ACCTG test #2

In a process-costing system, manufacturing costs are accumulated by: A. batch. B. batch and time period. C. department. D. department and time period. E. department or process, and time period.

e

Consumption ratios are useful in determining: A. the existence of product-line diversity. B. overhead that is incurred at the unit level. C. if overhead-producing activities are being utilized effectively. D. if overhead costs are being applied to products. E. if overhead-producing activities are being utilized efficiently.

A

In an activity-based costing system, direct materials used would typically be classified as a: A. unit-level cost. B. batch-level cost. C. product-sustaining cost. D. facility-level cost. E. matrix-level cost.

A

Widely varying consumption ratios: A. are reflective of product-line diversity. B. indicate an out-of-control production environment. C. dictate a need for traditional costing systems. D. work against the implementation of activity-based costing. E. create an unsolvable product-costing problem.

A

In an activity-based costing system, materials receiving would typically be classified as a: A. unit-level activity. B. batch-level activity. C. product-sustaining activity. D. facility-level activity. E. period-level activity.

B

Moon Bay Manufacturing uses machine hours to apply manufacturing overhead to products. This method of costing would likely be acceptable if the company has: A. a large proportion of unit-level activities. B. a large proportion of unit-level activities and fairly identical consumption ratios among product lines. C. a large proportion of unit-level activities and widely varying consumption ratios among product lines. D. a large proportion of nonunit-level activities. E. a large proportion of nonunit-level activities and fairly identical consumption ratios among product lines.

B

When determining the cost of a manufactured good under an operation-costing system, a company would: A. trace direct-material cost and actual conversion cost to each product produced. B. trace direct-material cost to each product produced and use a predetermined application rate for conversion cost. C. trace actual conversion cost to each product produced and use a predetermined application rate for direct material. D. use a predetermined application rate for both direct-material cost and conversion cost. E. often switch to a job-costing system to simplify recordkeeping procedures.

B

Which of the following is the proper sequence of events in an activity-based costing system? A. Identification of cost drivers, identification of cost pools, calculation of cost application rates, assignment of cost to products. B. Identification of cost pools, identification of cost drivers, calculation of cost application rates, assignment of cost to products. C. Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of cost application rates. D. Calculation of cost application rates, identification of cost drivers, identification of cost pools, assignment of cost to products. E. Some other sequence of the four activities listed above.

B

Consider the following statements regarding product-sustaining activities: I They must be done for each batch of product that is made. II They must be done for each unit of product that is made. III They are needed to support an entire product line. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and II. E. II and III.

C

Consider the following statements: I Product diversity creates costing problems because diverse products tend to utilize manufacturing activities in different ways. II Overhead costs that are not incurred at the unit level create costing problems because such costs do not vary with traditional application bases such as direct labor hours or machine hours. III Product diversity typically exists when a single product (e.g., a ballpoint pen) is made in different colors. Which of the above statements is (are) true? A. I only. B. II only. C. I and II. D. I and III. E. II and III.

C

Foster, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology. The research and testing costs associated with the new ovens is said to arise from a: A. unit-level activity. B. batch-level activity. C. product-sustaining activity. D. facility-level activity. E. competitive-level activity.

C

Many traditional costing systems: A. trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates. B. write off manufacturing overhead as an expense of the current period. C. combine widely varying elements of overhead into a single cost pool. D. use a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to improve the accuracy of product costing. E. produce results far superior to those achieved with activity-based costing.

C

The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories is commonly known as a cost: A. object. B. application method. C. hierarchy. D. estimation method. E. classification scheme that is useful in traditional, volume-based systems

C

Which of the following is least likely to be classified as a facility-level activity in an activity-based costing system? A. Plant maintenance. B. Property taxes. C. Machine processing cost. D. Plant depreciation. E. Plant management salaries.

C

Which of the following tasks is not normally associated with an activity-based costing system? A. Calculation of cost application rates. B. Identification of cost pools. C. Preparation of allocation matrices. D. Identification of cost drivers. E. Assignment of cost to products.

C

Consider the following statements regarding traditional costing systems: I Overhead costs are applied to products on the basis of volume-related measures. II All manufacturing costs are easily traceable to the goods produced. III Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and III. E. II and III.

D

The first processing department in a sequence of three production departments must account for which of the following costs? A. Direct material and transferred-in costs. B. Direct material costs only. C. Conversion and transferred-in costs. D. Direct material and conversion costs. E. Direct material, conversion, and transferred-in costs.

D

The following tasks are associated with an activity-based costing system: 1—Calculation of cost application rates 2—Identification of cost drivers 3—Assignment of cost to products 4—Identification of cost pools Which of the following choices correctly expresses the proper order of the preceding tasks? A. 1, 2, 3, 4. B. 2, 4, 1, 3. C. 3, 4, 2, 1. D. 4, 2, 1, 3. E. 4, 2, 3, 1.

D

The salaries of a manufacturing plant's management are said to arise from: A. unit-level activities. B. batch-level activities. C. product-sustaining activities. D. facility-level activities. E. direct-cost activities.

D

Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system? A. Shipping. B. Receiving and inspection. C. Production setup. D. Property taxes. E. Quality assurance.

D

Department no. 2 receives goods from Department no. 1, adds material, completes the units, and transfers the units to Department no. 3 for final processing. The cost of goods completed by Department no. 2 would include charges for: A. direct materials. B. conversion cost. C. direct materials and conversion cost. D. transferred-in costs. E. transferred-in costs, direct materials, and conversion cost.

E

The second processing department in a sequence of three production departments would typically account for which of the following costs? A. Direct material and transferred-in costs. B. Direct material costs only. C. Transferred-in costs only. D. Direct material and conversion costs. E. Direct material, conversion, and transferred-in costs.

E

Which of the following is not a broad, cost classification category typically used in activity-based costing? A. Unit-level. B. Batch-level. C. Product-sustaining level. D. Facility-level. E. Management-level.

E

Companies that use a process-cost accounting system would: A. establish a separate Work-in-Process Inventory account for each manufacturing department. B. establish a separate Finished-Goods Inventory account for each manufacturing department. C. pass completed production directly to Cost of Goods Sold. D. charge goods produced with actual overhead amounts rather than applied overhead amounts. E. eliminate the need for the Finished-Goods Inventory account.

a

Equivalent-unit calculations are necessary to allocate manufacturing costs between: A. units completed and ending work in process. B. beginning work in process and units completed. C. units sold and ending work in process. D. cost of goods manufactured and beginning work in process. E. cost of goods manufactured and cost of goods sold.

a

Grossman Enterprises is converting to an activity-based costing system and needs to depict the various activities in its manufacturing process along with the activities' relationships. Which of the following is a possible tool that the company can use to accomplish this task? A. Storyboards. B. Activity relationship charts (ARCs). C. Decision trees. D. Simulation games. E. Process organizers.

a

Process costing is used to account for: A. large numbers of identical products that are produced in a continuous manufacturing environment. B. small numbers of products that are produced in batches. C. raw materials that are converted directly to finished goods. D. finished goods that are refined and processed further. E. large numbers of products that are produced in a non-repetitive process.

a

Which of the following is a key document in a typical process-costing system? A. Departmental production report. B. Master schedule. C. Production budget. D. Sequential product report. E. Materials requirement report.

a

Which of the following statements about activity-based costing (ABC) is false? A. ABC cannot be used by service businesses. B. In comparison with traditional costing systems, ABC tends to use more cost pools and more cost drivers. C. In comparison with traditional-costing systems, ABC results in less cost "averaging" of various diversified activities. D. In comparison with traditional-costing systems, ABC results in more costs being classified as direct costs. E. ABC tends to reduce cost distortion among product lines.

a

In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has: A. a large proportion of nonunit-level activities. B. product-line diversity or a large proportion of nonunit-level activities. C. minimal product-line diversity and a small proportion of nonunit-level activities. D. existing variances from budgeted amounts. E. a situation other than those noted above.

b

Operation costing: A. tends to parallel job-order costing with respect to the treatment of conversion cost. B. tends to parallel process costing with respect to the treatment of conversion cost. C. tends to parallel process costing with respect to the treatment of direct materials. D. would likely be used by a manufacturing plant that produces one model of a single product. E. is commonly known as a joint-costing system.

b

Which of the following data are needed to calculate total equivalent units under the weighted-average method? A. Work-to-date on ending work in process, units started during the period. B. Units completed during the period, work-to-date on ending work in process. C. Work to complete beginning work in process, work-to-date on ending work in process. D. Work to complete beginning work in process, units completed, work done on ending work in process. E. Units completed, work to complete beginning work in process.

b

Which of the following statements regarding similarities between process costing and job-order costing are true? 1. Both systems assign production costs to units of output. 2. Both systems require extensive knowledge of financial accounting. 3 The flow of costs through the manufacturing accounts is essentially the same. A. I only. B. I and III. C. II and III. D. III only. E. I, II, and III.

b

. Activity-based costing systems: A. use a single, volume-based cost driver. B. assign overhead to products based on the products' relative usage of direct labor. C. often reveal products that were under- or overcosted by traditional costing systems. D. typically use fewer cost drivers than more traditional costing systems. E. have a tendency to distort product costs.

c

Corruption, Inc., overstated the percentage of work completed with respect to conversion cost on the ending work-in-process inventory. What is the effect of this overstatement on conversion-cost equivalent units and physical units manufactured, respectively? A. Overstated, overstated. B. Overstated, understated. C. Overstated, none. D. None, overstated. E. None, none.

c

When calculating unit costs under the weighted-average process-costing method, the unit cost is based on: A. only the current period's manufacturing costs. B. only costs in the period's beginning work-in-process inventory. C. a summation of the costs in the beginning work-in-process inventory plus costs incurred in the current period. D. only costs incurred in previous accounting periods. E. a summation of the costs in the beginning work-in-process inventory plus costs to be incurred in the upcoming period.

c

When computing the conversion cost per equivalent unit under the weighted-average method of process costing, all of the following information would be needed except: a. the number of units completed during the current accounting period. b. the conversion work performed during the current period on the ending work-in-process inventory. c. the conversion work performed during the current period on the beginning work-in-process inventory. d. the conversion cost in the beginning work-in-process inventory. e. the conversion cost incurred during the current accounting period.

c

Barnes, Inc., which uses a process-costing system, transfers completed production from Department no. 1 to Department no. 2 for further work. Which of the following best describes the account that would be credited to record this transfer? A. Cost of Goods Transferred. B. Finished-Goods Inventory: Department no. 1. C. Finished-Goods Inventory: Department no. 2. D. Work-in-Process Inventory: Department no. 1. E. Work-in-Process Inventory: Department no. 2.

d

Michael, Inc., uses a process-costing system. A newly hired accountant has identified the following procedures that must be performed by the close of business on Friday: 1—Calculation of equivalent units 2—Analysis of physical flows of units 3—Assignment of costs to completed units and units still in process 4—Calculation of unit costs Which of the following choices correctly expresses the proper order of the preceding tasks? A. 1, 2, 3, 4. B. 1, 2, 4, 3. C. 1, 4, 3, 2. D. 2, 1, 4, 3. E. 2, 1, 3, 4.

d

Unit costs in a process-costing system are derived by using: A. in-process units. B. completed units. C. physical units. D. equivalent units. E. a measure of activity other than those listed above.

d

Which of the following manufacturers would most likely not use a process-cost accounting system? A. A producer of computer monitors. B. A paint manufacturer. C. A producer of frozen orange juice. D. A builder of customized yachts. E. A lumber mill.

d

Which of the following statements is false? A. In job-order costing, costs are accumulated by job order. B. In process costing, costs are accumulated by department. C. In process costing, the cost per unit in a department is found by spreading the period's manufacturing costs over the production activity. D. In process costing, the total cost of each unit is found by dividing the total factory costs by the number of units completed. E. In job-order costing, the unit cost is found by dividing the job's total cost by the job's total units.

d

. Which of the following generally fails to signal the need for a new product-costing system? A. Line managers do not believe reported product costs. B. Complex products have high reported profitability despite the lack of premium prices. C. Overhead rates are high and increasing over time. D. Line managers suggest that seemingly profitable products be dropped. E. Product-line profit margins are easy to explain.

e

A hospital administrator is in the process of implementing an activity-based-costing system. Which of the following tasks would not be part of this process? A. Identification of cost pools. B. Calculation of cost application rates. C. Assignment of cost to services provided. D. Identification of cost drivers. E. None of the above, as all these tasks would be part of the process.

e

Consider the following factors: I The degree of correlation between consumption of an activity and consumption of a particular cost driver. II The likelihood that a particular cost driver will induce a desired behavioral effect. III The likelihood that a particular cost driver will cause an increase in the cost of measurement. Which of these factors should be considered in the selection of a cost driver? A. I only. B. I and II. C. I and III. D. II and III. E. I, II, and III.

e

Greene, Inc., which uses a process-costing system, transfers completed production from Department no. 1 to Department no. 2 for further work. Which of the following best describes the account that would be debited to record this transfer? A. Cost of Goods Transferred. B. Finished-Goods Inventory: Department no. 1. C. Finished-Goods Inventory: Department no. 2. D. Work-in-Process Inventory: Department no. 1. E. Work-in-Process Inventory: Department no. 2.

e

Morrison, Inc., which uses a process-cost accounting system, passes completed production from Department A to Department B for further manufacturing. The journal entry to record completed production in Department A requires: A. a debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory. B. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory. C. a debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory: Department A. D. a debit to Work-in-Process Inventory: Department A and a credit to Work-in-Process Inventory: Department B. E. a debit to Work-in-Process Inventory: Department B and a credit to Work-in-Process Inventory: Department A.

e

Of the following organizations, activity-based costing cannot be used by: A. manufacturers. B. financial-services firms. C. book publishers. D. hotels. E. none of the above, as all are able to use this costing system.

e

Process costing would be used in all of the following industries except: A. petroleum refining. B. chemicals. C. truck tire manufacturing. D. wood pulp production. E. automobile repair.

e

Successful adoptions of activity-based costing typically occur when companies rely heavily on: A. finance personnel. B. accounting personnel. C. manufacturing personnel. D. office personnel. E. multidisciplinary project teams.

e

Under a traditional costing system, which of the following costs would likely be classified as indirect with respect to the various products manufactured? A. Plant maintenance. B. Factory supplies. C. Utilities. D. Machinery depreciation. E. All of the above would be considered indirect costs.

e

Which of the following statements about operation costing is (are) true? I. Conversion costs are accumulated by department. II. Direct material costs are accumulated by batch. III. Operation costing is a hybrid product-costing system. A. I only. B. I and II. C. I and III. D. II and III. E. I, II, and III.

e

Williams Corporation is changing from a traditional costing system to an activity-based system. As a result of this action, which of the following costs would likely change from indirect to direct? A. Direct materials. B. Factory supplies. C. Production setup. D. Production setup and finished-goods inspection. E. Production setup, finished-goods inspection, and product shipping

e