Exam 1 Managerial Accounting

For external reporting purposes, GAAP requires companies to treat period costs as assets. True or False

False

Managers are able to set an accurate selling price without knowing product cost information. True or False

False

Manufacturing overhead is allocated by debiting the Finished Goods Inventory account. True or False

False

Overallocated manufacturing overhead occurs when the manufacturing overhead allocated to Work-in-Process Inventory is less than the amount actually incurred. True or False

False

Sales commissions are included in manufacturing overhead. True or False

False

Target pricing starts with the full product cost, and it then adds the desired profit to arrive at the sales price. True or False

False

The just-in-time management system results in an increase in the costs to buy, store, insure, and move inventory. True or False

False

The primary activity of manufacturing companies is to purchase goods from a wholesaler and resell them. True or False

False

Traditional costing systems employ multiple allocation rates for manufacturing overhead costs, but an activity-based costing system uses only one rate for allocating manufacturing overhead costs. True or False

False

What is total period costs?

Office Rent

The common factor in all quality management systems is the desire to _________. a. improve performance b. complete repairs in a timely manner c. ignore the costs and benefits of changes to products d. increase the number of quality inspections

a

A job order costing system is used by companies that manufacture batches of unique products or provide specialized services. True or False

True

Activity-based management (ABM) uses activity-based costs to make decisions that increase profits while meeting customer needs. True or False

True

Companies using just-in-time production systems are far more vulnerable to production shutdowns if they receive defective raw materials. True or False

True

Cost accounting systems are primarily concerned with accumulating product cost information. True or False

True

Direct materials and direct labor are prime costs. True or false

True

In selecting machine usage as the primary cost driver of overhead costs for the Production Department, management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred. True or False

True

Managers are able to set an accurate selling price without knowing product cost information. True or False

True

Manufacturing companies produce their own products, but merchandising companies do not. True or False

True

Service companies do not have product costs, so they often consider all operating expenses as part of their cost of service. True or False

True

The following format represents the flow of costs for all three manufacturing inventory accounts:Beginning balance + Additions - Ending balance = Amount used, manufactured, or sold True or False

True

When goods are transferred from the Finished Goods Inventory account to the Cost of Goods Sold account, the product costs move from the balance sheet to the income statement. True or False

True

The costs incurred in training employees is an example of a(n) ________. a. prevention cost b. external failure cost c. internal failure cost d. appraisal cost

a

A manufacturer produced 7,500 total units. The cost of goods manufactured is $88,000 and the cost of goods sold is $71,000. The unit product cost is $9.47. True or False

False

Activity-based costing focuses on a single predetermined overhead rate for cost analysis. True or False

False

Activity-based management is not suitable for service companies as it deals with the proper allocation of manufacturing overhead costs. True or False

False

A furniture manufacturer has decided that its use of a single plantwide predetermined overhead allocation rate is no longer accurate. In making the transition to using multiple predetermined overhead allocation rates, which of the following statements is incorrect? a. With multiple overhead rates, there is one cost pool and multiple allocation bases. b. With multiple overhead rates, there are multiple cost pools. c. The use of multiple predetermined overhead allocation rates is more complex, but it may be more accurate. d. Management must analyze the expected overhead costs and separate them into a cost pool for each department.

a

An activity-based costing system is developed in four steps: a.Compute the predetermined overhead allocation rate for each activity. b.Identify activities and estimate their total indirect costs. c.Identify the allocation base for each activity and estimate the total quantity of each allocation base.d.Allocate indirect costs to the cost object.Which of the following is the correct order for performing these steps? a. b, c, a, d b. b, a, c, d c. a, b, c, d d. c, a, b, d

a

The journal entry to record $1600 of direct labor and $350 of indirect labor incurred will include debit(s) to the ________. a. Work-in-Process Inventory account for $1600 and Manufacturing Overhead account for $350 b. Manufacturing Overhead account for $1950 c. Work-in-Process Inventory account for $1600 and Finished Goods Inventory account for $350 d. Finished Goods Inventory account for $1950

a

Which of the following would most likely be treated as an activity in an activity-based costing system? a. machine processing b. sales revenues c. direct labor cost d. direct materials cost

a

Which of the following would use a process costing system rather than a job order costing system? a. a paint manufacturer b. a music production studio c. a health-care service provider d. a home remodeling contracting company

a

A radial tire manufacturer produces products in two departments—Divisions A and B. The company uses separate predetermined overhead allocation rates for each department to allocate its overhead. Divisions A and B have estimated manufacturing overhead costs of $160,000 and $360,000, respectively. Division A uses machine hours as the allocation base, and Division B uses direct labor hours as the allocation base. The total estimated machine hours were 31,000, and direct labor hours were 22,000 for the year. Calculate the departmental predetermined overhead allocation rates. (Round your answer to the nearest cent.) a. Division A—$7.27, Division B—$11.61 b. Division A—$5.16, Division B—$16.36 c. Division A—$16.36, Division B—$5.16 d. Division A—$11.61, Division B—$7.27

b

The journal entry to record indirect labor costs incurred involves a debit to the ________. a. Work-in-Process Inventory account b. Manufacturing Overhead account c. Finished Goods Inventory account d. Wages Payable account

b

Which of the following decisions will most likely involve the use of activity-based management? a. decisions related to the financing of an investment using equity or debt b. decisions related to the pricing of a product c. decisions related to the expansion operations in a particular geographic location d. decisions related to the payment of dividends

b

Which of the following statements is true of an activity-based costing system? a. it is not as accurate or precise as traditional costing systems b. it uses separate predetermined overhead allocation rates for each activity c. it is not as complex or as costly as traditional systems d. it accumulates overhead costs by processing departments

b

________ are costs incurred to avoid poor-quality goods or services. a. Appraisal costs b. Prevention costs c. Internal failure costs d. External failure costs

b

At the end of the year, Beta, Inc. has an unadjusted debit balance in the Manufacturing Overhead account of $3950. The adjusting journal entry needed to adjust the balance to zero will include a ________. a. debit to Gross Profit $3950 and credit to Cost of Goods Sold $3950 b. debit to Work-in-Process Inventory $3950 and credit to Manufacturing Overhead $3950 c. debit to Cost of Goods Sold $3950 and credit to Manufacturing Overhead $3950 d. debit to Manufacturing Overhead $3950 and credit to Cost of Goods Sold $3950 Results for item 28. 28

c

The entry to record the purchase of raw materials on account would include a ________. a. credit to the Work-in-Process Inventory account b. credit to the Raw Materials Inventory account c. debit to the Raw Materials Inventory account d. debit to the Work-in-Process Inventory account

c

The journal entry to record $1600 of direct labor and $350 of indirect labor incurred will include debit(s) to the ________. a. Finished Goods Inventory account for $1950 b. Work-in-Process Inventory account for $1600 and Finished Goods Inventory account for $350 c. Work-in-Process Inventory account for $1600 and Manufacturing Overhead account for $350 d. Manufacturing Overhead account for $1950

c

The journal entry to record direct labor costs actually incurred involves a debit to the ________. a. Wages Payable account b. Raw Materials Inventory account c. Work-in-Process Inventory account d. Manufacturing Overhead account

c

Which of the following statements is true? a. Indirect costs must be allocated based on a single plant wide rate. b. Managers can choose to wait until the end of the accounting period to allocate manufacturing overhead costs. c. Managers cannot wait until the end of the accounting period for product cost information. d. Manufacturing overhead costs are accumulated in cost pools and then assigned to products.

c

Costs incurred in customer service are categorized as ________. a. Prevention Costs b. internal failure costs c. appraisal costs d. external failure costs

d

The activity-based costing system improves the allocation of ________. a. sales commissions b. direct materials c. direct labor d. indirect manufacturing costs

d

The predetermined overhead allocation rate for a given production year is calculated ________. a. at the end of the production year. b. after the preparation of financial statements for the year c. after completion of each job d. before the accounting period begins

d