ACC 200

1. Companies manufacture customized products or provide customized services to clients. Accumulate, track and assign costs for each job. Jobs are simply the individual units of a product. Used in situations when a customer initiates an order, "pulling" the product or service through the process. 2. A costing system accumulating and tracking costs for each process performed, then assigns these costs equally to each unit produced. Used to forecast demand and "push" a product through manufacturing process. 3. Hybrid costing system. Make products in batches - large numbers of products that are standardized within a batch.

1. Job Costing 2. Process Costing 3. Operations Costing

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred every time a new rug is designed and engineered is (product testing and quality control for example): A. product-level cost. B. batch-level cost. C. unit-level cost. D. facility-level cost.

A. Product Level Costs

In an activity-based costing system, direct materials used would typically be classified as a: A.unit-level cost. B.batch-level cost. C.product-sustaining cost. D.facility-level cost. E.matrix-level cost.

A.unit-level cost.

Which of the following statements is true regarding the identification of activities in ABC? A. The identification of activities that drive overhead costs is done after cost drivers are selected. B. An activity can be thought of as a procedure or process that causes work to be accomplished. C. Each type of overhead cost should be traced to only one activity. D. An activity that drives overhead costs can only occur outside the physical manufacturing facility

B. An activity can be thought of as a procedure or process that causes work to be accomplished.

Machine setups are an example of which type of cost? A. Unit Level Costs. B. Batch Level Costs C. Facility Level Costs. D. Product Level Costs.

B. Batch Level Costs

Which of the following statements is false regarding activities in an ABC system? A. As a business becomes more complex, more activities will probably need to be identified. B. Two different manufacturing companies that make the same products will always have the same sets of activities and cost drivers. C. There can be more than one batch level activity identified. D. Overhead costs may be allocated to more than one activity.

B. Two different manufacturing companies that make the same products will always have the same sets of activities and cost drivers.

Which of the following is the proper sequence of events in an activity-based costing system?A.Identification of cost drivers, identification of cost pools, calculation of cost application rates,assignment of cost to products. B.Identification of cost pools, identification of cost drivers, calculation of cost application rates,assignment of cost to products. C.Assignment of cost to products, identification of cost pools, identification of cost drivers,calculation of cost application rates. D.Calculation of cost application rates, identification of cost drivers, identification of cost pools, assignment of cost to products. E.Some other sequence of the four activities listed above.

B.Identification of cost pools, identification of cost drivers, calculation of cost application rates,assignment of cost to products.

In an activity-based costing system, materials receiving would typically be classified as a: A.unit-level activity. B.batch-level activity. C.product-sustaining activity. D.facility-level activity. E.period-level activity

B.batch-level activity.

For a construction company, the lumber to build houses would be considered: A. overhead. B. a product-level cost. C. direct materials. D. a facility-level cost.

C. Direct Materials

Which of the following tasks is not normally associated with an activity-based costing system? A.Calculation of cost application rates. B.Identification of cost pools. C.Preparation of allocation matrices. D.Identification of cost drivers. E.Assignment of cost to products.

C.Preparation of allocation matrices.

Many traditional costing systems: A.trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates. B.write off manufacturing overhead as an expense of the current period. C.combine widely varying elements of overhead into a single cost pool. D.use a host of different cost drivers (e.g., number of production setups, inspection hours,orders processed) to improve the accuracy of product costing. E.produce results far superior to those achieved with activity-based costing

C.combine widely varying elements of overhead into a single cost pool.

Herndon Brothers Inc. produces a variety of all-natural household cleaning supplies that it manufactures and distributes to various grocery stores along the east coast. Which of the following types of costs would most likely be classified as a unit-level cost? A. Salaries of engineers B. Quality Control costs C. Depreciation on the factory building D. Depreciation on factory machinery used to produce the cleaning supplies

D. Depreciation on factory machinery used to produce the cleaning supplies

Which of the following is least likely to be classified as a batch-level activity in an activity-basedcosting system?A.Shipping. B.Receiving and inspection. C.Production setup. D.Property taxes. E.Quality assurance.

D.Property taxes.

(T/F) Decision making should not take into account ethical considerations.

False

(T/F) Inventory is "pulled" from one factory area to another in a traditional manufacturing environment whereas inventory is "pushed" from one factory area to another in a JIT manufacturing environment.

False

(T/F) It is not as important for companies that have a JIT manufacturing environment to have reliable suppliers and employees than companies that have a traditional manufacturing environment.

False

(T/F)Managerial accounting is more focused on the past than financial accounting.

False

(T/F)Managerial accounting reports should always follow GAAP.

False

(T/F)Most decisions do not involve risk.

False

(T/F)Opportunity costs are not relevant to decision making.

False

Operating Activities

Involve the activities that management must do to run the business on a day-to- day basis.

Planning Activities

Involve the development of both short- term and long-term objectives and goals, and the identification of the resources needed to achieve them.

Controlling Activities

Involve the motivation and monitoring of employees and other resources used in the business.

Bostock's Building Blocks uses number of minutes in its firing oven to allocate overhead costs to products. In a typical month, 5,000 firing minutes are expected, and average monthly overhead costs are $3,500. During January, 4,800 firing minutes were used and total overhead costs were $2,750. Predetermined overhead rate:_____ per minute Amount of applied overhead: $_____

Predetermined overhead rate:$.7 per minute Amount of applied overhead: $3360

(T/F) Relevant costs differ among alternatives.

True

(T/F) The JIT manufacturing process begins when a customer places an order.

True

(T/F) The first step in the decision making process is to define the problem.

True

(T/F)It is normal to accumulate buffers of raw materials or finished goods inventories in a traditional manufacturing environment.

True

(T/F)Managerial accounting is more timely than financial accounting.

True

(T/F)One of the steps in stakeholder analysis requires the company to understand the nature of each stakeholder's interests.

True

(T/F)Sunk costs are always irrelevant in decision making.

True

Which of the following statements comparing traditional and activity-based costing (ABC) is false? a. ABC systems are generally less expensive to implement than traditional systems. b. ABC and traditional systems often produce different product cost information. c. ABC systems focus on activity costing while traditional systems focus on volume costing. d. Traditional systems are generally less accurate than ABC systems.

a. ABC systems are generally less expensive to implement than traditional systems.

Classify each of the following as either a direct material (DM), indirect material (IM), or period cost (P). a. wood used to build custom bookshelves b. sandpaper, glue, and nails used to build customer bookshelves c. paper supplies used in the administrative offices d. computer chips used in computer e. cleaning supplies used in the factory

a. DM b. IM c. P d.IM e. IM

(T/F) a. The costs of direct labor include production workers and supervisors. b. Shipping costs related to direct materials should be treated as manufacturing overhead. c. A job cost report provides data regarding direct labor, direct materials, and manufacturing overhead. d. The cost of fringe benefits is not included in direct labor, but is included in manufacturing overhead. e. Most companies treat the cost of idle time of production employees as manufacturing overhead. f. The use of job cost reports eliminates the need for tracking direct labor costs on a job-by-job basis.

a. False b. False c. True d. False e. True f. False

(T/F) a. Cost is rarely a factor in decisions and should be considered only when financial resources are plentiful. b.Relevant costs are those costs which can be avoided by choosing one alternative over another. c. Future costs that do not differ across alternatives are always relevant. d. Only historical costs are sunk costs. e. Opportunity costs that are not quantifiable need not be considered in decision making.

a. False b. True c. False d. True e. False

The following statements describe various business managers. Identify the type of business manager described in each of the following statements. a. These managers make decisions about how to raise capital as well as where and how it is invested. b. These managers need to know how much a product costs in order to help establish a reasonable selling price. c. These managers support other managers by recruiting and staffing, designing compensation and benefit packages, and providing training and development opportunities for employees. d. These managers make decisions about how and when products and services are produced or provided.

a. Finance managers b. Marketing managers c. HR managers d. Operations/Production managers

Indicate whether each of the following phrases describes financial accounting or managerial accounting. a. Must follow GAAP b. Focused on past performance c. Timeliness is critical d. Emphasizes reporting on the whole company e. Information is often less precise f. Future orientation g. Information is often "old" h. Reports results by segments i. Highly customizable

a. Financial accounting b. Financial accounting c. Managerial accounting d. Financial accounting e. Managerial accounting f. Managerial accounting g. Financial accounting h. Managerial accounting i. Managerial accounting

Which of the following statements is true? a. Financial accounting is less flexible than managerial accounting. b. External and internal users of accounting information have exactly the same information needs. c. Managerial accounting emphasizes the organization as a whole more than financial accounting. d. Managerial accounting provides the best information to external users.

a. Financial accounting is less flexible than managerial accounting.

Which of the following statements is true regarding activity-based costing (ABC)? a. It is based on the concept that activities drive overhead costs. b. It is based on the concept that a single cost driver can drive all overhead costs. c. It is based on the concept that either the number of direct labor or machine hours incurred drives all overhead costs. d. It is based on the concept that unit-level costs drive all overhead costs.

a. It is based on the concept that activities drive overhead costs.

Which of the following statements about manufacturing in a traditional environment is true? a. Partially completed inventory is accumulated in a work in process inventory account. b. Factories are organized with machines that are dissimilar grouped together. c. It is not desirable to accumulate raw materials inventory to serve as buffers in case of unexpected demand for products. d. The process begins with a customer order and products are "pulled" through the manufacturing process.

a. Partially completed inventory is accumulated in a work in process inventory account.

Select which type of costing system (i.e., job costing, process costing, or operations costing) is described by each statement. a. This costing technique is generally used by companies that forecast demand and "push" a product through the manufacturing process. b. This costing technique is used by companies that produce goods in large batches with products that are standardized within a batch. c. A large automobile manufacturer that produces cars that are mostly built with standard features, but that allows customers to select some custom features, likely uses this costing system. d. Companies that need to track production costs for individual projects because of their custom nature most likely use this costing system. e. This costing technique is often used when customers initiate orders, which "pull" the product or service through the manufacturing process. f. This costing technique does not attempt to assign costs to specific individual units, but assigns costs equally to units as they pass through the production processes.

a. Process costing b. Operations costing c. Operations costing d. Job costing e. Job costing f.Process costing

(T/F) a. Traditional overhead allocation methods typically use 1 or 2 volume-based cost drivers to assign OH costs to products b. Tradition OH allocation methods work best if the manufacturing environment includes mostly unit-level costs c. Traditional OH allocation methods are most accurate when a company is highly automated and makes many diverse products d. ABC is mostly concerned with allocating DL costs to products e. ABC is mostly concerned wit allocating OH costs to products f. ABC is based on the concept of assigning OH costs based on the activities that drive costs g. Batch-level costs are incurred each time a unit is produced h. A particular OH cost can be traced to more than one activity i. ABC cannot be used in service industries j. ABC cannot be applied to selling and administrative activities k. Cross-subsidies occur when high-volume products are assigned more than their fair share of OH costs

a. True b. True c. False d. False e. True f. True g. False h. True i. False j. False k. True

Classify each of the following costs as unit-level (U), batch-level (B), product-level (P), or facility-level (F). a. Factory supplies b. Factory insurance c. Product development costs d. Depreciation of factory equipment e. Depreciation of set-up equipment f. Utilities costs for factory machinery g. Salaries of product engineers h. Salary of plant manager i. Repairs of factory machinery j. Factory rent

a. U b. F c. P d. U e. B f. U g. P h. F i. U j. F

Relevant costs are costs that: a. differ between alternatives. b. have already been incurred. c. do not differ between alternatives. d. may not be eliminated by choosing one alternative over another.

a. differ between alternatives.

A(n) ____ decides whether a company should borrow money or issue stock as a way to raise capital. a. finance manager b. human resource manager c. marketing manager d. operations/production manager

a. finance manager

a. factory depreciation b. indirect labor c. administrative salaries d. direct labor e. utilities used in the factory f. direct materials g. indirect materials h. advertising i. factory insurance j. utilities used in the administrative offices

a. product cost b. product cost c. period cost d. product cost e. product cost f. product cost g. product cost h. period cost i. product cost j. period cost

a. Overhead costs cause cost drivers. b. In traditional manufacturing environments, most overhead costs are directly related to production activities. c. Overhead rates are calculated by multiplying manufacturing overhead costs by the volume of cost pool activity. d. Companies that are labor intensive are likely to allocate overhead costs such as utilities expense on the basis of direct labor hours. e. More overhead costs in a just-in-time environment are direct in nature as opposed to indirect. f. A "good" allocation base is one that drives the incurrence of overhead costs. g. Companies generally allocate overhead equally to all products produced during a given period.

a.false b.false c. false d. true e. true f. true g. false

Which of the following statements is (are) false? a) Job-order costing systems can be used by service firms. b) Costs are traced to departments and then allocated to units of product when job-order costing is used. c) Companies that produce many different products or services would probably use job-order costing systems. d) All of the above.

b) Costs are traced to departments and then allocated to units of product when job-order costing is used.

Which of the following is true regarding managerial accounting? a. It must be prepared according to generally accepted accounting principles. b. It often emphasizes segments rather than the organization as a whole. c. It is less flexible than financial accounting. d. Its primary focus is on providing information to external users.

b. It often emphasizes segments rather than the organization as a whole.

Companies that manufacture products such as custom-designed decks and pools would most likely use which type of costing? a. Normal costing b. Job costing c. Operations costing d. Process costing

b. Job costing

Which of the following statements regarding the traditional manufacturing environment is not true? a. Raw material is "pushed" to the next production area in anticipation of customer demand. b. Machines are often put into "manufacturing cells" whereby dissimilar machines are grouped together. c. Buffers of inventory may result in workers being less efficient. d. Manufacturers often have raw material, work in process, and finished goods inventory on hand.

b. Machines are often put into "manufacturing cells" whereby dissimilar machines are grouped together.

Which of the following statements is true regarding manufacturing costs? a. They will not appear on the income statement or the balance sheet until the product is completed. b. They will appear on the balance sheet as an inventory cost until the product is sold. c. They will appear on the balance sheet as an inventory cost after the product is sold. d. They will be appear on the income statement as the product is made.

b. They will appear on the balance sheet as an inventory cost until the product is sold.

Costs associated with factory costs such as insurance, maintenance, rent, property taxes, and other similar items are typically included in manufacturing overhead and assigned to products: a. primarily based on whatever technique is easiest. b. based on a related cost driver that can be identified and measured. c. if not treated as a period cost. d. basedontherelativesalesrevenuegeneratedbytheproduct.

b. based on a related cost driver that can be identified and measured.

In more labor-intensive companies, the cost of utility might be allocated by using ________ as cost driver. a) Material cost b) Factoryrent c) Labor hours d) Machine hours

c) Labor hours

Clyde Retailer's is a local merchandiser which buys vintage clothing and sells it to local college students. Clyde began the year with inventory costing $60,000. During the year inventory costing $300,000 was purchased. At the end of the year, inventory costing $45,000 still remained. What was Clyde's cost of goods sold for the year a. $285,000 b. $255,000 c. $315,000 d. $300,000

c. $315,000

The premium for two-year's worth of coverage is $14,400 and is paid at the beginning of the first year. Two-thirds of the premium relates to factory operations and one-third relates to selling and administrative activities. The amount of premium that should be recorded as a product cost for the first year is: a. $14,400 b. $9,600 c. $4,800 d. $2,400

c. $4,800

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a facility-level cost? a. A machine setup cost b. Utility costs for factory machinery c. Depreciation on the factory building d. A package product design cost for a new product line

c. Depreciation on the factory building

Which of the following statements is correct? a. Overhead consists of a limited variety of costs that should have the same cost driver. b. Overhead consists of a wide variety of costs that should have the same cost driver. c. Overhead consists of a variety of costs that may potentially have different cost drivers. d. Overhead consists of a limited variety of costs that must each have a unique cost driver.

c. Overhead consists of a variety of costs that may potentially have different cost drivers.

Which of the following would most likely be a product-level cost? a. Depreciation of setup equipment b. Energy costs for factory machinery c. Research and development costs for a new product line d. Salaries related to purchasing and receiving

c. Research and development costs for a new product line

Which of the following statements is true regarding lean production and just-in-time (JIT) manufacturing systems? a. The number of suppliers the company can purchase raw materials from, often increases. b. Customers are often less satisfied with the purchased product. c. The factory is often restructured where dissimilar machines are grouped together. d. The number of product defects often increases.

c. The factory is often restructured where dissimilar machines are grouped together.

Which of the following is not true regarding predetermined overhead rates? a. They are useful in estimating product costs before actual overhead amounts are known with certainty. With their use, too much or too little overhead may end up being allocated to a product b. or job. c. With their use, it is no longer necessary to be able to identify a cost driver. d. They can normalize seasonal and random fluctuations in overhead costs so that product costs will be consistent throughout the year.

c. With their use, it is no longer necessary to be able to identify a cost driver.

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred each time a machine is set up is called a(n): a. unit-level cost. b. product-level cost. c. batch-level cost. d. facility-level cost.

c. batch-level cost.

In Stage 2 of ABC allocation: a. equivalent units are computed. b. activities are identified. c. cost drivers are determined and costs are traced to each activity. d. predetermined overhead rates are calculated.

c. cost drivers are determined and costs are traced to each activity.

An example of qualitative data is a. warranty claims. b. budgeted hours. c. customer satisfaction. d. net income.

c. customer satisfaction.

In a job order cost system, the usage of direct materials would be recorded as a credit (reduction) to: a) Finished Goods inventory. b) Work in Process inventory. c) ManufacturingOverhead. d) Raw Materials inventory.

d) Raw Materials inventory.

Which of the following statements about decision-making is true? a. Sunk costs should usually be taken into account. b. Objectives should be quantitative and not qualitative. c. Risk should not be taken into account. d. Opportunity cost should be considered.

d. Opportunity cost should be considered.

Manufacturing costs typically consist of: a. production and shipping costs. b. direct materials, direct labor, and administrative costs. c. manufacturing overhead and selling costs. d. direct materials, direct labor, and manufacturing overhead.

d. direct materials, direct labor, and manufacturing overhead.

Lean production is focused on eliminating waste associated with all of the following except: a. down time caused by people waiting for work to do. b. moving products farther than required. c. over-processing a product. d. providing excessive customer service.

d. providing excessive customer service.