hours). Rationale  $16.875 per direct labor hour. Incorrect. Actual overhead is not used to calculate the predetermined overhead rate. Rationale  $21.60 per direct labor hour. Incorrect. Actual overhead and actual direct labor hours are not used to calculate the predetermined overhead rate. $20.00 per direct labor hour. Correct $16.875 per direct labor hour. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 42/66 Question 38 1.D.2.a tb.job.oc.019_1809 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 An example of a similarity between a job order cost system and a process cost system would be the: Unit cost computations. Method used to track costs. Rationale  Point at which costs are totaled. Incorrect. Using a job order cost system, costs are totaled either at the end of the accounting period, or when a job is completed. Using a process cost system, costs are totaled either at the end of the accounting period, or the end of a batch run; therefore, this is not an example of a similarity between a job order cost system and a process cost system. Rationale  Unit cost computations. Incorrect. Using a job order cost system, unit costs are computed by dividing the total cost of a job by the number of units produced for that job. Using a process cost system, unit costs are computed by dividing the total costs in the beginning inventory plus the costs added to the process by the equivalent units of production; therefore, this is not an example of a similarity between a job order cost system and a process cost system. Rationale  Flow of costs. Correct. Whether a job order cost system or a process cost system is used, costs will flow from Work-in-Process Inventory to Finished Goods Inventory when goods are finished, and from Finished Goods Inventory to Cost of Goods Sold when delivered to customers; therefore, this is an example of a similarity between a job order cost system and a process cost system. Rationale  Method used to track costs. Incorrect. Using a job order cost system, costs are tracked by job number. Using a process cost system, costs are tracked either at the end of the accounting period, or the end of a batch run; therefore, this is not an example of a similarity between a job order cost system and a process cost system. Flow of costs. Correct Point at which costs are totaled. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 43/66 Question 39 1.D.2.a 1A4-CQ20 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 4 Maker Distributors has a policy of maintaining inventory at 15% of the next month's forecasted sales. The cost of Maker's merchandise averages 60% of the selling price. The inventory balance as of May 31 is $63,000, and the forecasted dollar sales for the last seven months of the year are as follows: June $700,000 July 600,000 August 650,000 September 800,000 October 850,000 November 900,000 December 840,000 What is the budgeted dollar amount of Maker's purchases for July? $360,000. $418,500. Rationale  $360,000. This answer is incorrect. This answer represents the cost of sales for units sold in July. However, it does not consider beginning or expected ending inventory. Rationale  $355,500. This answer is incorrect. This answer mixed up beginning and ending inventory when calculating purchases for July. Rationale  $418,500. This answer is incorrect. This answer did not subtract beginning inventory when calculating purchases for July. Rationale  $364,500. Purchases in dollars is calculated as follows: Purchases in dollars = (cost of sales) + (expected ending inventory) − (expected beginning inventory) Cost of sales = (100% − the gross profit percentage)(sales) Cost of sales = (100% − 40%)(sales in dollars) The expected ending inventory for each month = 15% of the next month's expected sales. Therefore, the purchases in dollars for July can be calculated as follows: Purchases for July = (0.6)($600,000) + (0.15)(0.6)($650,000) − (0.15)(0.6)($600,000) Purchases for July = $360,000 + $58,500 − $54,000 = $364,500 $364,500. Correct $355,500. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 44/66 Question 40 2.C.3.h 2C3-LS28 LOS: 2.C.3.h Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: easy Bloom Code: 2 Which of the following is a primary benefit of involving cross-functional teams in the target costing process? More accurate input and maintenance of cost table databases More realistic market assessment of customer wants and needs Rationale  More accurate input and maintenance of cost table databases This answer is incorrect. More accurate input and maintenance of cost table databases is not a primary benefit of involving cross-functional teams in the target costing process. Rationale  More realistic market assessment of customer wants and needs This answer is incorrect. More realistic market assessment of customer wants and needs is not a primary benefit of involving cross-functional teams in the target costing process. Rationale  Improved analysis of how to gain and sustain competitive advantage This answer is incorrect. Improved analysis of how to gain and sustain competitive advantage is not a primary benefit of involving cross-functional teams in the target costing process. Rationale  Better assurance that the proposed product or service generates the desired profit margin The cross-functional participation of research and design, engineering, production, marketing, and accounting are necessary to ensure that the proposed product or service when sold generates the desired profit margin. Stated another way, the cross-functional team is given the responsibility to design and develop the product or service so that it can be made for the target cost. Better assurance that the proposed product or service generates the desired profit margin Correct Improved analysis of how to gain and sustain competitive advantage Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 45/66 Question 41 1.D.3.l 1C2-AT20 LOS: 1.D.3.l Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: easy Bloom Code: 1 An accounting system that collects financial and operating data on the basis of the underlying nature and extent of the cost drivers is: target costing. variable costing. direct costing. Rationale  target costing. This answer is incorrect. Target costing does not collect financial and operating data on the basis of the underlying nature and extent of the cost drivers. Rationale  variable costing. This answer is incorrect. Variable costing does not collect financial and operating data on the basis of the underlying nature and extent of the cost drivers. Rationale  activity-based costing (ABC). ABC is an accounting technique that allocates production support costs to the activities that drive these costs. The ABC system then reassigns the costs from the activities to the products produced. Rationale  direct costing. This answer is incorrect. Direct costing does not collect financial and operating data on the basis of the underlying nature and extent of the cost drivers. activity-based costing (ABC). Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 46/66 Question 42 1.D.2.b 1C1-LS07 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 3 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? $340,000. $40,000. Rationale  $180,000. This answer is incorrect. This answer subtracted purchases and added ending material inventory when calculating direct material used in manufacturing. Rationale  $160,000. Direct materials (DM) used is equal to the beginning material inventory plus purchases minus ending material inventory ($50,000 + $20,000 − $30,000 = $40,000). Cost of goods manufactured is beginning WIP inventory plus DM, plus conversion costs, minus ending WIP inventory ($100,000 + $40,000 + $80,000 − $60,000 = $160,000). Rationale  $340,000. This answer is incorrect. When calculating direct material used in manufacturing, this answer added ending inventory. Additionally, when calculating cost of goods manufactured, this answer added ending WIP inventory. Rationale  $40,000. This answer is incorrect. This answer represents the direct materials used in manufacturing, not the cost of goods manufactured. $160,000. Correct $180,000. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 47/66 Question 43 1.D.2.a 1C2-LS11 LOS: 1.D.2.a Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 Which of the following is true of job order costing? Job order costing cannot be used with actual, normal, or standard costing. Actual or normal costing can be used with job order costing but not standard costing. Rationale  Job order costing cannot be used with actual, normal, or standard costing. This answer is incorrect. Job order costing can be used with actual, normal, or standard costing. Rationale  Actual or normal costing can be used with job order costing but not standard costing. This answer is incorrect. Job order costing can be used with standard costing as well. Rationale  Standard costing can be used with job order costing but not actual or normal costing. This answer is incorrect. Job order costing can be used with actual or normal costing as well. Rationale  Actual, normal, or standard costing can be used with job order costing. Job order costing allows use of actual, normal, or standard costing. Actual, normal, or standard costing can be used with job order costing. Correct Standard costing can be used with job order costing but not actual or normal costing. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 48/66 Question 44 1.D.2.b 1C2-AT10 LOS: 1.D.2.b Lesson Reference: Process Costing Difficulty: hard Bloom Code: 6 A sporting goods manufacturer buys wood as a direct material for baseball bats. The Forming Department processes the baseball bats, and the bats are then transferred to the Finishing Department where a sealant is applied. The Forming Department began manufacturing 10,000 “Casey Sluggers” during the month of May. There was no beginning inventory. Costs for the Forming Department for the month of May were as: Direct materials $33,000 Conversion costs 17,000 Total $50,000 A total of 8,000 bats were completed and transferred to the Finishing Department; the remaining 2,000 bats were still in the forming process at the end of the month. All of the Forming Department's direct materials were placed in process but, on average, only 25% of the conversion cost was applied to the ending work-in-process inventory. The cost of the units transferred to the Finishing Department is: $49,000. $40,000. Rationale  $50,000. This answer is incorrect. Not all of costs of the Forming Department will be transferred to the Finishing Department this period. Rationale  $49,000. This answer is incorrect. Not all of the direct material costs will be transferred to the Finishing Department this period. Rationale  $42,400. In a process costing system, costs may be added to a product at different points in the manufacturing process. In this scenario, all of the direct material costs have been placed in process for the 10,000 units that the Forming Department began manufacturing during the month. Regarding the conversion costs (conversion costs = direct labor + manufacturing overhead) , all conversion costs were applied to 8,000 units, but only 25% of the conversion costs have been applied to the 2,000 units in ending work-in-process inventory. The cost of the units transferred to the Finishing Department is calculated by taking the number of units that were transferred out and multiplying that number by the total manufacturing cost per unit. Cost of units transferred out = (units transferred out) × (manufacturing cost per unit) Number of units transferred to Finishing Department = 8,000 units Manufacturing cost per unit = direct material cost applied per unit + conversion cost applied per unit Direct material costs applied per unit = $33,000 ÷ 10,000 units = $3.30 per unit (Note that direct material costs are related to all 10,000 units, so that number must be used as the denominator.) Conversion costs applied during the period totaled $17,000 and they were applied in full to the 8,000 units that were transferred out, as well as 25% applied to the units remaining in process (2000 units × 0.25 = 500 equivalent units). Conversion costs per unit = ($17,000) ÷ (8,000 units + 500 units) = $17,000 ÷ 8,500 units = $2.00 per unit Cost of units transferred out = (units transferred out) × (manufacturing cost per unit) $42,400. Correct $50,000. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 49/66 Cost of units transferred out = (8,000) × ($3.30 + $2.00) = (8,000) × ($5.30) = $42,400 Rationale  $40,000. This answer is incorrect. This answer did not consider that the units remaining in work-in-process only had 25% of conversion costs, not 100%.

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 50/66 Question 45 1.D.3.n 1C2-LS06 LOS: 1.D.3.n Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: easy Bloom Code: 2 Which of the following is not an advantage of using activity-based cost drivers? Costs are more reliably determined. Cost deviations from expectations are highlighted. Rationale  Costs are more reliably determined. This answer is incorrect. An advantage of using activity-based cost drivers is that costs are more reliably determined. Rationale  Implementation is relatively inexpensive compared to other methods. Activity-based cost drivers require a detailed description of each type of activity, so initial implementation can be costly and time-consuming. Rationale  Detailed breakdown of activities helps firms remove non-value-added activities. This answer is incorrect. An advantage of using activity-based cost drivers is that detailed breakdown of activities helps firms remove non-value- added activities. Rationale  Cost deviations from expectations are highlighted. This answer is incorrect. An advantage of using activity-based cost drivers is that cost deviations from expectations are highlighted. Implementation is relatively inexpensive compared to other methods. Correct Detailed breakdown of activities helps firms remove non-value-added activities. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 51/66 Question 46 1.D.2.b tb.job.oc.027_1809 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 3 Jolly Manufacturing produces furniture. Jolly has three jobs in process at the end of the month with the following information: 1. Job AA—$400 direct materials, $620 direct labor 2. Job BB—$340 direct materials, $580 direct labor 3. Job CC—$120 direct materials, $80 direct labor Jolly's average direct labor rate is $20 per hour, and Jolly applies overhead at the rate of $17 per direct labor hour. What is the balance in Jolly's Work-in- Process Inventory at the end of the month? $2,140 $2,368 Rationale  $2,140 Incorrect. This amount is the total of the direct materials and direct labor, but it excludes the amount of applied overhead. To calculate the applied overhead, first calculate the number of labor hours, then multiply the labor hours by the overhead application rate. Rationale  $1,088 Incorrect. This amount is the total applied overhead for the three jobs; however, the total cost of a job equals the direct materials plus the direct labor plus the applied overhead. Rationale  $2,368 Incorrect. This amount is the direct labor plus the applied overhead for the three jobs, but it excludes the direct materials. Rationale  $3,228 Correct. The balance in the Work-in-Process Inventory account at the end of the month equals the direct materials plus the direct labor plus the applied overhead for each job in process. First, calculate the amount of direct labor hours for each job to find the applied overhead and then add the costs for each job together. Direct labor hours for Job AA = $620 ÷ $20 = 31 direct labor hours Total cost of Job AA = $400 + $620 + (31 × $17) = $1,547 Direct labor hours for Job BB = $580 ÷ $20 = 29 direct labor hours Total cost of Job BB = $340 + $580 + (29 × $17) = $1,413 Direct labor hours for Job CC = $80 ÷ $20 = 4 direct labor hours Total cost of Job CC = $120 + $80 + (4 × $17) = $268 Total cost of all three jobs = $1,547 + $1,413 + $268 = $3,228 $3,228 Correct $1,088 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 52/66 Question 47 1.D.3.m tb.ab.cost.035_1809 LOS: 1.D.3.m Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: medium Bloom Code: 3 At the beginning of the year, managers at King Industries estimated $400,000 in manufacturing overhead, 20,000 direct labor hours, and 30,000 machine hours. Actual manufacturing costs at the end of the year were $425,000 in manufacturing overhead. During the year, 22,000 direct labor hours and 27,000 machine hours were incurred. If King Industries uses a normal costing system, and if overhead is applied based on direct labor hours, how much overhead was applied during the year? $540,000 $400,000 Rationale  $440,000 Correct. With a normal costing system, the predetermined overhead rate equals estimated overhead divided by the estimated base, in this case direct labor hours. The actual activity in the base is then used to apply the overhead. The predetermined overhead rate is $20 per direct labor hour ($400,000 ÷ 20,000 direct labor hours). The overhead applied during the year equals $440,000 ($20 per direct labor hour × 22,000 actual direct labor hours). Rationale  $540,000 Incorrect. Make sure to use actual direct labor hours, not actual machine hours, to calculate the overhead applied. Rationale  $400,000 Incorrect. This is the amount of estimated overhead. Make sure to use estimates to calculate the predetermined overhead rate and use actual activity to apply the overhead. Rationale  $425,000 Incorrect. This is the amount of actual overhead. Make sure to use estimates to calculate the predetermined overhead rate and use actual activity to apply the overhead. $440,000 Correct $425,000 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 53/66 Question 48 1.D.2.j 1C2-AT03 LOS: 1.D.2.j Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: medium Bloom Code: 3 Claremont Company has been asked to evaluate the profitability of a product that it manufactured and sold from 20X5 through 20X8. The product had a one-year warranty from date of sale. The following information appears in the financial records. Research, development and design cost Manufacturing and distribution costs Warranty costs Warranty cost (20X3 and 20X4) (20X5–20X8) (20X5–20X8) (20X9) $5,000,000 $7,000,000 $200,000 $100,000 The life-cycle cost for this product is: $12,200,000. $12,000,000. Rationale  $12,200,000. This answer is incorrect. This answer did not consider warranty cost (20X9) when calculating the life-cycle cost for this product. Rationale  $12,000,000. This answer is incorrect. This answer did not consider warranty costs (20X5–20X8) or warranty cost (20X9) when calculating the life-cycle cost for this product. Rationale  $7,300,000. This answer is incorrect. This answer did not consider research, development, and design cost when calculating the life-cycle for this product. Rationale  $12,300,000. The life-cycle cost for the product = Manufacturing and distribution costs + R&D and design costs + Total warranty costs = $7,000,000 + $5,000,000 + $200,000 + $100,000 = $12,300,000. $12,300,000. Correct $7,300,000. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 54/66 Question 49 1.D.3.m tb.ab.cost.026_1809 LOS: 1.D.3.m Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: hard Bloom Code: 4 Turnbull Company produces two products, Beta and Delta. Overhead consists of the following: $20,000 in setup costs with number of setups as the driver; $2,220,000 in machining costs with machine hours as the driver; and $80,000 in packing costs with packing orders as the driver. Data for the current year follows: Beta Delta Number of setups 10 30 Machine hours 1,000 4,000 Packing orders 150 350 Number of units produced 600 400 What is the total overhead allocated to Beta under activity-based costing? $464,000 $773,333 $1,392,000 Rationale  $464,000 Incorrect. This is the amount that would have been allocated to Beta using a traditional allocation based on machine hours. Under activity-based costing, there are three cost pools and three allocation bases. Rationale  $473,000 Correct. Under activity-based costing, calculate an application rate for setup costs, an application rate for machining, and an application rate for packing. After calculating the application rates, use them to calculate the amount of overhead allocated to Beta. Application rate for setups = $20,000 ÷ (10 + 30) = $500 per setup Application rate for machining = $2,220,000 ÷ (1,000 + 4,000) = $444 per machine hour Application rate for packing = $80,000 ÷ (150 + 350) = $160 per packing order Overhead allocated to Beta = (10 setups × $500 per setup) + (1,000 machine hours × $444 per machine hour) + (150 packing orders × $160 per packing order) Overhead allocated to Beta = $5,000 + 444,000 + 24,000 = $473,000 Rationale  $773,333 Incorrect. This amount is one-third of the total overhead. Under activity-based costing, there are three cost pools and three allocation bases. Rationale  $1,392,000 Incorrect. This amount is the total overhead allocated by number of units. Under activity-based costing, there are three cost pools and three allocation bases. $473,000 Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 55/66 Question 50 1.D.2.b tb.job.oc.037_1809 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 3 Ed was working on a custom-made workbench for a customer. The job, TB0414, was started in November. At the end of November, the job cost sheet for TB0414 showed direct materials of $215, direct labor of 14 hours at $18 per hour, and overhead of 50% of direct labor cost. During December, $85 of direct materials were added to Job TB0414 and Ed's time ticket showed 15 hours on Job TB0414, 25 hours on Job TB0614, 10 hours of maintenance on the lathe, and 40 hours on a new job, DR1014. Job TB0414 was completed on December 28. What is the total amount of overhead applied to Job TB0414? $126 $135 Rationale  $126 Incorrect. This is the amount of overhead applied to Job TB0414 in November. The total overhead applied includes overhead applied in November and December. Rationale  $135 Incorrect. This is the amount of overhead applied to Job TB0414 in December. The total overhead applied includes overhead applied in November and December. Rationale  $300 Incorrect. This amount is the total direct materials applied to Job TB0414. To calculate overhead applied, first calculate the total direct labor cost, then use the overhead application rate. Rationale  $261 Correct. The total labor hours applied to Job TB0414 are 14 hours in November and 15 hours in December, totaling 29 hours. The total direct labor cost equals $522 (29 hours × $18 per hour). Overhead is applied at a rate of 50% of direct labor. Total overhead applied equals $261 ($522 × 50%). $261 Correct $300 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 56/66 Question 51 1.D.2.g tb.ab.cost.002_1809 LOS: 1.D.2.g Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: easy Bloom Code: 2 In changing from a traditional costing system to an activity-based costing system, overhead costs tend to shift from high- volume standard products to low-volume premium products because: Organizational level overhead is not allocated under activity-based costing. Standard products generally use more total activities than premium products. Rationale  The general overhead cost pool is not allocated under activity-based costing. Incorrect. General overhead cost pools are allocated under activity-based costing. Rationale  Premium products usually consume more activities per unit than standard products. Correct. Premium products tend to have extra features or finishing that consume more labor hours and/or machine hours than standard products. Rationale  Organizational level overhead is not allocated under activity-based costing. Incorrect. Organizational level overhead will not directly change when production shifts from high-volume standard products to low-volume premium products. Rationale  Standard products generally use more total activities than premium products. Incorrect. Standard products generally do not use more total activities than premium products. Premium products tend to have extra features or finishing that consume more labor hours and/or machine hours. Premium products usually consume more activities per unit than standard products. Correct The general overhead cost pool is not allocated under activity-based costing. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 57/66 Question 52 1.D.2.j 1C2-LS17 LOS: 1.D.2.j Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: easy Bloom Code: 2 In life-cycle costing, which of the these is the primary method of lowering downstream costs? Improving supplier relationships. Improving product designs in the downstream phase. Proactive management during the downstream phase such as streamlining manufacturing costs. Rationale  Improving supplier relationships. This answer is incorrect. In life-cycle costing, improving supplier relationships is not the primary method of lowering downstream costs. Rationale  Improving product designs in the downstream phase. This answer is incorrect. In life-cycle costing, improving product designs in the downstream phase is not the primary method of lowering downstream costs. Rationale  Improving the upstream and manufacturing cost phases. By the time a product reaches the downstream phase, it is too late to be proactive about changes unless the product has been correctly and efficiently designed during the upstream and manufacturing cost phases. Rationale  Proactive management during the downstream phase such as streamlining manufacturing costs. This answer is incorrect. In life-cycle costing, proactive management during the downstream phase such as streamlining manufacturing costs is not the primary method of lowering downstream costs. Improving the upstream and manufacturing cost phases. Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 58/66 Question 53 1.D.3.n 1C2-LS16B LOS: 1.D.3.n Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: easy Bloom Code: 2 Which of these are a benefit of using activity-based costing (ABC)? ABC reports conform to GAAP and save the expense of needing to create more than one format. ABC simplifies the amount of information supplied to managers so that only relevant information is supplied. Rationale  ABC reduces distortions caused by traditional methods that may make one product seem more or less profitable than it really is. ABC reduces distortions to profits by providing a more accurate picture of costs than traditional methods because it uses the most appropriate cost driver for each activity while traditional methods use a very limited number of cost drivers. Rationale  ABC uses traditional rules for managers, so acceptance is usually automatic. This answer is incorrect. ABC does not use traditional rules for managers and acceptance is not usually automatic. Rationale  ABC reports conform to GAAP and save the expense of needing to create more than one format. This answer is incorrect. ABC reports do not conform to GAAP and do not save the expense of needing to create more than one format. Rationale  ABC simplifies the amount of information supplied to managers so that only relevant information is supplied. This answer is incorrect. ABC does not simplify the amount of information supplied to managers. ABC reduces distortions caused by traditional methods that may make one product seem more or less profitable than it really is. Correct ABC uses traditional rules for managers, so acceptance is usually automatic. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 59/66 Question 54 1.D.2.f tb.proc.c.012_1809 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: medium Bloom Code: 3 On July 1, Premiere Paints’ Mixing Department had 80,000 units in Beginning Work-in-Process that were 65% complete. Between July 1 and July 31, the Mixing Department transferred 150,000 units to the Packaging Department. At the end of the month, on July 31, the Mixing Department had 40,000 units in Work-in-Process that were 80% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. Premiere Paints uses the FIFO method. Based on this information, which of the following statements is accurate? In July, the Mixing Department had 230,000 equivalent units of production for materials. In July, the Mixing Department had 102,000 equivalent units of production for materials. Rationale  In July, the Mixing Department had 230,000 equivalent units of production for materials. Incorrect. Under the FIFO method, equivalent units of production for materials are not calculated as Beginning Work-in-Process plus units transferred out. Rationale  In July, the Mixing Department had 102,000 equivalent units of production for materials. Incorrect. Because materials are added at the beginning of the process, Ending Work-in-Process is not 80% complete for materials. Rationale  In July, the Mixing Department had 190,000 equivalent units of production for materials. Incorrect. This answer represents the equivalent units of production for materials calculated under the Weighted Average method, not the FIFO method. Rationale  In July, the Mixing Department had 110,000 equivalent units of production for materials. Correct. Units transferred to the Packaging Department include the 80,000 units in Beginning Work-in-Process. Because materials are added at the beginning of the process, the 80,000 units in Beginning Work-in-Process should not be included in the calculation of equivalent units of production for materials. However, for the same reason, the units in Ending Work-in-Process should be considered. See the following calculation: 150,000 (transferred out) − 80,000 (units in beginning inventory) + 40,000 (units in ending inventory) In July, the Mixing Department had 110,000 equivalent units of production for materials. Correct In July, the Mixing Department had 190,000 equivalent units of production for materials. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 60/66 Question 55 1.D.3.m tb.ab.cost.025_1809 LOS: 1.D.3.m Lesson Reference: Activity-Based Costing (ABC) and Life Cycle Costing Difficulty: medium Bloom Code: 3 Turnbull Company produces two products, Beta and Delta. Overhead consists of the following: $20,000 in setup costs with number of setups as the driver; $2,220,000 in machining costs with machine hours as the driver; and $80,000 in packing costs with packing orders as the driver. Data for the current year follow: Beta Delta Number of setups 10 30 Machine hours 1,000 4,000 Packing orders 150 350 Number of units produced 600 400 What is the total overhead allocated to Beta under a traditional allocation based on machine hours? $473,000 $1,392,000 Rationale  $473,000 Incorrect. This is the amount that would have been allocated to Beta using activity-based costing. Under a traditional allocation system, there is only one overhead pool and one allocation base used to apportion the overhead. Rationale  $773,333 Incorrect. This amount is one-third of the total overhead. Under a traditional allocation system, total overhead is allocated based upon proportionate usage of the base, machine hours in this case. Rationale  $1,392,000 Incorrect. This amount is the total overhead allocated by number of units. Under a traditional allocation system, total overhead is allocated based upon proportionate usage of the base, machine hours in this case. Rationale  $464,000 Correct. Using a traditional allocation based on machine hours, the overhead allocation rate is estimated overhead divided by the estimated base. After calculating the overhead allocation rate, use it to calculate the amount of overhead allocated to Beta. The total estimated overhead is $2,320,000 ($20,000 + $2,220,000 + $80,000), and the total base (machine hours) is 5,000 hours (1,000 + 4,000). The overhead allocation rate is $464 per machine hour ($2,320,000 ÷ 5,000 machine hours). The overhead allocated to Beta equals $464,000 (1,000 machine hours × $464 per machine hour). $464,000 Correct $773,333 Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 61/66 Question 56 1.D.2.f 1C2-AT15 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: hard Bloom Code: 5 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. Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000 The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are: Beginning inventory costs are: materials, $54,560; direct labor, $20,320; and factory overhead, $15,240. Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160. Using the first-in, first-out (FIFO) method, the equivalent unit conversion cost for May is: $6.24. $6.20. Rationale  $1.86. This answer is incorrect. This answer did not consider the factory overhead costs, just the direct labor costs. Rationale  $6.24. This answer is incorrect. This answer divided the conversion costs by the completed production during May instead of the equivalent units for conversion. Rationale  $6.20. This answer is incorrect. This answer incorrectly included beginning inventory direct labor and factory overhead costs. Rationale  $5.83. The FIFO approach follows the production flow and assumes that units will be sold in the order in which they were placed in inventory. In order to compute the cost per equivalent unit for conversion costs, it is first necessary to calculate the number of equivalent units with respect to conversion costs. To calculate the equivalent units of production for conversion costs using FIFO, calculate the equivalent units for: 1. units in beginning inventory, 2. products started into production during the month, and, 3. units in ending inventory. $5.83. Correct $1.86. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 62/66 First, the 16,000 units in the beginning inventory would be completed, requiring the addition of 12,800 [(16,000)×(1 − 0.2)] equivalent units for conversion costs. Next, of the 100,000 units started during the month, 76,000 would be completed, requiring 76,000 equivalent units for conversion costs. (92,000 units completed during month − 16,000 units from beginning inventory = 76,000 units) Lastly, of the 100,000 units started, 24,000 would be in the ending inventory, 40% complete with respect to conversion costs, requiring 9,600 [(0.40)×(24,000)] equivalent units for conversion costs. The total equivalent units for conversion costs would be 12,800 + 76,000 + 9,600 = 98,400. Conversion costs consist of direct labor and factory overhead. Conversion costs = $182,880 (direct labor) + $391,160 (factory overhead) Conversion costs = $574,040 Therefore, the equivalent unit cost for conversion = ($574,040 conversion costs) ÷ (98,400 equivalent units for conversion costs) = $5.83 per unit.

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 63/66 Question 57 1.D.2.f tb.proc.c.014_1809 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: easy Bloom Code: 3 On August 1, Mega Manufacturing's Fabrication Department had 24,000 units in Beginning Work-in-Process that were 60% complete. Between August 1 and August 31, the department transferred a number of completed units to the Packaging Department. At the end of the month, on August 31, the Fabrication Department had 60,000 units in Work-in-Process that were 80% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. If the Fabrication Department had 190,000 equivalent units of production for materials for August, how many completed units did it transfer to the Packaging Department? Mega uses the FIFO method. 132,400 units. 250,000 units. Rationale  154,000 units. Correct. Because materials are added at the beginning of the production process, units in Beginning Work-in-Process are already 100% complete for materials. Also, for the same reason, Ending Work-in-Process is 100% complete for materials. Therefore, units transferred out to the Packaging Department can be calculated as follows: Units transferred out = 190,000 (started during the period) − 60,000 (units in Ending Work-in-Process) + 24,000 (units in Beginning Work-in-Process) = 154,000. Rationale  84,000 units. Incorrect. This number is units in Beginning Work-in-Process plus units in Ending Work-in-Process. However, units in Ending Work-in-Process were not completed and transferred out. Additionally, this answer does not consider the units that were started and completed. Rationale  132,400 units. Incorrect. This number is units transferred out assuming the Fabrication Department had 190,000 equivalent units of production for conversion costs. Beginning Work-in-Process is not 60% complete for materials. Additionally, Ending Work-in-Process is not 80% complete for materials. Rationale  250,000 units. Incorrect. This number is equivalent units of production for materials plus equivalent units of materials in ending inventory. However, equivalent units of materials in ending inventory is already considered in equivalent units of production for materials and should be subtracted instead of added. Additionally, this answer does not consider Beginning Work-in-Process. 154,000 units. Correct 84,000 units. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 64/66 Question 58 1.D.2.b tb.job.oc.036_1809 LOS: 1.D.2.b Lesson Reference: Job Order Costing Difficulty: medium Bloom Code: 4 Jones Manufacturing had one job, Job PLS5, in Work-in-Process Inventory at the beginning of March. The costs incurred to date on PLS5 included $12,300 of direct materials, $7,800 in direct labor, and $19,500 in overhead. During March, Jones finished the job by adding $1,700 of direct materials and $3,900 of direct labor. If Jones applies overhead at the rate of 250% of direct labor cost, what total cost related to Job PLS5 was transferred to Finished Goods Inventory during March? $39,600 $45,200 $15,350 Rationale  $39,600 Incorrect. This amount is the total of the materials, labor, and overhead added prior to March. Materials, labor, and overhead were added to these costs to complete the job during March, and need to be added to Finished Goods Inventory. Rationale  $45,200 Incorrect. This amount is the total of the materials, labor, and overhead added prior to March, plus the materials and labor added during March. You need to apply overhead based upon the activity added in March and add this amount to Finished Goods Inventory. Rationale  $15,350 Incorrect. This is the total of the materials, labor, and overhead added during March. You also need to add the costs that were added prior to March to the Finished Goods Inventory. Rationale  $54,950 Correct. The total costs added prior to March equal $39,600 ($12,300 + $7,800 + $19,500). The costs added during March equal $15,350 ($1,700 + $3,900 + ($3,900 × 250%)). The total cost transferred to Finished Goods Inventory are the costs added prior to March plus the costs added in March which equals $54,950 ($39,600 + $15,350). $54,950 Correct

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 65/66 Question 59 1.D.2.f 1C2-CQ12 LOS: 1.D.2.f Lesson Reference: Process Costing Difficulty: medium Bloom Code: 3 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? 4,400 units. 22,000 units. Rationale  8,800 units. The ending inventory of 22,000 shirts is only 50% complete. Therefore, the inventory units have only 40% of the Material B. This equates to 8,800 equivalent units, which is calculated by multiplying the number of units in ending inventory (22,000) by the percent of Material B (40%). Equivalent units, shirts = (22,000 units) × (0.4) = 8,800 units. Rationale  4,400 units. This answer is incorrect. This answer represents 50% of the 40% of Material B added to the shirt production. 100% of the 40% is considered for the calculation of the equivalent units. Rationale  11,000 units. This answer is incorrect. Only 40% of Material B is added by this point, not 50%. Rationale  22,000 units. This answer is incorrect. The shirts are only 50% complete, so not all of Material B is added yet. 8,800 units. Correct 11,000 units. Your Answer

8/4/22, 6:51 PM CMA Exam Review - Part 1 - Assessment Review https://app.efficientlearning.com/pv5/v8/5/app/cma/part1_2020.html?#assessmentReview 66/66 Question 60 1.D.2.d 1C1-LS09 LOS: 1.D.2.d Lesson Reference: Job Order Costing Difficulty: easy Bloom Code: 2 Which of the following would a merchandising company use in place of cost of goods manufactured on a statement of cost of goods sold? Materials inventory. Conversion costs. Rationale  Net purchases. The income statement for a merchandising company looks similar to that of a manufacturing company, except that it uses net purchases instead of cost of goods manufactured. Rationale  Prime costs. This answer is incorrect. A merchandising company would not use prime costs in place of cost of goods manufactured on a statement of cost of goods sold. Rationale  Materials inventory. This answer is incorrect. A merchandising company would not use material inventory in place of cost of goods manufactured on a statement of cost of goods sold. Rationale  Conversion costs. This answer is incorrect. A merchandising company would not use conversion costs in place of cost of goods manufactured on a statement of cost of goods sold. Net purchases. Correct Prime costs. Your Answer