Accounting 2 test 1

Which of the following statements is correct with regard to a CVP graph?

A CVP graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.

Which of the following is an example of a period cost in a company that makes clothing?

Advertising cost for a new line of clothing.

If a company uses a predetermined overhead rate, actual manufacturing overhead costs of a period will be recorded in the Manufacturing Overhead account and will be recorded on the job cost sheets.

False

In a CVP graph, the anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line (sales) and the total fixed expense line.

False

In a job-order cost system, indirect labor is assigned to a job using information from the employee time ticket.

False

Prime cost equals manufacturing overhead cost.

False

The cost of shipping parts from a supplier is considered a period cost.

False

The following entry would be used to record the transfer of $40,000 of direct material and $10,000 of indirect material from the storeroom to production: Direct Materials 40,000 Indirect Materials 10,000 Raw Materials 50,000

False

The journal entry for cost of goods manufactured includes the costs of units that are partially completed.

False

When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?

Gross margin will increase.

When manufacturing overhead is applied to production, it is added to:

the Work in Process account.

If manufacturing overhead is underapplied, then:

the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.

Which of the following is correct? The break-even point occurs on the CVP graph where:

total contribution margin equals total fixed expenses.

Which of the following statements is not correct concerning multiple overhead rate systems?

In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.

Which of the following is an assumption underlying standard CVP analysis? 1)The price of a product or service is expected to change as volume changes. 2)Fixed expenses will change as volume increases. 3) In multiproduct companies, the sales mix is constant. 4) In manufacturing companies, inventories always change.

In multiproduct companies, the sales mix is constant.

Which of the following statements about using a plantwide overhead rate based on direct labor is correct?

It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

In a job-order costing system, indirect labor cost is usually recorded as a debit to:

Manufacturing Overhead.

Assigning manufacturing overhead to a specific job is complicated by all of the below except:

Manufacturing overhead is incurred only to support some jobs.

Refer to the T-account below: Manufacturing Overhead (2) 9,000 (12) 167,000 (3) 15,000 (4) 80,000 (5) 30,000 (6) 25,000 159,000 167,000 Bal. 8,000 The ending balance of $8,000 represents which of the following?

Overapplied overhead.

Which of the following statements about product costs is true?

Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets.

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the "Total raw materials available" is computed by adding together the "Beginning raw materials inventory" and:

Purchases of raw materials

Which of the following statements is true? I. Overhead can be applied slowly as a job is worked on. II. Overhead can be applied when the job is completed. III. Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory.

Statements I, II, and III are all true.

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?

The amount paid to the individual who stains a chair.

Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?

The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.

Conversion cost equals product cost less direct materials cost.

True

If managers are reluctant to lay off direct labor employees when activity declines leads to a decrease in the ratio of variable to fixed costs.

True

Opportunity costs at a manufacturing company are not part of manufacturing overhead.

True

When expressed on a per unit basis, fixed costs can mislead decision makers into thinking of them as variable costs.

True

When raw materials are purchased, they are recorded as an asset.

True

Which of the following statements concerning direct and indirect costs is NOT true?

Whether a particular cost is classified as direct or indirect does not depend on the cost object.

As the level of activity increases, how will a mixed cost in total and per unit behave? In Total Per Unit A) Increase Decrease B) Increase Increase C) Increase No effect D) Decrease Increase E) Decrease No effect

Choice A

Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year? Contribution Margin Ratio Break-even point A) Increase Decrease B) Decrease Decrease C) Increase No effect D) Decrease No effect

Choice A

The cost of electricity for running production equipment is classified as: Conversion cost Period cost A) Yes No B) Yes Yes C) No Yes D) No No

Choice A

The following data have been collected for four different cost items. Cost Item Cost at 100 units Cost at 140 units W $ 8,000 $ 10,560 X $ 5,000 $ 5,000 Y $ 6,500 $ 9,100 Z $ 6,700 $ 8,580 Which of the following classifications of these cost items by cost behavior is correct? Cost W Cost X Cost Y Cost Z A) variable fixed mixed variable B) mixed fixed variable mixed C) variable fixed variable variable D) mixed fixed mixed mixed

Choice B

Which of the following approaches to preparing an income statement includes a calculation of the gross margin? Traditional Approach Contribution Approach A) Yes Yes B) Yes No C) No Yes D) No No

Choice B

Which of the following would usually be found on a job cost sheet under a normal cost system? Actual direct material cost Actual MOVH Cost A) Yes Yes B) Yes No C) No Yes D) No No

Choice B

The costs of direct materials are classified as: Conversion cost. Manufacturing cost Prime cost A) Yes Yes Yes B) No No No C) Yes Yes No D) No Yes Yes

Choice D

Wages paid to the supervisor of the warehouse where raw materials and parts are temporarily stored before being used in production is considered an example of: Direct Labor Period Cost A) Yes Yes B) Yes No C) No Yes D) No No

Choice D

Which of the following is NOT a period cost?

Depreciation of factory maintenance equipment.

Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle?

Direct Cost - No; Fixed Cost - Yes

Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs:

completed during the period.

For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit even though total costs have remained stable. This cost per unit increase may be due to _____________ costs if the level of activity at Jinan is _______________.

fixed, decreasing

A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will:

have no effect on the break-even volume.

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n):

indirect material cost.

Overapplied manufacturing overhead would result if:

manufacturing overhead costs incurred were less than manufacturing overhead costs charged to production.

Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as:

manufacturing overhead.

If sales volume increases and all other factors remain constant, then the:

margin of safety will increase.

In a job-order costing system, which of the following events would trigger recording data on a job cost sheet?

none of the choices

If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will:

not change.