exam 2 acct 310
d
For which of the following industries would job-order costing most likely not be appropriate? A. Aircraft assembly. B. Small business printing. C. Home construction. D. Cereal production.
b
How does a job-costing system differ from a process-costing system? A. A process-costing system allocates indirect costs to products; a job-costing system does not allocate indirect costs to products. B. A job-costing system assigns costs to distinct units; a process-costing system assigns costs to masses of similar units. C. A job-costing system allocates indirect costs to products; a process-costing system does not allocate indirect costs to products. D. A job-costing system assigns costs to masses of similar units; a process-costing system assigns costs to distinct units.
b
Identify the appropriate way(s) to dispose of under- or overallocated overhead costs. A. (1) Proration to all operating expense accounts, (2) Year-end write-off to miscellaneous expense, (3) Restatement of all overhead entries using budgeted indirect costs rates rather than actual indirect cost. B. (1) Proration to work in process, finished goods and cost of good sold, (2) Year-end write-off to cost of goods sold, (3) Restatement of all overhead entries using actual indirect costs rates rather than budgeted indirect cost rates. C. (1) Proration to materials inventory, finished goods and cost of good sold, (2) Year-end write-off to work in process inventory, (3) Restatement of all overhead entries using budgeted indirect costs rates rather than actual indirect cost. D. No entry is required to dispose of over or under-allocated overhead.
a
Identify the main difference between journal entries in process costing and job costing. A. There is often more than one work-in-process account in process costinglong dash-one for each process. B. The journal entries in process costing are posted to record the number of units as they are moved from one department to another. Journal entries in job costing are posted to record costs rather than number of units. C. The weighted-average method is used for the journal entries in process costing while the FIFO method is used for the journal entries in job costing. D. The journal entries in process costing are the same as those made in job-costing systems.
a
Identify the ways in which a house construction company may use job-cost information. A. (a) to determine the profitability of individual jobs, (b) to assist in bidding on future jobs, and (c) to evaluate professionals who are in charge of managing individual jobs B. (a) to divide the total costs of constructing all the houses by the total number of houses built to obtain an average cost of each house, and (b) to apply the average per-unit cost to each of the identical or similar houses built in that period C. (a) to report profit results to shareholders, and (b) to report taxable profits to tax authorities D. None of the above.
b
Identify three different debit entries to the Work-in-Process Control T-account under normal costing. A. direct materials purchased, indirect manufacturing labor paid to employees, manufacturing overhead incurred B. direct materials used, direct manufacturing labor billed to a job, manufacturing overhead allocated to a job C. direct materials purchased, completion and transfer of jobs to finished goods, sale of completed goods D. direct materials purchased, manufacturing overhead incurred, completion and transfer of jobs to finished goods
a
Identify three major source documents used in job-costing systems. A. job cost record (sheet), materials requisition record, and labor time record B. accounts receivable aging report, accounts payable aging report, and inventory control report C. general journal, general ledger, and trial balance D. balance sheet, income statement, and cash flow statement
c
A company might use budgeted costs rather than actual costs to compute direct-labor rates because A. the budgeted costs will result in a higher gross margin. B. the budgeted cost will result in lower corporate income taxes. C. it may be difficult to trace direct labor costs to jobs as they are completed. D. the budgeted costs are more accurate.
a
If manufacturing labor costs are added to the process at a different time compared to other conversion costs, an additional cost categorylong dashdirect manufacturing labor costslong dashwould be needed to assign these costs to products. a) True b) False
d
Assuming beginning work in process is zero, the equivalent units of production computed using FIFO versus weighted average will have the following relationship: a) FIFO equivalent units will be greater than weighted-average equivalent units. b) Weighted-average equivalent units are always greater than FIFO equivalent units. c) FIFO equivalent units will be less than weighted-average equivalent units. d) Weighted-average equivalent units will be equal to FIFO equivalent units.
c
Conroe Company is reviewing the data provided by its management accounting system. Which of the following statements is/are correct? I. A cost driver is a causal factor that increases the total cost of a cost object. II. Cost drivers may be volume based or activity based. III. Cost drivers are normally the largest cost in the manufacturing process. a) I only is correct. b) II and III only are correct. c) I and II only are correct. d) I, II, and III are correct.
c
Costing system refinement A. is a process used to categorize various activity cost pools on the basis of the different types of cost drivers, or cost-allocation bases, or different degrees of difficulty in determining cause-and-effect (or benefits-received) relationships. B. describes a costing approach that uses broad averages for assigning the cost of resources uniformly to cost objects when the individual products or services, in fact, use those resources in non-uniform ways. C. means making changes to a simple costing system that reduces the use of broad averages for assigning the cost of resources to cost objects and provides better measurement of the costs of overhead resources used by different cost objects. D. describes an event, task, or unit of work with a specified purpose. Consistent with its more strategic focus, costing system refinement identifies activities in all functions of the value chain. Costing system refinement first calculates the costs of individual activities and then assigns costs to cost objects such as products and services on the basis of the mix of activities needed to produce each product or service.
d
Distinguish between actual costing and normal costing. A. Actual costing and normal costing differ in their use of actual or budgeted direct-cost rates. B. Actual costing and normal costing differ in their use of actual or budgeted quantities of direct-cost inputs. C. Actual costing and normal costing differ in their use of actual or budgeted quantities of cost-allocation bases. D. Actual costing and normal costing differ in their use of actual or budgeted indirect-cost rates.
d
Does increasing the number of indirect-cost pools guarantee an increase in the accuracy of product or service costs? A. Yes, increasing the number of indirect-cost pools will always increase the homogeneity of the cost pools themselves, and will, in turn, improve the accuracy of the indirect costs allocated to product or service costs. B. No, increasing the number of indirect-cost pools does not guarantee increased accuracy of product or service costs. If the existing cost pool is not homogeneous, accuracy will increase only if the increased cost pools themselves increase in homogeneity. C. No, increasing the number of indirect-cost pools does not guarantee increased accuracy of product or service costs. If the existing cost pool is already homogeneous, increasing the number of cost pools will not increase accuracy. D. Both B. and C.
b
In process costing, why are costs often divided into two main classifications? A. Process costing systems separate costs into cost categories according to the inventory method being used. Indirect costs are used under the weighted-average method and direct costs are used under the FIFO method. B. Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. Often, only two cost classifications, direct materials and conversion costs, are necessary. Direct materials are frequently added at the start or end of the process and conversion costs are often added throughout the process. C. Process costing systems separate costs into cost categories according to the type of product or service being provided. Direct materials are applicable only to the manufacture of a product and conversion costs are applicable only when a service is being provided. D. Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process. Often, only two cost classifications, fixed and variable costs, are necessary. Fixed costs are only added at the start of the process and variable costs are added at the end.
c
Nobis Company uses an ABC system. Which of the following statements is/are correct with respect to ABC? I. Departmental costing systems are a refinement of ABC systems. II. ABC systems are useful in manufacturing, but not in merchandising or service industries. III. ABC systems can eliminate cost distortions because ABC develops cost drivers that have a cause-and-effect relationship with the activities performed. a) II and III only are correct. b) I, II, and III are correct. c) III only is correct. d) None of the listed choices is correct.
d
Select four decisions for which ABC information is useful. A. 1. Allocating direct material costs 2. Allocating direct labor costs 3. Identifying direct manufacturing overhead cost pools 4. Identifying indirect manufacturing overhead cost pools B. 1. Product-cost cross subsidization 2. Converting product-sustaining costs into unit-level costs 3. Identifying cost objects 4. Predicting gross profit C. 1. Identifying problems and uncertainties 2. Obtaining information 3. Making predictions about the future 4. Choosing among alternatives D. 1. Pricing and product mix 2. Cost reduction and process improvement 3. Product design 4. Decisions for planning and managing activities
d
The three guidelines for refinement include: A. 1. Identify the products that are the chosen cost objects. 2. Identify the direct and indirect costs of the products. 3. Compute the total cost of the products by adding all direct and indirect costs assigned to the products. B. 1. Set cost reduction targets in terms of reducing the cost per unit of a cost-allocation base in different activity areas. 2. Perform an analysis of the factors that cause costs to be incurred (cost drivers) in order to identify opportunities for improving the way work is done. 3. Evaluate whether particular nonvalue-added activities can be reduced or eliminated. C. 1. Select the activities and cost-allocation bases to use for allocating indirect costs to the products. 2. Identify the indirect costs associated with each cost-allocation base. 3. Compute the rate per unit of each cost-allocation base. D. 1. Classify as many of the total costs as direct costs as is economically feasible. 2. Expand the number of indirect cost pools until each of these pools is more homogenous. 3. Use the cause-and-effect criterion, when possible, to identify the cost-allocation base for each indirect-cost pool.
d
What are the four levels of a cost hierarchy? A. 1. Direct materials 2. Direct labor 3. Direct manufacturing overhead 4. Indirect manufacturing overhead B. 1. Direct costs 2. Indirect costs 3. Variable costs 4. Fixed costs C. 1. Design costs 2. Manufacturing costs 3. Distribution costs 4. Customer service costs D. 1. Output unit-level costs 2. Batch-level costs 3. Product-sustaining costs or service-sustaining costs 4. Facility-sustaining costs
a
What are the main costs and limitations of implementing ABC systems? A. The measurements necessary to implement it require many calculations and can be costly to operate. B. Identifying the five-step decision-making process required to implement an ABC system is very time consuming. C. The fact that ABC systems cannot be used for service and merchandising companies is its main limitation. D. All of the above.
b
What is an activity-based approach to designing a costing system? A. An activity-based approach traces direct costs to a cost object by using the actual direct-cost rates times the actual quantities of the direct-cost inputs. Indirect costs are allocated based on the actual indirect-cost rates times the actual quantities of the cost-allocation bases. B. An activity-based approach refines a costing system by focusing on individual activities as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products or services. C. An activity-based approach describes a particular costing approach that uses broad averages for assigning the cost of resources uniformly to cost objects. D. An activity-based approach means making changes that result in cost numbers better measuring the way different cost objects, such as products, use different amounts of resources of the company. These changes require the assignment of costs to direct and indirect cost pools and the use of a single indirect-cost rate.
b
Which if the following are not conversion costs? A. the cost of depreciation on an automobile assembly plant B. the cost of tires on an automobile C. the cost of direct laborers who assemble the parts of an automobile D. the cost of electricity to run the tools in the automobile assembly plant
d
Which of the following are examples of industries that use process-costing systems? A. Pharmaceutical B. Semiconductor Chips C. Oil refining D. All of the above
b
Which of the following describes the distinctive characteristic of FIFO computations in assigning costs to units completed and to units in ending work in process? A. Calculates the equivalent unit cost of all the work done to date and assigns this cost to equivalent units completed and transferred out of the process, and to equivalent units in ending work-in-process inventory. B. Assigns the cost of the previous accounting period's equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, next started and completed new units, and finally to units in ending work-in-process inventory. C. Standard costs are assigned first to complete beginning work-in-process inventory, next started and completed new units, and finally to start new units that are in ending work-in-process inventory. D. None of the above.
c
Which of the following describes the distinctive characteristic of weighted-average computations in assigning costs to units completed and to units in ending work in process? A. Assigns the cost of the previous accounting period's equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning inventory, next started and completed new units, and finally to units in ending work-in-process inventory. B. Standard costs are assigned first to complete beginning work-in-process inventory, next started and completed new units, and finally to start new units that are in ending work-in-process inventory. C. Calculates the equivalent unit cost of all the work done to date and assigns this cost to equivalent units completed and transferred out of the process, and to equivalent units in ending work-in-process inventory. D. None of the above.
b
Which of the following does not accurately describe the application of job-order costing? A. Finished goods that are purchased by customers will directly impact cost of goods sold. B. Manufacturing overhead costs incurred is used to determine total manufacturing costs. C. Indirect manufacturing labor and indirect materials are part of the actual manufacturing costs incurred. D. Direct materials and direct manufacturing labor are included in total manufacturing costs.
c
Which of the following statements is true? A. ABC systems provide benefit to manufacturing companies only. Merchandising companies carry only merchandising (finished goods) inventory and service companies generally carry no inventory at all, and therefore, an ABC system would not apply to these companies. B. ABC systems apply equally well to manufacturing and merchandising companies, but not to service companies. Service companies generally carry no inventory, and therefore, an ABC system would provide little, if any, benefit. C. ABC systems apply equally well to manufacturing, merchandising and service companies. D. ABC systems apply equally well to manufacturing and retail-oriented merchandising companies, but not to distribution-oriented merchandising companies, which carry only finished goods inventory, or to service companies, which do not carry inventory.
a
Why might an advertising agency use job costing for an advertising campaign by PepsiCo, whereas a bank might use process costing to determine the cost of checking account deposits? A. Job costing enables all the specific aspects of each job to be identified, whereas process costing can be used to compute the cost of numerous identical or similar services. B. Whenever a product or service is unique or distinct, process costing is the most efficient way to assign costs. Therefore since each banking transaction is unique, the banks use process costing to determine the cost of checking account deposits. C. Job costing can be used to compute the cost of masses of similar services, in contrast process costing enables all the specific aspects of each job to be identified individually. D. An advertising agency provides the same service to all its clients, while a bank supplies its customers with specialized services. For that reason an advertising agency would use job costing to monitor the costs of an advertising campaign by PepsiCo.
c
Why should managers worry about product overcosting or undercosting? A. Overcosting products may lead to sales that acutally result in losses because the sales may bring in less revenue than the cost of the resources they use. Undercosting products may lead to the loss market share to competitors selling similar products. B. Averaging can result in inaccurate and misleading cost data. As such, companies may overinvest in products that have been overcosted, and underinvest in products that have been undercosted. C. Overcosting may result in competitors entering a market and taking market share for products that a company erroneously believes are low-margin or even unprofitable. Undercosting may result in companies selling products on which they are in fact losing money, when they erroneously believe them to be profitable. D. If prices of products are determined by the market based on consumer demands and competition, a product that is overcosted may appear more profitable than it actually is, while a product that is undercosted may appear less profitable than it actually is.
b
"Transferred-in costs are those costs incurred in the preceding accounting period." Do you agree? Explain. A. No. Transferred-in costs or current period costs are costs incurred only while the product is being processed within the current department. As the costs are incurred in the current period, they are transferred in and assigned to the units. B. No. Transferred-in costs or previous department costs are costs incurred in a previous department that have been charged to a subsequent department. These costs may be costs incurred in that previous department during this accounting period or a preceding accounting period. C. Yes. Transferred-in costs or previous department costs are only costs incurred in a preceding accounting period. As units move from one accounting period to another, the related costs are transferred by monthly journal entries. D. None of the above are correct. Transferred-in costs have nothing to do with costs incurred during any accounting period.