Accounting test 1

Place the following steps in developing an ABC system in the correct order. Allocate MOH from each activity to the individual jobs that use the activities. Identify the primary activities and estimate the total MOH associated with each activity. Identify the allocation base for each activity's costs and estimate the total amount to be used for the year. Calculate an activity cost allocation rate for each activity. 1,2,3,4 2,1,4,3 2,4,3,1 2,3,4,1

2,3,4,1

Which of the following represents a sunk cost? An outlay expected to be incurred in the future A historical cost that is never relevant A historical cost that is always relevant A cost that is relevant to any decision

A historical cost that is never relevant

Which type of company has three categories of inventory? A merchandising company A manufacturing company A service company All of these companies

A manufacturing company

The benefits of adopting ABC/ABM are higher for companies in competitive markets because accounting/information system expertise is inexpensive to develop. ABM can pinpoint opportunities for cost savings. accurate product cost information is not as relevant for price setting. companies in competitive markets have low indirect costs.

ABM can pinpoint opportunities for cost savings.

Which of the following refers to using refined cost information to make decisions that increase profits while satisfying customers' needs? Traditional costing Activity-based costing Activity-based management Departmental costing

Activity-based management

Which of the following is a period cost? Direct materials Advertising Salaries of plant supervisors Wages of production line employees

Advertising

Which of the following circumstances does NOT favor departmental overhead rates? Each department incurs different types and amounts of manufacturing overhead. All departments incur approximately equal types and amounts of manufacturing overhead. Each product or job uses the departments to a different extent. All of the above favor departmental overhead rates.

All departments incur approximately equal types and amounts of manufacturing

Before operating income can be determined for a manufacturer, which of the following is calculated? Cost of goods sold Cost of goods manufactured Cost of goods available for sale All of the above

All of the above

Managerial accountants are required to possess which of the following skills? Oral and written communication skills Analytical skills The ability to work on a team All of the above

All of the above

Which of the following groups are external users of financial information? Vendors of the company Potential investors of the company Customers of the company All of the above

All of the above

Which of the following skills are required of management accountants? Knowledge of both financial and managerial accounting Knowledge of how a business functions Oral and written communication skills All of the above

All of the above

Which statement is true? Management uses financial information to analyze costs. Management uses reports created for internal parties. Management uses financial information to plan internal operations. All of the above are true.

All of the above are true.

Managerial accountants may be responsible for providing decision support. analyzing data. communicating results. All of the above.

All of the above.

Non-value added activities are also called waste activities. activities that could be reduced or removed from the process with no ill effect on the end product or service. activities that neither enhance the customer's image of the product or service nor provide a competitive advantage. All of the above.

All of the above.

Manufacturing overhead is allocated on the basis of machine hours. direct labor hours. direct labor costs. All of these

All of these

An example of an uncontrollable cost is property taxes. property insurance. depreciation on factory equipment. All of these.

All of these.

Indications that a product cost system needs revision include managers lose bids they expected to win and win bids they expected to lose. employees do not believe the cost numbers are accurate. the company uses a single-allocation-base system developed long ago. All of these.

All of these.

The cost to set up a machine for a specific production run is an example of which type of activity? Unit-level Batch-level Product-level Facility-level

Batch-level

In addition to cost of goods manufactured, which of the following is needed to compute the cost of goods sold for a manufacturer? Beginning work in process inventory less ending work in process inventory Beginning finished goods inventory less ending finished goods inventory Ending work in process inventory less beginning work in process inventory Ending finished goods

Beginning finished goods inventory less ending finished goods inventory

Which of the following condition(s) favors using departmental overhead rates in place of a plantwide overhead rate? Different jobs or products use the departments to a different extent. Different departments incur different amounts and types of manufacturing overhead. Both of the above. Neither of the above.

Both of the above.

Which of the following are merchandising companies? Wholesalers Retailers Manufacturers Both retailers and wholesalers

Both retailers and wholesalers

How do you calculate the predetermined manufacturing overhead rate used to allocate manufacturing overhead costs? By dividing the total estimated amount of the allocation base by the total estimated manufacturing overhead costs By dividing the total estimated manufacturing overhead costs by the total estimated amount of the allocation base By multiplying the total estimated manufacturing overhead costs by the total estimated amount of the allocation base By dividing the total estimated manufacturing overhead costs by the total actual amount of the allocation base

By dividing the total estimated manufacturing overhead costs by the total estimated amount of the allocation base

Which of the following role is directly responsible for all financial functions in an organization? Treasurer CEO CFO COO

CFO

The individual responsible for managing all of the financial aspects of the organization is the COO. CFO. CEO. CPA.

CFO.

The person who is directly responsible for the company's operations, such as research and development (R&D), production and distribution is the: COO. CFO. CEO. Treasurer.

COO

Which of the following is an example of an industry that would use a process costing-rather than a job costing-system? Snyder & Lewis, Attorneys at Law Boeing Jets Coca-Cola Centex Custom Homes

Coca-Cola

Comparing actual results to budgets is an example of which of the following management functions? Directing Controlling Planning Analyzing

Controlling

In the basic flow of inventory through a manufacturing system, which of the following occurs third in the job costing system?

Cost of goods sold Raw materials inventory Work in process inventory Finished goods inventory

Which of the following is NOT a component of manufacturing overhead in the production of wine for a winery? Depreciation on the basket press Salaries of supervisors Oil and lubricants for machines Crushing labor

Crushing labor

Which of the following persons or groups would be least likely to receive detailed managerial accounting reports? CEO Plant managers Sales territory managers Current shareholders

Current shareholders

Which of the following is true about lean thinking? Finished goods are produced ahead of customers' orders to protect against running out of finished goods inventory. Raw materials are purchased in large quantities. Inventory levels are maintained at high levels. Customer orders drive the production process.

Customer orders drive the production process.

Overseeing the day-to-day operations of a company is an example of which of the following management functions? Planning Analyzing Controlling Directing

Directing

When management reviews product sales reports to set goals and objectives and then evaluates the results of sales operations against the plan and performance results, which of management's three primary responsibilities is fulfilled? Analyzing, directing, and planning Controlling and planning Directing, controlling, and planning Directing and planning

Directing, controlling, and planning

Which of the following is NOT a nontechnical competency that a managerial accountant needs to possess? Leadership Adaptability Ethics Empathy

Empathy

In the basic flow of inventory through a manufacturing system, which of the following occurs third in the job costing system? Cost of goods sold Raw materials inventory Work in process inventory Finished goods inventory

Finished goods inventory

Which of the following is a direct cost in the production of wine for a winery? Utilities Taxes Insurance Grapes

Grapes

Which of the following is NOT a value chain activity? Human resources Customer service Marketing Production

Human resources

A system in which companies purchase raw materials only when needed is called JIT production. external failure costs. ABC. internal failure costs.

JIT production.

Which product costing system would better account for a unique product? Overhead costing system Process costing system Job costing system Product costing system

Job costing system

Which of the following statements is TRUE? Managers are concerned with the external use of accounting information. Managerial accounting information relies heavily on its reliability and objectivity. The format of managerial accounting reports is determined by GAAP. Managerial accounting information must be relevant.

Managerial accounting information must be relevant.

Which of the following is FALSE about managerial accounting versus financial accounting? Managerial reports are prepared annually, whereas financial reports are prepared when required. Managerial accounting is primarily utilized by internal users, whereas financial accounting is primarily utilized by external users. The primary information characteristic for managerial accounting is relevance, whereas the primary information characteristics for financial accounting are reliability and objectivity. No authoritative body requires managerial accounting reports, whereas the SEC requires financial accounting reports for publicly traded companies.

Managerial reports are prepared annually, whereas financial reports are prepared when required.

A company's budget information is most likely to be used by which of the following groups? Suppliers Creditors Managers Customers

Managers

Among other products, Nabisco makes Oreo cookies. Which type of company is Nabisco? Service Retailer Wholesaler Manufacturer

Manufacturer

Which of these documents informs the storeroom to send specific materials to the factory floor? Purchase order Bill of materials Receiving report Materials requisition

Materials requisition

If the company does not carry Work in Process or Raw Materials inventory, what type of company is illustrated? Merchandising company Manufacturing company Service company Not-for-profit company

Merchandising company

Which of the following activities is not included in the value chain? Production Customer service Reporting Design

Reporting

Which of the following is an example of a cost item that should be classified as an internal failure cost? Employee training costs Inspection costs Product return costs Rework costs

Rework costs

Which of the following types of corporations has all costs along the value chain accounted for as period costs? Manufacturing corporation Merchandising corporation Service corporation None of the above

Service corporation

Which of the following is NOT a technical competency that a managerial accountant needs to possess? Tax return preparation Technology Internal Controls Decision Analysis

Tax return preparation

All except which of the following are ethical principles identified in the IMA's Statement of Ethical Professional Practice? Honesty Teamwork Objectivity Responsibility

Teamwork

Which of the following positions typically manages the company on a daily basis? The board of directors The controller The CEO The stockholders

The CEO

Which of the following statements is TRUE? The CEO is elected by the managers. The CFO is responsible for the company's operations. The board of directors is elected by the stockholders. The internal audit department reports solely to the CFO.

The board of directors is elected by the stockholders.

In ABC, how is the activity allocation rate computed? The total estimated activity cost pool is divided by the total estimated activity allocation base. The total estimated activity allocation base is multiplied by the total estimated activity cost pool. The total estimated activity allocation base is divided by the total estimated activity cost pool. You take the total estimated activity allocation base and subtract the total estimated total activity cost pool.

The total estimated activity cost pool is divided by the total estimated activity allocation base.

Which of the following positions is primarily responsible for raising capital and investing funds? The treasurer The CFO The CEO The COO

The treasurer

What will the use of departmental overhead rates generally result in? The use of a single overhead cost pool for the factory The use of a single cost allocation base The use of a separate cost allocation base for each department in the factory The use of separate cost allocation base for each activity in the factory

The use of a separate cost allocation base for each department in the factory

How do fixed costs per unit behave? They increase as production decreases. They remain the same throughout production levels within the relevant range. They decrease as production decreases. They increase as production increases.

They increase as production decreases.

How do variable costs per unit behave? They decrease as production decreases. They remain the same throughout production levels within the relevant range. They increase as production decreases. They decrease as production increases

They remain the same throughout production levels within the relevant range.

How do variable costs per unit behave? They increase as production decreases. They decrease as production decreases. They decrease as production increases. They remain the same throughout production levels within the relevant range.

They remain the same throughout production levels within the relevant range.

When calculating a departmental overhead rate, what should the numerator be? Total estimated departmental overhead cost pool Actual quantity of the departmental allocation base used by the job Total estimated amount of the departmental allocation base Total estimated amount of manufacturing overhead for the factory

Total estimated departmental overhead cost pool

An example of direct labor would be which of the following? Wages of assembly line personnel Wages of factory security Salary of a production manager Salary of the vice-president of operations

Wages of assembly line personnel

Which of the following is an example of manufacturing overhead expense in a factory? Wages of factory maintenance personnel Salaries of salespersons Wages of machine operators Wages of administrators in the corporate office

Wages of factory maintenance personnel

A salesperson's salary would be classified as ________ when determining the cost of a manufactured product. an indirect cost a period cost a direct cost none of the above

a period cost

Underallocated manufacturing overhead results when estimated overhead is greater than actual overhead. actual overhead is greater than expected. production is greater than last year. actual overhead is greater than allocated overhead.

actual overhead is greater than allocated overhead.

All of the following relate to part of the value chain for a clothing company except cost of advertising new products. cost of shipping products to retailers. salaries of clothing designers. administrative costs.

administrative costs.

An example of a controllable cost is property insurance. property taxes. advertising. depreciation on headquarters building.

advertising

If a frozen pizza plant is the cost object, classify each of the following costs as direct or indirect, respectively: property insurance, cafeteria workers wages, and janitorial supplies. all are indirect direct, indirect, and indirect direct, indirect, and direct all are direct

all are direct

Most companies adopt ABC in order to get a more accurate price of products. help make product mix decisions. cut costs. all of the above are correct.

all of the above are correct.

The primary goal of financial accounting is to provide information to government regulators. potential investors. creditors. all of the above.

all of the above.

A factory janitor's wages would be classified as ________ when determining the cost of a manufactured product. a direct cost an indirect cost a period cost none of the above

an indirect cost

Variable costs are fixed per unit and vary in total as production levels change. are fixed in total as production levels change. vary per unit of output as production levels change. decrease per unit as production volume increases.

are fixed per unit and vary in total as production levels change.

ABC generally causes the least amount of cost distortion among products because indirect costs are allocated to the products based on the extent to which the activities are used. types of activities used by the product. both A and B. none of the above.

both A and B.

ABC generally causes the least amount of cost distortion among products because indirect costs are allocated to the products based on types of activities used by the product. the extent to which the activities are used. both types of activities used by the product and the extent to which the activities are used. None of these.

both types of activities used by the product and the extent to which the activities are used.

For a manufacturer, beginning work in process would be equal to ending work in process inventory + manufacturing costs incurred in the period. cost of goods manufactured - ending work in process inventory + manufacturing costs incurred in the period. manufacturing costs incurred in the period - ending work in process inventory. cost of goods manufactured + ending work in process inventory - manufacturing costs incurred in the period.

cost of goods manufactured + ending work in process inventory - manufacturing costs incurred in the period.

According to the textbook, a managerial accountant often works on a (an) audit team. multi-functional team. cross-functional team. workgroup.

cross-functional team.

Conversion costs consist of direct materials, direct labor and manufacturing overhead. direct materials and direct labor. direct labor and manufacturing overhead. direct materials and manufacturing overhead.

direct labor and manufacturing overhead.

Allocating manufacturing overhead costs is done during the period. never. at the end of the period. before the period starts.

during the period.

The primary objective of lean operations is to focus on creating value for the customer by eliminating waste. provide customers with superior products and services. make the company's processes as efficient and effective as possible. use activity-based costing information to make decisions that increase profits while satisfying customer needs.

focus on creating value for the customer by eliminating waste.

Work in Process inventory includes raw materials that will be used in manufacturing. completed goods not yet sold. goods that are in the manufacturing process but are not yet complete. goods that have been shipped to customers.

goods that are in the manufacturing process but are not yet complete.

The difference between the sales price and the job cost is net income. gross profit. operating income. cost of goods sold.

gross profit.

Job order costing might be used by a balloon manufacturer. water bottling plant. hospital. saltine cracker manufacturer.

hospital.

If a company were to decrease its prevention costs by eliminating employee training, the company's external failure costs would most likely increase. decrease. remain the same. Unable to predict

increase

If the Ford Focus is the cost object, classify each of the following costs as indirect or direct, respectively: property taxes for the manufacturing plant, engines for the cars, and janitor wages for the factory. indirect, direct, and indirect all are indirect indirect, direct, and direct all are direct

indirect, direct, and indirect

The primary goal of managerial accounting is to provide information to shareholders. internal decision-makers. creditors. both shareholders and creditors.

internal decision-makers.

The focus of management accounting is on tax preparation. auditing. external reporting. internal reporting.

internal reporting.

Costs that remain the same among alternatives are controllable costs. uncontrollable costs. sunk costs. irrelevant costs.

irrelevant costs.

Determining how much manufacturing overhead is overallocated or underallocated is done at the end of the period. is done before the period starts. can be done at any time. is done during the period.

is done at the end of the period.

Research and development would most likely be classified as a ________ cost. unit-level batch-level product-level facility-level

product-level

The goal of total quality management (TQM) is to eliminate waste from operations. determine the cost driver behind each activity. identify non-value-added activities. provide customers with superior products and services.

provide customers with superior products and services.

The assignment of direct and indirect materials to a cost object reduces the finished goods inventory account. manufacturing overhead account. raw materials inventory account. work in process inventory account.

raw materials inventory account.

Before these materials are used to manufacture cabinets, a woodworker classifies lumber, paint, and glue as raw materials inventory. finished goods inventory. work in process inventory. merchandise inventory.

raw materials inventory.

Before these materials are used to manufacture its cars, Toyota classifies steel, glass, and plastic as work in process inventory. merchandise inventory. raw materials inventory. finished goods inventory.

raw materials inventory.

Activity-based costing helps to reduce cost distortion. develop departmental overhead rates. allocate direct costs. develop a plantwide overhead rate.

reduce cost distortion.

All of the following activities are included in the value chain except production. customer service. design. safety.

safety

All of the following would be considered a direct material for a kitchen cabinet except hinges. stain. wood. sand paper.

sand paper.

When job costing is used at a service firm, the bill to the client shows actual direct cost of providing the service. the profit on the job. the allocation of indirect costs. the billing rate and hours spent on the job.

the billing rate and hours spent on the job.

If manufacturing overhead has been overallocated during the period, then the jobs produced during the period have been undercosted. the jobs produced during the period have been costed correctly. the jobs produced during the period have been overcosted. none of the above.

the jobs produced during the period have been overcosted.

Quality-related costs generally fall into four different categories, which include all of the following except transportation costs. prevention costs. appraisal costs. internal failure costs.

transportation costs.

The eight wastes of traditional operations includes all of the following except overproduction. utilizing people to their full potential. waiting. defects.

utilizing people to their full potential.