ACCTG 202
10. Which of the following entities would most likely have raw materials, work in process, and finished goods? A. Exxon Corporation. B. Macy's Department Store. C. Wendy's. D. Southwest Airlines. E. Columbia University.
A
13. As production takes place, all manufacturing costs are added to the: A. Work-in-Process Inventory account. B. Manufacturing-Overhead Inventory account. C. Cost-of-Goods-Sold account. D. Finished-Goods Inventory account. E. Production Labor account.
A
16. Which of the following statements about materials is false? A. Acquisitions of materials are normally charged to the Purchases account. B. The use of direct materials gives rise to a debit to Work-in-Process Inventory. C. The use of indirect materials gives rise to a debit to Manufacturing Overhead. D. The use of indirect materials gives rise to a credit to Manufacturing Supplies Inventory. E. Direct materials are accounted for in a different manner than indirect materials.
A
17. Which of the following employees of a commercial printer/publisher would be classified as direct labor? A. Book binder. B. Plant security guard. C. Sales representative. D. Plant supervisor. E. Payroll supervisor.
A
18. Norwood Appliance produces washers and dryers in an assembly-line process. Labor costs incurred during a recent period were: corporate executives, $100,000; assembly-line workers, $80,000; security guards, $18,000; and plant supervisor, $30,000. The total of Norwood's direct labor cost was: A. $80,000. B. $98,000. C. $110,000. D. $128,000. E. $228,000.
A
20. The following information relates to October: Production supervisor's salary: $2,500 Factory maintenance wages: 250 hours at $8 per hour The journal entry to record the preceding information is: A. Manufacturing Overhead 4,500 Wages Payable 4,500 B. Wages Payable 4,500 Manufacturing Overhead 4,500 C. Work-in-Process Inventory 4,500 Wages Payable 4,500 D. Wages Payable 4,500 Work-in-Process Inventory 4,500 E. Work-in-Process Inventory 2,500 Manufacturing Overhead 2,000 Wages Payable 4,500
A
22. The accounting records of Westcott Company revealed the following costs: Factory utilities $ 35,000 Wages of assembly-line personnel 170,000 Customer entertainment 45,000 Indirect materials used 19,000 Depreciation on salespersons' cars 51,000 Production equipment rental costs 110,000 Costs that would be considered in the calculation of manufacturing overhead total: A. $164,000. B. $215,000. C. $385,000. D. $430,000. E. some other amount.
A
22. The journal entry needed to record $5,000 of advertising for Westwood Manufacturing would include: A. a debit to Advertising Expense. B. a credit to Advertising Expense. C. a debit to Manufacturing Overhead. D. a credit to Manufacturing Overhead. E. a debit to Projects-in-Process.
A
23. Which of the following statements is (are) correct? A. Overtime premiums should be treated as a component of manufacturing overhead. B. Overtime premiums should be treated as a component of direct labor. C. Idle time should be treated as a component of direct labor. D. Idle time should be accounted for as a special type of loss. E. Both "B" and "C" are correct.
A
26. Metro Corporation uses a predetermined overhead rate of $20 per machine hour. In deriving this figure, the company's accountant used: A. a denominator of budgeted machine hours for the current accounting period. B. a denominator of actual machine hours for the current accounting period. C. a denominator of actual machine hours for the previous accounting period. D. a numerator of budgeted machine hours for the current accounting period. E. a numerator of actual machine hours for the current accounting period.
A
27. In a manufacturing company, the cost of goods completed during the period would include which of the following elements? A. Raw materials used. B. Beginning finished goods inventory. C. Marketing costs. D. Depreciation of delivery trucks. E. More than one of the above.
A
31. The left side of the Manufacturing Overhead account is used to accumulate: A. actual manufacturing overhead costs incurred throughout the accounting period. B. overhead applied to Work-in-Process Inventory. C. underapplied overhead. D. predetermined overhead. E. overapplied overhead.
A
32. The accounting records of Bronco Company revealed the following information: Raw materials used $ 60,000 Direct labor 125,000 Manufacturing overhead 360,000 Work-in-process inventory, 1/1 50,000 Finished-goods inventory, 1/1 189,000 Work-in-process inventory, 12/31 76,000 Finished-goods inventory, 12/31 140,000 Bronco's cost of goods manufactured is: A. $519,000. B. $522,000. C. $568,000. D. $571,000. E. some other amount.
A
33. An accountant recently debited Work-in-Process Inventory and credited Manufacturing Overhead. The accountant was: A. applying a predetermined overhead amount to production. B. recognizing receipt of the factory utilities bill. C. recording a year-end adjustment for an insignificant amount of underapplied overhead. D. recognizing actual overhead incurred during the period. E. recognizing the completion of production.
A
34. The final step in recognizing the completion of production requires a company to: A. debit Finished-Goods Inventory and credit Work-in-Process Inventory. B. debit Work-in-Process Inventory and credit Finished-Goods Inventory. C. add direct labor to Work-in-Process Inventory. D. add direct materials, direct labor, and manufacturing overhead to Work-in-Process Inventory. E. add direct materials to Finished-Goods Inventory.
A
35. Job no. C12 was completed in November at a cost of $18,500, subdivided as follows: direct material, $3,500; direct labor, $6,000; and manufacturing overhead, $9,000. The journal entry to record this information is: A. Finished-Goods Inventory 18,500 Work-in-Process Inventory 18,500 B. Work-in-Process Inventory 18,500 Finished-Goods Inventory 18,500 C. Work-in-Process Inventory 18,500 Raw-Material Inventory 3,500 Wages Payable 6,000 Manufacturing Overhead 9,000 D. Cost of Goods Sold 18,500 Finished-Goods Inventory 18,500 E. Finished-Goods Inventory 18,500 Cost of Goods Sold 18,500
A
36. If a company sells goods that cost $70,000 for $82,000, the firm will: A. reduce Finished-Goods Inventory by $70,000. B. reduce Finished-Goods Inventory by $82,000. C. report sales revenue on the balance sheet of $82,000. D. reduce Cost of Goods Sold by $70,000. E. follow more than one of the above procedures.
A
39. Barney Company applies manufacturing overhead by using a predetermined rate of 200% of direct labor cost. The data that follow pertain to job no. 764: Direct material cost $55,000 Direct labor cost 40,000 If Barney adds a 40% markup on total cost to generate a profit, which of the following choices depicts a portion of the accounting needed to record the sale of job no. 764? Account Debited Amount A. Cost of Goods Sold $175,000 B. Cost of Goods Sold $245,000 C. Finished-Goods Inventory $175,000 D. Finished-Goods Inventory $245,000 E. Sales Revenue $245,000
A
4. A custom-home builder would likely utilize: A. job-order costing. B. process costing. C. mass customization. D. process budgeting. E. joint costing.
A
41. Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was: A. $1,000 underapplied. B. $1,000 overapplied. C. $4,000 underapplied. D. $4,000 overapplied. E. $5,000 underapplied.
A
42. Which of the following is not an example of a variable cost? A. Straight-line depreciation on a machine that has a five-year service life. B. Wages of manufacturing workers whose pay is based on hours worked. C. Tires used in the production of tractors. D. Aluminum used to make patio furniture. E. Commissions paid to sales personnel.
A
45. Howard Manufacturing's overhead at year-end was underapplied by $5,800, a small amount given the firm's size. The year-end journal entry to record this amount would include: A. a debit to Cost of Goods Sold. B. a debit to Manufacturing Overhead. C. a debit to Work-in-Process Inventory. D. a credit to Cost of Goods Sold. E. a credit to Work-in-Process Inventory.
A
46. The variable costs per unit are $4 when a company produces 10,000 units of product. What are the variable costs per unit when 8,000 units are produced? A. $4.00. B. $4.50. C. $5.00. D. $5.50. E. Some other amount.
A
51. Costs that can be easily traced to a specific department are called: A. direct costs. B. indirect costs. C. product costs. D. manufacturing costs. E. processing costs.
A
57. In comparison with firms that use plantwide overhead rates and departmental overhead rates, companies that have adopted activity-based costing will typically use: A. more cost pools and more cost drivers. B. more cost pools and fewer cost drivers. C. fewer cost pools and more cost drivers. D. fewer cost pools and fewer cost drivers. E. only one cost pool and one cost driver.
A
6. A manufacturing firm produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order. To accumulate the cost of each order, the company would use a: A. job-cost record. B. cost allocation matrix. C. production log. D. overhead sheet. E. manufacturing cost record.
A
Use the following to answer questions 58-59: Wee Care is a nursery school for pre-kindergarten children. The school has determined that the following biweekly revenues and costs occur at different levels of enrollment: Number of Students Enrolled Total Revenue Total Costs 10 $3,000 $2,100 15 4,500 2,700 16 4,800 2,800 20 6,000 3,200 21 6,300 3,255 58. The marginal cost when the twenty-first student enrolls in the school is: A. $55. B. $155. C. $300. D. $3,045. E. $3,255.
A
1. Which of the following statements is true? A. The word "cost" has the same meaning in all situations in which it is used. B. Cost data, once classified and recorded for a specific application, are appropriate for use in any application. C. Different cost concepts and classifications are used for different purposes. D. All organizations incur the same types of costs. E. Costs incurred in one year are always meaningful in the following year.
Answer: C
17. Longview Corporation recently used $72,000 of direct materials and $3,000 of indirect materials in production activities. The journal entries reflecting these transactions would include: A. a debit to Raw-Material Inventory for $72,000. B. a debit to Manufacturing Overhead for $3,000. C. a credit to Manufacturing Overhead for $3,000. D. a debit to Work-in-Process Inventory for $75,000. E. a debit to Manufacturing Overhead for $75,000.
B
2. Product costs are: A. expensed when incurred. B. inventoried. C. treated in the same manner as period costs. D. treated in the same manner as advertising costs. E. subtracted from cost of goods sold.
B
25. Which of the following is the correct method to calculate a predetermined overhead rate? A. Budgeted total manufacturing cost ÷ budgeted amount of cost driver. B. Budgeted overhead cost ÷ budgeted amount of cost driver. C. Budgeted amount of cost driver ÷ budgeted overhead cost. D. Actual overhead cost ÷ budgeted amount of cost driver. E. Actual overhead cost ÷ actual amount of cost driver.
B
28. Dale Company, which applies overhead at the rate of 190% of direct labor cost, began work on job no. 101 during June. The job was completed in July and sold during August, having accumulated direct material and labor charges of $27,000 and $15,000, respectively. On the basis of this information, the total overhead applied to job no. 101 amounted to: A. $0. B. $28,500. C. $51,300. D. $70,500. E. $79,800.
B
29. Huxtable charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of machine hours. The following data pertain to the current year: Budgeted manufacturing overhead: $480,000 Actual manufacturing overhead: $440,000 Budgeted machine hours: 20,000 Actual machine hours: 16,000 Overhead applied to production totaled: A. $352,000. B. $384,000. C. $550,000. D. $600,000. E. some other amount.
B
32. Throughout the accounting period, the credit side of the Manufacturing Overhead account is used to accumulate: A. actual manufacturing overhead costs. B. overhead applied to Work-in-Process Inventory. C. overapplied overhead. D. underapplied overhead. E. predetermined overhead.
B
34. For the year just ended, Cole Corporation's manufacturing costs (raw materials used, direct labor, and manufacturing overhead) totaled $1,500,000. Beginning and ending work-in-process inventories were $60,000 and $90,000, respectively. Cole's balance sheet also revealed respective beginning and ending finished-goods inventories of $250,000 and $180,000. On the basis of this information, how much would the company report as cost of goods manufactured (CGM) and cost of goods sold (CGS)? A. CGM, $1,430,000; CGS, $1,460,000. B. CGM, $1,470,000; CGS, $1,540,000. C. CGM, $1,530,000; CGS, $1,460,000. D. CGM, $1,570,000; CGS, $1,540,000. E. Some other amounts.
B
38. A computer manufacturer recently shipped several laptops to a customer (cost: $25,000) and billed the customer $30,000. Which of the following options correctly expresses the accounts that are debited and credited to record this transaction? A. Debits: Accounts Receivable, Finished-Goods Inventory; credits: Sales Revenue, Cost of Goods Sold. B. Debits: Accounts Receivable, Cost of Goods Sold; credits: Sales Revenue, Finished-Goods Inventory. C. Debits: Sales Revenue, Cost of Goods Sold; credits: Accounts Receivable, Finished-Goods Inventory. D. Debits: Sales Revenue, Finished-Goods Inventory; credits: Accounts Receivable, Cost of Goods Sold. E. Debits: Accounts Receivable; credits: Finished-Goods Inventory, Profit on Sale.
B
39. The choices below depict five costs of Benton Corporation and a possible driver for each cost. Which of these choices likely contains an inappropriate cost driver? A. Gasoline consumed; number of miles driven. B. Manufacturing overhead incurred in a heavily automated facility; direct labor hours. C. Sales commissions; gross sales revenue. D. Building maintenance cost; building square footage. E. Personnel department cost; number of employees.
B
40. Armada Company applies manufacturing overhead by using a predetermined rate of 150% of direct labor cost. The data that follow pertain to job no. 831: Direct material cost $72,000 Direct labor cost 38,000 If Armada adds a 30% markup on total cost to generate a profit, which of the following choices depicts a portion of the accounting needed to record the sale of job no. 831? Account Debited Amount A. Accounts Receivable $167,000 B. Accounts Receivable $217,100 C. Finished-Goods Inventory $167,000 D. Finished-Goods Inventory $217,100 E. Sales Revenue $217,100
B
40. Variable costs are those costs that: A. vary inversely with changes in activity. B. vary directly with changes in activity. C. remain constant as activity changes. D. decrease on a per-unit basis as activity increases. E. increase on a per-unit basis as activity increases.
B
42. Maher, Inc., applies manufacturing overhead at the rate of $60 per machine hour. Budgeted machine hours for the current period were anticipated to be 80,000; however, a lengthy strike resulted in actual machine hours being worked of only 65,000. Budgeted and actual manufacturing overhead figures for the year were $4,800,000 and $4,180,000, respectively. On the basis of this information, the company's year-end overhead was: A. overapplied by $280,000. B. underapplied by $280,000. C. overapplied by $620,000. D. underapplied by $620,000. E. underapplied by $900,000.
B
45. Which of the following is an example of a fixed cost? A. Paper used in the manufacture of textbooks. B. Property taxes paid by a firm to the City of Los Angeles. C. The wages of part-time workers who are paid $8 per hour. D. Gasoline consumed by salespersons' cars. E. Surgical supplies used in a hospital's operating room.
B
48. Under- or overapplied manufacturing overhead at year-end is most commonly: A. charged or credited to Work-in-Process Inventory. B. charged or credited to Cost of Goods Sold. C. charged or credited to a special loss account. D. prorated among Work-in-Process Inventory, Finished-Goods Inventory, and Cost of Goods Sold. E. ignored because there is no effect on the Cash account.
B
49. When underapplied or overapplied manufacturing overhead is prorated, amounts can be assigned to which of the following accounts? A. Raw-Material Inventory, Manufacturing Overhead, and Direct Labor. B. Cost of Goods Sold, Work-in-Process Inventory, and Finished-Goods Inventory. C. Work-in-Process Inventory, Raw-Material Inventory, and Cost of Goods Sold. D. Raw-Material Inventory, Finished-Goods Inventory, and Cost of Goods Sold. E. Raw-Material Inventory, Work-in-Process Inventory, and Finished-Goods Inventory
B
5. Which of the following types of companies would most likely use process costing? A. Aircraft manufacturers. B. Textile manufacturers. C. Textbook publishers. D. Custom-machining firms. E. Shipbuilders.
B
52. Which of the following would not be considered a direct cost with respect to the service department of a new car dealership? A. Wages of repair techniques. B. Property taxes paid by the dealership. C. Repair parts consumed. D. Salary of the department manager. E. Depreciation on new equipment used to analyze engine problems.
B
53. Indirect costs: A. can be traced to a cost object. B. cannot be traced to a particular cost object. C. are not important. D. are always variable costs. E. may be indirect with respect to Disney World but direct with respect to one its major components, Epcot Center.
B
53. Which of the following statements about the use of direct labor as a cost driver is false? A. Direct labor is the most commonly used cost driver when calculating a predetermined overhead rate. B. Direct labor is gaining in importance in many manufacturing applications with respect to being a significant cost driver. C. Direct labor is an inappropriate cost driver to use if a company is highly automated. D. If direct labor is a good cost driver, increases in direct labor are matched with increases in manufacturing overhead. E. Companies can use either direct labor cost or direct labor hours as a cost driver.
B
54. If the amount of effort and attention to products varies substantially throughout a firm's various manufacturing operations, the firm might consider the use of: A. a plant-wide overhead rate. B. departmental overhead rates. C. actual overhead rates instead of predetermined overhead rates. D. direct labor hours to determine the overhead rate. E. machine hours to determine the overhead rate.
B
55. The tuition that will be paid next semester by a college student who pursues a degree is a(n): A. sunk cost. B. out-of-pocket cost. C. indirect cost. D. average cost. E. marginal cost.
B
56. Which of the following costs should be ignored when choosing among alternatives? A. Opportunity costs. B. Sunk costs. C. Out-of-pocket costs. D. Differential costs. E. None of the above.
B
57. At the Nassau Advertising Agency, partner and staff compensation cost is a key driver of agency overhead. In light of this fact, which of the following is the correct expression to determine the amount of overhead applied to a particular client job? A. (Budgeted overhead ÷ budgeted compensation) x budgeted compensation cost on the job. B. (Budgeted overhead ÷ budgeted compensation) x actual compensation cost on the job. C. (Budgeted compensation ÷ budgeted overhead) x budgeted compensation cost on the job. D. (Budgeted compensation ÷ budgeted overhead) x actual compensation cost on the job. E. None of the above, because service providers do not apply overhead to jobs.
B
7. A typical job-cost record would provide information about all of the following items related to an order except: A. the cost of direct materials used. B. administrative costs. C. direct labor costs incurred. D. applied manufacturing overhead. E. direct labor hours worked.
B
13. Which of the following inventories would a company ordinarily hold for sale? A. Raw materials. B. Work in process. C. Finished goods. D. Raw materials and finished goods. E. Work in process and finished goods.
C
15. Companies that engage in mass customization: A. tend to have a relatively low production volume. B. tend to have a high production volume that involves highly standardized end-products. C. tend to have a high production volume, many standardized components, and customer-specified combinations of components. D. tend to have a high production volume, many unique components, and customer-specified combinations of components. E. could be typified by the refining operations of Shell Oil.
C
20. Depreciation of factory equipment would be classified as: A. operating cost. B. "other" cost. C. manufacturing overhead. D. depreciation expense. E. administrative cost.
C
21. Which of the following costs is not a component of manufacturing overhead? A. Indirect materials. B. Factory utilities. C. Factory equipment. D. Indirect labor. E. Property taxes on the manufacturing plant.
C
23. Regency Company incurred $90,000 of depreciation for the year. Eighty percent relates to the firm's production facilities, and 20% relates to sales and administrative offices. If all items are handled in the proper manner, a review of the company's accounting records should reveal a: A. debit to Depreciation Expense for $90,000. B. debit to Manufacturing Overhead for $90,000. C. debit to Manufacturing Overhead for $72,000. D. debit to Work-in-Process Inventory for $18,000. E. credit to Cash for $90,000.
C
24. Conversion costs are: A. direct material, direct labor, and manufacturing overhead. B. direct material and direct labor. C. direct labor and manufacturing overhead. D. prime costs. E. period costs.
C
24. The process of assigning overhead costs to the jobs that are worked on is commonly called: A. service department cost allocation. B. overhead cost distribution. C. overhead application. D. transfer costing. E. overhead cost apportionment.
C
3. Which of the following manufacturers would most likely use job-order costing? A. Chemical manufacturers. B. Microchip processors. C. Custom-furniture manufacturers. D. Gasoline refiners. E. Fertilizer manufacturers.
C
30. Fort Walton Industries began July with a finished-goods inventory of $48,000. The finished-goods inventory at the end of July was $41,000 and the cost of goods sold during the month was $125,000. The cost of goods manufactured during July was: A. $77,000. B. $84,000. C. $118,000. D. $132,000. E. some other amount.
C
30. Treetops worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. Nos. 401 and 402 were completed by year-end, and no. 401 was sold at a profit of 40% of cost. A review of job no. 403's cost record revealed direct material charges of $20,000 and total manufacturing costs of $25,000. If Treetops applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have been: A. $0. B. $2,000. C. $3,000. D. $3,333. E. $5,000.
C
31. Kansas Plating Company reported a cost of goods manufactured of $260,000, with the firm's year-end balance sheet revealing work in process and finished goods of $35,000 and $67,000, respectively. If supplemental information disclosed raw materials used in production of $40,000, direct labor of $70,000, and manufacturing overhead of $120,000, the company's beginning work in process must have been: A. $5,000. B. $37,000. C. $65,000. D. $97,000. E. some other amount.
C
33. The accounting records of Dolphin Company revealed the following information: Total manufacturing costs $530,000 Work-in-process inventory, Jan. 1 56,000 Work-in-process inventory, Dec. 31 78,000 Finished-goods inventory, Jan. 1 146,000 Finished-goods inventory, Dec. 31 123,000 Dolphin's cost of goods sold is: A. $508,000. B. $529,000. C. $531,000. D. $553,000. E. some other amount.
C
41. As activity decreases, unit variable cost: A. increases proportionately with activity. B. decreases proportionately with activity. C. remains constant. D. increases by a fixed amount. E. decreases by a fixed amount.
C
46. Fog Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied overhead at month-end if: A. suppliers of direct materials have an across-the-board price increase. B. an accountant failed to record the period's charges for plant maintenance and security. C. employees are hit hard with a widespread outbreak of the flu. D. direct laborers are granted a wage increase. E. outlays for advertising expenditures are increased.
C
47. The fixed costs per unit are $10 when a company produces 10,000 units of product. What are the fixed costs per unit when 12,500 units are produced? A. $4. B. $6. C. $8. D. $10. E. Some other amount.
C
5. The accounting records of Tacoma Company revealed the following costs: direct materials used, $170,000; direct labor, $350,000; manufacturing overhead, $400,000; and selling and administrative expenses, $220,000. Tacoma's product costs total: A. $520,000. B. $750,000. C. $920,000. D. $1,140,000. E. some other amount.
C
54. The salary that is sacrificed by a college student who pursues a degree full time is a(n): A. sunk cost. B. out-of-pocket cost. C. opportunity cost. D. differential cost. E. marginal cost.
C
55. In the two-stage cost allocation process, costs are assigned: A. from jobs, to service departments, to production departments. B. from service departments, to jobs, to production departments. C. from service departments, to production departments, to jobs. D. from production departments, to jobs, to service departments. E. from the balance sheet (when goods are produced), to the income statement (when goods are sold).
C
59. The average cost per student when 16 students enroll in the school is: A. $100. B. $125. C. $175. D. $300. E. $400.
C
CHAPTER 3
Chapter 3
1. Product costing in a manufacturing firm is the process of: A. accumulating the company's period costs. B. allocating costs among the firm's departments. C. placing a value on the company's fixed assets. D. assigning costs to the firm's inventory. E. assigning costs to the company's managers.
D
10. The assignment of direct labor cost to individual jobs is based on: A. an estimate of the total time spent on the job. B. actual total payroll cost divided equally among all jobs in process. C. estimated total payroll cost divided equally among all jobs in process. D. the actual time spent on each job multiplied by the wage rate. E. the estimated time spent on each job multiplied by the wage rate.
D
11. The total production cost of a job is composed of: A. direct material and direct labor. B. direct material, direct labor, manufacturing overhead, and outlays for selling costs. C. direct material, direct labor, manufacturing overhead, and outlays for both selling and administrative costs. D. direct material, direct labor, and applied manufacturing overhead. E. direct material, direct labor, and actual manufacturing overhead.
D
12. Which of the following inventories would a discount retailer such as Wal-Mart report as an asset? A. Raw materials. B. Work in process. C. Finished goods. D. Merchandise inventory. E. All of the above.
D
14. Zeno Corporation engages in mass customization and direct sales, the latter by accepting customer orders over the Internet. As a result, Zeno: A. would probably begin the manufacturing process upon receipt of a customer's order. B. would typically have fairly low inventory levels for the amount of sales revenue generated. C. would typically have fairly high inventory levels for the amount of sales revenue generated. D. would likely find choices "A" and "B" to be applicable. E. would likely find choices "A" and "C" to be applicable.
D
15. Which of the following statements about manufacturing cost flows is false? A. Direct materials, direct labor, and manufacturing overhead are entered in the Work-in-Process Inventory account. B. The Finished-Goods Inventory account will contain entries that reflect the cost of goods sold during the period. C. The cost of units sold during the period will typically appear on the income statement. D. When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an account entitled Profit on Sale. E. Units are normally transferred from Work-in-Process Inventory to Finished-Goods Inventory.
D
19. Oregon Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper journal entry to record these events would include a debit to Work in Process for: A. $0 because Work in Process should be credited. B. $0 because Work in Process is not affected. C. $11,000. D. $106,000. E. $117,000.
D
2. Which of the following statements is true? A. Service firms have little need for determining the cost of their services. B. The concept of product costing is relevant only for manufacturing firms. C. The cost of year-end inventory appears on the balance sheet as an expense. D. Service companies use cost information for planning and control purposes. E. Mining and petroleum companies have no inventoriable costs.
D
21. Electricity costs that were incurred by a company's production processes should be debited to: A. Utilities Expense. B. Accounts Payable. C. Cash. D. Manufacturing Overhead. E. Work-in-Process Inventory.
D
25. Prime costs are comprised of: A. direct materials and manufacturing overhead. B. direct labor and manufacturing overhead. C. direct materials, direct labor, and manufacturing overhead. D. direct materials and direct labor. E. direct materials and indirect materials.
D
27. Horton Company applies overhead based on direct labor hours. At the beginning of 20x1, the company estimated that manufacturing overhead would be $500,000, and direct labor hours would be 10,000. Actual overhead by the conclusion of 20x1 amounted to $400,000. On the basis of this information, Horton's 20x1 predetermined overhead rate is: A. $0.02 per direct labor hour. B. $0.025 per direct labor hour. C. $40 per direct labor hour. D. $50 per direct labor hour. E. none of the above.
D
28. Which of the following equations is used to calculate cost of goods sold during the period? A. Beginning finished goods + cost of goods manufactured + ending finished goods. B. Beginning finished goods - ending finished goods. C. Beginning finished goods + cost of goods manufactured. D. Beginning finished goods + cost of goods manufactured - ending finished goods. E. Beginning finished goods + ending finished goods - cost of goods manufactured.
D
35. Leggio Industries reported the following data for the year just ended: sales revenue, $950,000; cost of goods sold, $420,000; cost of goods manufactured, $330,000; and selling and administrative expenses, $170,000. Leggio's gross margin would be: A. $30,000. B. $200,000. C. $360,000. D. $530,000. E. $620,000.
D
36. Pumpkin Enterprises began operations on January 1, 20x1, with all of its activities conducted from a single facility. The company's accountant concluded that the year's building depreciation should be allocated as follows: selling activities, 20%; administrative activities, 35%; and manufacturing activities, 45%. If Pumpkin sold 60% of 20x1 production during that year, what percentage of the depreciation would appear (either directly or indirectly) on the 20x1 income statement? A. 27%. B. 45%. C. 55%. D. 82%. E. 100%.
D
44. Sanger Corporation debited Cost of Goods Sold and credited Manufacturing Overhead at year-end. On the basis of this information, one can conclude that: A. budgeted overhead exceeded actual overhead. B. budgeted overhead exceeded applied overhead. C. budgeted overhead was less than applied overhead. D. actual overhead exceeded applied overhead. E. actual overhead was less than applied overhead.
D
48. Total costs are $120,000 when 10,000 units are produced; of this amount, variable costs are $48,000. What are the total costs when 12,000 units are produced? A. $57,600. B. $72,000. C. $120,000. D. $129,600. E. $144,000.
D
49. Baxter Company, which pays a 10% commission to its salespeople, reported sales revenues of $210,000 for the period just ended. If fixed and variable sales expenses totaled $56,000, what would these expenses total at sales of $168,000? A. $16,800. B. $35,000. C. $44,800. D. $51,800. E. Some other amount.
D
50. Fletcher, Inc., disposes of under- or overapplied overhead at year-end as an adjustment to cost of goods sold. Prior to disposal, the firm reported cost of goods sold of $590,000 in a year when manufacturing overhead was underapplied by $15,000. If sales revenue totaled $1,400,000, determine (1) Fletcher's adjusted cost of goods sold and (2) gross margin. Adjusted Cost of Goods Sold Gross Margin A. $575,000 $810,000 B. $575,000 $825,000 C. $590,000 $810,000 D. $605,000 $795,000 E. $605,000 $810,000
D
52. The term "normal costing" refers to the use of: A. job-costing systems. B. computerized accounting systems. C. targeted overhead rates. D. predetermined overhead rates. E. actual overhead rates.
D
57. Which of the following would not likely be used by service providers to accumulate job costs? A. Projects. B. Contracts. C. Clients. D. Processes. E. All of the above, as service providers cannot use job-costing systems.
D
6. Costs that are expensed when incurred are called: A. product costs. B. direct costs. C. inventoriable costs. D. period costs. E. indirect costs.
D
8. Which of the following is not a period cost? A. Legal costs. B. Public relations costs. C. Sales commissions. D. Wages of assembly-line workers. E. The salary of a company's chief financial officer (CFO).
D
8. Which of the following statements about material requisitions is false? A. Material requisitions are often computerized. B. Material requisitions are a common example of source documents. C. Material requisitions contain information that is useful to the cost accounting department. D. Material requisitions authorize the transfer of materials from the production floor to the raw materials warehouse. E. Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to complete a job.
D
9. Pruitt Company has developed an integrated system that coordinates the flow of all goods, services, and information into and out of the organization, working with raw material vendors as well as customers to improve service and reduce costs. The firm is said to be using: A. participative management. B. top-down management. C. strategic cost management. D. supply chain management. E. management by objectives (MBO).
D
9. The accounting records of Hill Corporation revealed the following selected costs: Sales commissions, $40,000; plant supervision, $94,000; and administrative expenses, $185,000. Hill's period costs total: A. $40,000. B. $94,000. C. $185,000. D. $225,000. E. $319,000.
D
11. Selling and administrative expenses would likely appear on the balance sheet of: A. The Gap. B. Texas Instruments. C. Turner Broadcasting System. D. all of the above firms. E. none of the above firms.
E
12. Manufacturing overhead: A. includes direct materials, indirect materials, indirect labor, and factory depreciation. B. is easily traced to jobs. C. includes all selling costs. D. should not be assigned to individual jobs because it bears no obvious relationship to them. E. is a pool of indirect production costs that must somehow be attached to each unit manufactured.
E
14. Which of the following statements regarding work in process is not correct? A. Work in process is partially completed inventory. B. Work in process consists of direct labor, direct material, and manufacturing overhead. C. Work-in-Process Inventory is debited to record direct material used and direct labor incurred. D. Work-in-Process Inventory appears on the year-end balance sheet. E. Work-in-Process Inventory is credited when goods are sold.
E
16. Midwest Motors manufactures automobiles. Which of the following would not be classified as direct materials by the company? A. Sheet metal used in the automobile's body. B. Tires. C. Interior leather. D. CD player. E. Wheel lubricant.
E
18. A review of a company's Work-in-Process Inventory account found a debit for materials of $67,000. If all procedures were performed in the correct manner, this means that the firm: A. also recorded a credit to Raw-Material Inventory. B. also recorded a credit to Manufacturing Supplies Inventory. C. was accounting for the usage of direct materials. D. was accounting for the usage of indirect materials. E. was accounting for the usage of direct materials by also crediting the Raw-Material Inventory account.
E
19. Which of the following employees would not be classified as indirect labor? A. Custodian. B. Salesperson. C. Assembler of wooden furniture. D. Plant security guard. E. Choices "B" and "C."
E
26. Which of the following statements is true? A. Product costs affect only the balance sheet. B. Product costs affect only the income statement. C. Period costs affect only the balance sheet. D. Period costs affect both the balance sheet and the income statement. E. Product costs eventually affect both the balance sheet and the income statement.
E
29. Work-in-process inventory is composed of: A. direct material and direct labor. B. direct labor and manufacturing overhead. C. direct material and manufacturing overhead. D. direct material only. E. direct material, direct labor, and manufacturing overhead.
E
3. Which of the following is a product cost? A. Glass in an automobile. B. Advertising. C. The salary of the vice president-finance. D. Rent on a factory. E. Both "A" and "D."
E
37. An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error? A. Cost of goods manufactured will be overstated by $50,000. B. Cost of goods sold will be overstated by $50,000. C. Both cost of goods manufactured and cost of goods sold will be overstated by $50,000. D. Cost of goods sold will be overstated by $50,000, and cost of goods manufactured will be understated by $50,000. E. None of the above.
E
37. Selto Manufacturing recently sold goods that cost $35,000 for $45,000 cash. The journal entries to record this transaction would include: A. a credit to Work-in-Process Inventory for $35,000. B. a debit to Sales Revenue for $45,000. C. a credit to Profit on Sale for $10,000. D. a debit to Finished-Goods Inventory for $35,000. E. a credit to Sales Revenue for $45,000.
E
38. Which of the following would likely be a cost driver for the amount of direct materials used? A. The number of units sold. B. The number of direct labor hours worked. C. The number of machine hours worked. D. The number of employees working in the factory.
E
4. Which of the following would not be classified as a product cost? A. Direct materials. B. Direct labor. C. Indirect materials. D. Insurance on the manufacturing plant. E. Sales commissions.
E
43. Carlson charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of labor hours. The following data pertain to the current year: Budgeted manufacturing overhead: $1,600,000 Actual manufacturing overhead: $1,632,000 Budgeted labor hours: 50,000 Actual labor hours: 48,000 Which of the following choices denotes the correct status of manufacturing overhead at year-end? A. Overapplied by $32,000. B. Underapplied by $32,000. C. Overapplied by $68,000. D. Overapplied by $96,000. E. Underapplied by $96,000.
E
43. Fixed costs are those costs that: A. vary directly with changes in activity. B. vary inversely with changes in activity. C. remain constant on a per-unit basis. D. increase on a per-unit basis as activity increases. E. remain constant as activity changes.
E
44. The fixed cost per unit: A. will increase as activity increases. B. will increase as activity decreases. C. will decrease as activity increases. D. will remain constant. E. will exhibit the behavior described in choices "B" and "C."
E
47. The estimates used to calculate the predetermined overhead rate will virtually always: A. prove to be correct. B. result in a year-end balance of zero in the Manufacturing Overhead account. C. result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount. D. result in underapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount. E. result in either underapplied or overapplied overhead that is closed to Cost of Goods Sold if it is immaterial in amount.
E
50. Which of the following would not be characterized as a cost object? A. An automobile manufactured by General Motors. B. The New York Fire Department. C. A Burger King restaurant located in Cleveland, Ohio. D. A Delta Airlines flight from Atlanta to Miami. E. All of the above are examples of cost objects.
E
51. Which of the following statement(s) is (are) correct regarding overhead application? I. Actual overhead rates result in more accurate but less timely information. II. Predetermined overhead rates result in less accurate but more timely information. III. Predetermined overhead rates tend to smooth product costs over time. A. III only. B. I and II. C. I and III. D. II and III. E. I, II, and III.
E
56. Which of the following entities would not likely be a user of job-costing systems? A. Custom-furniture manufacturers. B. Repair shops. C. Hospitals. D. Accounting firms. E. None of the above, as all are likely users.
E
57. If the total cost of alternative A is $50,000 and the total cost of alternative B is $34,000, then $16,000 is termed the: A. opportunity cost. B. average cost. C. sunk cost. D. out-of-pocket cost. E. differential cost.
E
7. Which of the following is a period cost? A. Direct material. B. Advertising expense. C. Depreciation on cars driven by a firm's president and treasurer. D. Miscellaneous supplies used in production activities. E. Both "B" and "C."
E
