Accounting 310 Test 2

A document that summarizes the manufacturing activity that takes place in a process department for a given period of time is called the: a. processing report. b. production report. c. maintenance schedule. d. physical flow schedule.

b

Scarlet Company is a job-order firm that follows a normal costing approach. Consider the following information regarding Scarlet Company: Estimated overhead costs $7,500 Estimated direct labor hours 1,500 hours Hours worked for Job 10 45 hours For Job 10, with a total of 45 hours worked, the amount of overhead cost posted is: a. $225. b. $250. c. $235. d. $215.

a

Under the weighted average method, equivalent units of output are computed by: a. adding units completed to equivalent units in ending work in process. b. subtracting units completed from equivalent units in beginning work in process. c. subtracting units completed from equivalent units in ending work in process. d. adding units completed to equivalent units in beginning work in process.

a

Which of the following is an assumption made under the process-costing method? a. There is a one-to-one relationship between the output measures of a transferring department and a receiving department. b. There is no beginning work in process at the end of are porting period. c. All the goods in ending work in process are considered complete in all respects. d. There is no physical movement of goods from the transferring department to the receiving department.

a

Which of the following is true of a physical flow schedule? a. It shows the units to account for and what happened to them. b. It is the same as an equivalent units schedule, which is prepared at the end of a reporting period. c. It measures the output of a period. d. It is used to determine the equivalent units transferred to the subsequent department.

a

Daffodil Cosmetics has six customers who buy all the cosmetics it produces. One large customer purchases 400,000 units per year, placing four orders per year. The other five customers order 500,000 units in total, placing 200 orders per year. At the end of current year, Daffodil has incurred the order filling cost of $510,000. Which of the following is the order filling cost assigned to the large customer using the activity-based costing method? a. $10,000 b. $12,500 c. $8,000 d. $2,500

a. $10,000

Terra, Inc., is an automobile company. It is planning to spend a total amount of $150,000,000 on resources in its assembling unit. The practical capacity of these resources is 1,200,000 hours. Based on the given information, calculate the capacity cost rate for the assembling unit of Terra, Inc. a. $125 per hour b. $115 per hour c. $105 per hour d. $95 per hour

a. $125 per hour

Which of the following statements best defines cost accumulation? a. It is the recognition and recording of costs in the course of business operations. b. It is the process of reducing business expenses to increase profits. c. It is the determination of the dollar amounts of direct materials, direct labor, and overhead used in production. d. It is the association of production costs with the units produced.

a. It is the recognition and recording of costs in the course of business operations.

A work-in-process inventory file is the collection of all: a. purchase requisition forms. b. job cost sheets. c. time tickets. d. material requisition forms.

b

Which of the following statements is true about product diversity? a. Product diversity is caused by differences in product size, product complexity, setup time, and size of batches. b. Product diversity is one of the reasons for a firm to choose the plantwide costing method over other costing methods. c. Product diversity causes product cost distortion only when the non-unit overhead costs are insignificant. d. Product diversity results in lesser overhead activities at the unit-level in the production process.

a. Product diversity is caused by differences in product size, product complexity, setup time, and size of batches.

If overhead variance is immaterial, then it is disposed of by: a. assigning it to cost of goods sold. b. assigning it to distribution costs. c. assigning it to work-in-process inventory. d. assigning it to finished goods inventory.

a. assigning it to cost of goods sold.

The proportion of each overhead activity consumed by a product is defined as: a. consumption ratio. b. activity driver. c. consumable rate. d. product diversity.

a. consumption ratio

Assume Excellent Company is a job-order firm that follows a normal costing approach. Which of following statements reflect the correct approach of accounting for overheads? a. Overhead is assigned to production using indirect labor hours. b. Overhead is applied to each job using a predetermined rate. c. Actual overheads incurred need not be accounted for. d. Actual overheads are assigned to jobs.

b

In a job-order costing system, if a spoilage is not caused by any particular job, it is: a. subtracted from the cost of goods sold. b. spread across all jobs through applied overhead. c. not charged to any of the production accounts. d. added to the cost of the first job dealt with

b

In process costing, transferred-in goods are treated as: a. ending work-in-process units for the subsequent process. b. a type of direct material for the subsequent process. c. indirect materials for the subsequent process. d. equivalent units for the subsequent process.

b

The two categories of completed units needed in the first-in-first-out (FIFO) method are: a. units completed during the current period and ending work-in-process units. b. units started and completed during the current period and beginning work-in-process units. c. units completed during the current period and beginning work-in-process units. d. units started during the current period and ending work-in-process units.

b

Which of the following statements is true of normal spoilage? a. It may result from electrical surges or by a leaky roof. b. It is expected due to the nature of the production process. c. It is not charged to the production accounts. d. It should be deducted from the cost of inventories.

b

Which of the following is an example of a pure service? a. A service provided by a transport agency b. A service provided by an internet cafe c. A service provided by a restaurant d. A service provided by a beautician

b. A service provided by an internet cafe

Which of the following statements is true of normal costing? a. It uses predetermined direct materials, direct labor, and overhead costs. b. It measures overhead costs on a predetermined basis and uses actual costs for direct materials and direct labor. c. It uses predetermined direct materials cost, predetermined direct labor cost, and actual overhead costs. d. It measures costs of direct materials on a predetermined basis and uses actual costs for direct labor and overhead.

b. It measures overhead costs on a predetermined basis and uses actual costs for direct materials and direct labor.

Which of the following is an example of a facility-level activity? a. Purchasing raw-materials b. Providing plant security c. Developing product-testing procedures d. Introducing new products

b. Providing plant security

Which of the following are the essential characteristics of job-order costing? a. Homogeneous products and products that incur different costs b. Wide variety of unique products and products that incur different costs c. Homogeneous products and products that incur the same costs d. Wide variety of unique products and products that incur the same costs

b. Wide variety of unique products and products that incur different costs

The firms that have plants with multiple products, high product diversity, and significant non-unit-level overhead are candidates for: a. a unit-based costing system using direct material rate. b. an activity-based costing system. c. a traditional costing system. d. a direct tracing costing system.

b. an activity-based costing system.

Operation costing is a hybrid of: a. marginal and standard costing. b. job-order and process costing. c. job-order and standard costing. d. process and marginal costing.

b. job-order and process costing.

A bank issues credit cards to its eligible customers and processes them. It follows the process-costing system to record the costs incurred on credit card issuance and processing. Costs incurred during the month of October are as follows: Direct labor $7,900 Overhead $2,900 Number of credit cards issued and processed 1,200 Calculate the cost per credit card for October. a. $8 per card b. $11 per card c. $9 per card d. $10 per card

c

A leaky roof that allows rain to spoil the jobs beneath is charged to: a. Finished Goods. b. Cost of Goods Sold. c. Loss from Abnormal Spoilage. d. Loss from Normal Spoilage.

c

Boysenberry Company manufactures vacuum cleaners and follows the first-in, first-out (FIFO) method to record inventories. The journal entry to record requisitions of materials by the Assembling Department for the month of June will include: a. a debit to Work in Process—Assembling and a credit to Notes Payable. b. a debit to Work in Process—Assembling and a credit to Sales. c. a debit to Work in Process—Assembling and a credit to Materials. d. a debit to Work in Process—Assembling and a credit to Accounts Receivable.

c

Daffodil Company is into manufacturing a wide variety of unique products. During April, Daffodil worked on Job 20. Given below is the information related to Job 20. Job 20 Beginning balance $500 Materials requisitioned 4,500 Direct labor cost 2,250 Overhead is assigned at the rate of 60 percent of direct labor cost. From the provided information, calculate the total cost of Job 20. a. $8,800 b. $8,000 c. $8,600 d. $8,400

c

Ruby Company is a job-order firm that follows a normal costing approach. During the month of January, Ruby worked on two jobs: Job 52 and Job 56. For Job 52, the total direct labor cost is $450 and for Job 56, the total direct labor cost is $250. Identify the journal entry to be made to record the direct labor costs assigned to the two jobs. a. Debit Wages Payable by $700, and credit Finished Goods by $700. b. Credit Wages Payable by $700, and debit Finished Goods by $700. c. Debit Work-in-Process Inventory by $700, and credit Wages Payable by $700. d. Credit Work-in-Process Inventory by $700, and debit Wages Payable by $700.

c

Which of the following is true of the just-in-time (JIT) manufacturing approach? a. It works well only with the job-order costing system. b. It results in a lot of wastage in the manufacturing process. c. It emphasizes continuous improvement. d. It maximizes inventories.

c

Attire uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following estimated and actual data for the coming year: Estimated overhead $1,000,000 Expected activity 250,000 Actual activity (direct labor hours) 265,000 Units produced 500,000 Attire applies overhead cost to each unit by using predetermined plantwide overhead rate based on direct labor hours. Calculate the overhead cost per unit of jeans produced by Attire. a. $4.00 b. $2.65 c. $2.12 d. $4.24

c. $2.12

Which of the following activity drivers should be used when the time required to perform an activity varies from transaction to transaction? a. Transaction drivers b. Resource drivers c. Duration drivers d. Direct tracing drivers

c. Duration drivers

Which of the following statements is true regarding the time-driven activity-based costing (ABC) system? a. It is an approach that uses expected consumption ratios to reduce the number of cost drivers. b. It computes activity cost by multiplying the cost of resources supplied by the practical capacity of resources supplied. c. It eliminates the need for detailed interviewing and surveying to determine resource drivers to assign costs to activities. d. It computes capacity cost rate by dividing total activity output by activity rate.

c. It eliminates the need for detailed interviewing and surveying to determine resource drivers to assign costs to activities.

Which of the following statements is true regarding applied overhead? a. It is equal to the product of the overhead rate and budgeted annual usage of the unit-level drivers. b. It is disposed of by assigning it to cost of goods sold, if it is equal to actual overhead. c. It is the total overhead assigned to actual production at any point in time. d. It is calculated to determine whether the actual overhead is material or not.

c. It is the total overhead assigned to actual production at any point in time.

The source document used to assign direct labor to each particular job is known as a: a. job cost sheet. b. subsidiary ledger. c. time ticket. d. requisition form.

c. time ticket.

In a production report, equivalent units equal: a. units started and completed minus the units in beginning work in process. b. units completed minus the equivalent units in ending work in process. c. units started and completed plus the units in beginning work in process. d. units completed plus the equivalent units in ending work in process.

d

Vermillion Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Vermillion worked on two jobs in June. Data are as follows: Job 56 Job 55 Balance, 6/1 $32,000 $45,000 Direct materials 26,000 28,000 Direct labor 30,000 32,000 Engineering design 900 1,200 Purchasing 1,600 1,750 Other overhead 14,525 16,250 Which of the following would be true if Job 56 required no engineering hours? a. The engineering applied to job 56 would increase by $900. b. The engineering applied to Job 55 would increase by $900. c. The engineering applied to Job 55 would be zero, and the cost of Job 55 would decrease by $900. d. The engineering applied to Job 56 would be zero, and the cost of Job 56 would decrease by $900.

d

Which of the following can be achieved by implementing just-in-time (JIT) manufacturing? a. High inventory carrying costs b. Huge quantity of finished goods inventory c. Huge quantity of work-in-process inventory d. Minimal inventory holding costs

d

Which of the following is a disadvantage of the weighted average costing method? a. It increases the material costs of a firm significantly. b. It does not consider units in beginning work in process while computing equivalent units of output. c. It can be used only by manufacturing firms. d. It combines the performance of the current period with that of a prior period.

d

Which of the following is true of the process-costing system? a. It can be used only by service firms. b. It accumulates costs by jobs. c. It is complicated and more expensive than a job-order costing system. d. It uses multiple work-in-process accounts for manufacturing firms.

d

Beaver Manufacturing expects to produce 20,000 units next year and has budgeted overhead for the year at $240,000. Over the past four years, Beaver Manufacturing produced the following number of units: Year 1 22,000 Year 2 17,000 Year 3 21,000 Year 4 20,000 Calculate the predetermined overhead rate that Beaver Manufacturing will apply if normal capacity is used. a. $10 b. $14 c. $15 d. $12

d. $12

Which of the following costing systems analyzes the activity accounting system and uses the most expensive activities for activity-based costing (ABC) assignment? a. A normal costing system b. Equally accurate reduced ABC systems c. A transaction driven costing system d. Approximately relevant ABC systems

d. Approximately relevant ABC systems