Accounting 210 Exam 1

Cost Accounting involves

- Measuring, - Recording - Reporting product costs.

Under just-in-time processing

- raw materials are received just in time for use in production. - subassembly parts are completed just in time for use in assembling finished goods. - finished goods are completed just in time to be sold.

Which of the following statements is correct regarding job order and process costing systems?

A process cost accounting system is appropriate for similar products that are continuously mass produced.

Which of the following statements about activity-based costing (ABC) is INCORRECT?

ABC assumes all costs related to the activity should respond proportionally to changes in the activity level of the cost driver.

Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion?

Activity-based costing.

Mama Donna's Bakery produces cupcakes in a variety of unique flavors. The company's cupcakes are offered for sale in many local restaurants. When a purchase order is placed by a restaurant, the cost related to processing purchase order is most likely attributed to a(n) ________ activity.

Batch Level

After passage of the Sarbanes-Oxley Act of 2002

CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results.

Which of the following would you find on the income statement of a manufacturing company, but not on the income statement of a merchandising company?

Cost of goods manufactured

What will the journal entry include when the units are sold?

Credit to finished goods inventory

How is the Work in Process Inventory account related to the Finished Goods Inventory account?

Credits to Work in Process Inventory should equal debits to Finished Goods Inventory.

T or F: A traditional costing system allocates overhead by means of multiple overhead rates?

False

T or F: As manufacturing processes have become more automated, more companies have chosen to allocate overhead on the basis of direct labor costs.

False

________ is NOT considered a step in activity-based costing.

Identifying a single overhead rate as the predetermined overhead rate

Why do companies, using job order costing to estimate manufacturing overhead costs, allocate them to individual jobs and products?

It enables the company to determine the approximate cost of each job as it gets completed.

If manufacturing overhead is underapplied, what effect does this have on the Cost of Goods Sold account at the end of the period?

It increases Cost of Goods Sold through an adjusting debit.

Which of the following statements is true about managerial accounting?

It provides more detailed information than financial accounting does.

Which of the following is considered part of the controlling process?

Keeping the company's activities on track

Managerial accounting

Places emphasis on special-purpose information.

The management of an organization performs several broad functions. They are:

Planning, directing, and controlling.

The purchase of raw materials should be recorded as a debit to ________ in a job order cost system.

Raw Materials Inventory

Which one of the following causes the work in process account to increase in a job order cost accounting system?

Requisitioned direct materials from the storeroom

Which of the following is an overhead activity cost pool for a manufacturer?

Setting up machines

Which one of the following is a characteristic that job-order cost systems and process cost systems have in common?

They both use perpetual inventory systems.

T of F: Direct material and direct labor costs are easier to trace to products than overhead.

True

T or F: Activity-based costing allocates overhead costs in a two-stage process?

True

T or F: In activity-based costing, an activity is any event, action, transaction, or work sequence that incurs cost when producing a product.

True

True or False: Process costing systems assign costs to departments or processes for a time period.

True

When is it appropriate to use direct labor as a basis for assigning overhead costs to products?

When direct labor constitutes a significant part of total product costs.

Under activity-based costing, why might unit product costs for low-volume, complex products be higher?

because such products use more batch-level activities

When indirect materials are used in production, job order costing requires a

credit to Raw Materials Inventory.

How are indirect labor costs recognized in the ledger under job order costing?

debit to Manufacturing Overhead

Activity-based costing is most appropriate to use when labor costs are a(n) ___________ proportion of total product costs and the manufacturing process is __________.

decreasing, complex

The primary objective of just-in-time processing is to

eliminate or reduce all manufacturing inventories

When a job is completed in a job order cost accounting system, the cost of the job is transferred to

finished goods inventory

Which of the following is a relevant facility-level cost driver for air conditioning costs in a chiropractor's office?

floor space

In order to achieve the most accurate costing, the cost driver chosen for a given activity must show a ___________ between the cost driver and the actual consumption of overhead costs.

high degree of correlation

General Manufacturing is transitioning to an activity-based costing system from a traditional costing system. The company's first step in putting this new system in place should be to

identify and classify the activities involved in the manufacture of each of its products.

As the complexity of a product's manufacturing operation increases, the number of activities and cost drivers used in an activity-based cost system will likely

increase

All of the following are distinguishing features of managerial accounting except

independent audits

A company is more likely to use a job costing system if

it manufactures products with unique characteristics

What is the basic form to accumulate the cost of each job under job order costing?

job cost sheet

When Slick Heating Company switched to an activity based costing system, it realized that it was allocating a much lower percentage of factory overhead to a product line that the marketing department was trying to push prior to switching to activity based costing system. The product line may contain which type of products?

low volume and complex in nature

Susan needs 20 lbs. of flour to add to the cake mixing machine. Which of the following will she need to obtain the flour from storage?

materials requisition slip

The flow of costs in job order costing

parallels the physical flow of materials as they are converted into finished goods.

Cost accounting involves the measuring, recording, and reporting of

product costs

Managerial accounting places emphasis on

special-purpose information