MANG. ACCT. Exam 2

Which of the following is a relevant facility-level cost driver for air conditioning costs in a chiropractor's office? Entry field with correct answer Direct material cost Floor space Direct labor hours Machine hours

Floor space

Constitute a subsidiary ledger for Work in Process Inventory.

job cost sheets

Any activity that causes resources to be consumed is called a... cost driver. non-value-added activity. just-in-time activity. facility-level activity.

cost driver.

The predetermined overhead rate may be based on any of the following bases except direct labor costs. direct labor hours. machine hours. any of the options may be used

all

The primary objective of just-in-time processing is to... identify value-added activities. identify relevant activity cost drivers. accumulate overhead in activity cost pools. eliminate or reduce all manufacturing inventorie

eliminate or reduce all manufacturing inventories

In accumulating raw materials costs, the cost of raw materials purchased in a perpetual system is debited to work in process. raw materials purchases. raw materials inventory. purchases.

raw materials inventory. In a perpetual system, purchases of raw materials are debited to Raw Materials Inventory.

When actual manufacturing overhead costs are less than the overhead applied to products.

over applied oh

The flow of costs in job order costing parallels the physical flow of materials as they are converted into finished goods. is necessary to prepare the cost of goods manufactured schedule. begins with work in process inventory and ends with finished goods inventory. begins as soon as a sale occurs.

parallels the physical flow of materials as they are converted into finished goods the flow of costs in job order costing begins with raw materials, not work in process, and ends with finished goods

The basic similarities between job order cost and process cost systems include all of the following except the point at which costs are totaled. manufacturing cost elements. accumulation of the costs of materials, labor, and overhead. flow of costs.

point at which costs are totaled.

An activity that adds costs to the product but does not increase its market value is a non-value-added activity. cost driver. cost-benefit activity. value-added activity.

non-value-added activity.

Indicates number of hours that employees work and the account to be charged.

time ticket

Ford Company has two process departments, cutting and shaping, that produce products. At what point can direct materials be added to product costs? At the point the materials are acquired from the supplier. At the point the products are completed and transferred to Finished Goods. At the point production begins in the cutting department. At the point the materials are used in production during either the cutting or shaping Departments

At the point the materials are used in production during either the cutting or shaping Departments.

Which of the following is not one of the four steps involved in calculating unit costs under activity-based costing? Identify and classify the major activities involved in the manufacture of specific products, and allocate manufacturing overhead costs to the appropriate cost pools. Identify the cost driver that has a minor correlation to the costs accumulated in the activity cost pool. Compute the overhead rate per cost driver. Assign manufacturing overhead costs for each cost pool to products, using the overhead rates.

Identify the cost driver that has a minor correlation to the costs accumulated in the activity cost pool.

Which one of the following correctly describes a document used in recording job cost sheet information? Paychecks for workers who assemble products. A purchase order to order raw materials from suppliers. An invoice from a supplier for receipt of raw materials for jobs. A materials requisition to request materials from the company warehouse.

A materials requisition to request materials from the company warehouse Amounts recorded on a job cost sheet for materials and labor include materials used on a particular job (obtained through requisitions) and labor incurred taken from time tickets.

Which of the following is an important element in successfully operating a just-in-time approach to production? A multi-skilled workforce. Completing products in the quickest manner without regard for quality. Utilizing the lowest cost suppliers. All of the above are important elements.

A multi-skilled workforce.

Which of the following is a limitation of activity-based costing? Activity-based costing systems can only be used by firms with a state-of-the-art technology. Activity-based costing can be used only if approved by the Institute of Management Accountants. Activity-based costing can only be used by firms involved in manufacturing. Activity-based costing can be expensive to use.

Activity-based costing can be expensive to use.

which one of the following activities for a window cleaning service is a value-added activity?... Repairing window cleaning equipment. Giving a potential customer an estimate of cost to clean windows in a three bedroom home. Verifying credit card information upon receiving payment from a customer. Cleaning plate glass windows for a customer.

Cleaning plate glass windows for a customer.

Which one of the following occurs in a process cost system? Total costs are determined when the finished product is completed. Costs are accumulated in a production cost report. One work in process account is used to accumulated costs. The unit cost is total manufacturing costs incurred divided by the units completed at the end of production

Costs are accumulated in a production cost report.

just-in-case philosophy:

Inventories of raw materials are maintained just in case some items are of poor quality or a key supplier is shut down by a strike.

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. It is more accurate to estimate costs. The actual overhead costs are not determinable. Manufacturing overhead is a period cost, not a job or product cost.

It enables the company to determine the approximate cost of each job as it gets completed. Manufacturing overhead costs are indirect; therefore, there is no direct connection to the products to which they relate. As a result, allocating overhead costs give the company an approximate cost of products during and immediately after the products are completed.

Which statement is true about activity-based costing (ABC)? Entry field with correct answer It uses a single basis of allocation. It focuses on activities performed to produce a product. It can be used only in a process cost system. It focuses on units of production.

It focuses on activities performed to produce a product.

A company has three processing departments and uses a process costing system. When the company assigns manufacturing overhead costs to production, which account is affected? Entry field with correct answer Manufacturing Overhead is credited. Finished Goods Inventory is debited. Cost of Goods Sold is debited. The Work in Process account of the first department is credited

Manufacturing Overhead is credited. The work in process accounts for each of the individual processes are debited and the manufacturing overhead account is credited when manufacturing overhead is assigned.

Which of the following is not an important element of just-in-time processing?.... Multiple product lines A multi-skilled workforce A total quality control system Dependable suppliers

Multiple product lines

inspection... Value-Added Activity Non-Value-Added Activity

Non-Value-Added Activity

For which of the following activities will direct labor hours and direct labor cost be an appropriate cost driver? Entry field with correct answer Painting Drilling oil wells Equipment setups Engineering changes

Painting

Which one of the following statements is correct? Process costing systems use periodic inventory systems. Companies that produce many different products or services are more likely to use process costing systems. Process costing systems assign costs to departments or processes for a time period. Production is continuous when a job-order costing is used to ensure that adequate quantities are on hand.

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

Which of the following is a value-added activity for a bank? Processing electronic funds transfers Advertising cash management services Repairing ATM machines Storing of electronic banking records

Processing electronic funds transfers

Which one of the following causes the work in process account to increase in a job order cost accounting system? Incurred direct labor. Completed products during the period. Incurred and paid indirect labor. Requisitioned direct materials from the storeroom

Requisitioned direct materials from the storeroom Work in Process Inventory is debited and Raw Materials inventory is credited.

Which one of the following is considered a basic similarity between job order cost and process cost systems? Unit cost computations. Tracking costs through a series of processes of departments. The flow of costs through the accounts. The point at which costs are totaled.

The flow of costs through the accounts

Which one of the following would be the best cost driver for the activity of purchasing? Total number of items ordered Total dollar value of items orders The number of purchase orders issued The number of employees in the purchasing department

The number of purchase orders issued

Which of the following items is not a characteristic of a process cost system? The focus is on continually producing homogeneous products. The products produced are heterogeneous in nature. When the finished product emerges, all units have precisely the same amount of materials, labor, and overhead. Once production begins, it continues until the finished product emerges.

The products produced are heterogeneous in nature.

Which one of the following transactions causes the Manufacturing Overhead account to be debited in a job order cost accounting system? Purchased raw materials on account. Used indirect materials. Incurred direct labor. Completed products during the period.

Used indirect materials.

Assembly... Value-Added Activity Non-Value-Added Activity

Value-Added Activity

Marco Company has two processing departments and uses a process costing system. Which account is debited when the company assigns factory labor costs to production? Work in Process is debited. Cost of Goods Sold is debited. Manufacturing Overhead is debited. Factory Labor is debited.

Work in Process is debited Costs are transferred from Factory Labor with a credit to Factory Labor and a debit to Work in Process Inventory.

Manufacturing overhead is underapplied if actual overhead is greater than applied overhead.

actual overhead is greater than applied.

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. all of the above.

all of the above.

Measures, records, and reports product costs.

cost accounting

Manufacturing cost accounts are fully integrated into the general ledger.

cost acct system

In recording the issuance of raw materials in a job order cost system, it would be incorrect to credit Raw Materials Inventory. debit Finished Goods Inventory. debit Work in Process Inventory. debit Manufacturing Overhead

debit Finished Goods Inventory. Finished Goods Inventory is debited when goods are transferred from work in process to finished goods, not when raw materials are issued for a job.

Activity-based costing is most appropriate to use when labor costs are a(n) ___________ proportion of total product costs and the manufacturing process is __________. Entry field with incorrect answer large, uncomplicated decreasing, complex increasing, complex small, uncomplicated

decreasing, complex

primary objective of JIT is to...

eliminate all manufacturing inventories. Inventories have an adverse effect on net income because they tie up funds and storage space that could be put to more productive uses. JIT strives to eliminate inventories by using a "pull approach" in manufacturing.

The activity-based overhead rate is computed by dividing... estimated overhead per activity by expected use of cost drivers per activity. actual overhead per activity by expected use of cost drivers per activity. estimated overhead per activity by actual use of cost drivers per activity. actual overhead per activity by actual use of cost drivers per activity.

estimated overhead per activity by expected use of cost drivers per activity.

When incurred, factory labor costs are debited to factory wages payable. work in process. factory wages expense. factory labor.

factory labor

Assigning manufacturing costs to work in process results in credits to all of the following except manufacturing overhead. finished goods inventory. factory labor. raw materials inventory.

finished goods inventory Factory Labor is credited when manufacturing costs are assigned to work in process ("Assigning Manufacturing Costs to Work in Process").

When a job is completed in a job order cost accounting system, the cost of the job is transferred to manufacturing overhead. finished goods inventory. cost of goods sold. work in process inventory.

finished goods inventory.

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 reasonable relationship low degree of correlation moderate connection

high degree of correlation

Activity-based costing is the initial phase of converting to a just-in-time operating environment. uses direct labor as its primary cost driver. can be used only in a job order costing system. is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers.

is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers.

In a process cost system, manufacturing overhead... is assigned to a work in process account for each production department as overhead costs are incurred. is assigned to finished goods at the end of each accounting period. is assigned to a work in process account for each job as the job is completed. is assigned to a work in process account for each production department on the basis of a predetermined overhead rate.

is assigned to a work in process account for each production department on the basis of a predetermined overhead rate. In a process cost system, manufacturing overhead is assigned to a work in process account, for each production department on the basis of a predetermined overhead rate.

A company is more likely to use a job costing system if... it uses a periodic inventory system. it manufactures a large volume of similar products. its production is continuous. it manufactures products with unique characteristics.

it manufactures products with unique characteristics

Appropriate when products have distinguishing and heterogeneous characteristics.

job order cost system

n recent years, as production has become more automated, there has been a significant trend toward use of _______________ as the activity base in assigning overhead. machine hours direct labor hours direct labor costs units produced

machine hours

Work in Process Inventory is debited for all of the following except direct materials used. manufacturing overhead incurred. manufacturing overhead applied. factory labor used.

manufacturing overhead incurred Work in Process Inventory is debited for raw materials used

Source document which authorizes issuance of raw materials to production

materials requisition slip

In a manufacturing company, the cost of factory labor consists of all of the following except gross earnings of factory workers. employer payroll taxes. net earnings of factory workers. fringe benefits incurred by the employer

net earnings of factory workers.

Used to apply manufacturing overhead to jobs.

predetermined overhead rate

Companies assign manufacturing overhead to work in process on an estimated basis through the use of a(n) assigned overhead rate. predetermined overhead rate. actual overhead rate. previous year's overhead rate

predetermined overhead rate.

A process cost system would be used for all of the following except the printing of wedding invitations. manufacture of cereal. refining of petroleum. production of automobiles.

printing of wedding invitations. A process cost system would be used for the refining of petroleum because of the similarity of the product ("Process Cost System").

Appropriate when products are similar and are produced continuously

process cost system

Which of the following activities adds value to a product or service? Shaping a piece of metal on a lathe Moving parts from machine to machine Providing warranty service on products sold Storage of raw materials

shaping a piece of metal on a lathe

Raw materials are assigned to a job when the job is sold. the materials are purchased. the materials are received from the vendor. the materials are issued by the materials storeroom.

the materials are issued by the materials storeroom. Raw materials are assigned to a job when the materials are issued by the materials storeroom, not when the materials are received from the vendor.

To assign overhead costs to an individual product, the activity-based overhead rate is multiplied by... the number of products produced during the period. the number of employees who participate in manufacturing the product. the number of cost drivers used per product. the number of direct labor hours used during the period.

the number of cost drivers used per product.

In a process cost system... total costs are determined when the job is completed. the unit cost is total manufacturing costs for the period divided by the units produced during the period. costs are summarized in a job cost sheet. only one work in process account is used.

the unit cost is total manufacturing costs for the period divided by the units produced during the period.

When actual manufacturing overhead costs are greater than the overhead applied to products.

undersupplied oh

Job cost sheets constitute the subsidiary ledger for manufacturing overhead. cost of goods sold. work in process inventory. finished goods inventory.

work in process inventory

The entry when direct factory labor is assigned to jobs is a debit to work in process inventory and a credit to factory labor. manufacturing overhead and a credit to factory labor. factory labor and a credit to work in process inventory. factory labor and a credit to manufacturing overhead.

work in process inventory and a credit to factory labor.