Cost Accounting Midterms

Transferred-in costs as used in a process cost accounting system are: a. costs of the product of a previous internal process that is subsequently used in a succeeding internal process b. ending work in process inventory of a previous process that will be used in a succeeding process c. supervisory salaries that are transferred from an overhead cost center to a production cost center d. labor that is transferred from another department within the same plant instead of hiring temporary workers from the outside

a. costs of the product of a previous internal process that is subsequently used in a succeeding internal process

In its reports to management, a company disclosed the presence of a fixed efficiency variance. The procedure used to analyze variances was the: a. four-variance method b. alternative three-variance method c. two-variance method d. mix and yield variances method

a. four-variance method

Standard costs are used for all of the following except: a. income determination b. forming a basis for price setting c. measuring efficiencies d. establishing budgets

a. income determination

When a manufacturing company has a highly automated plant producing many different products, probably the most appropriate basis of applying factory overhead costs to Work in Process is: a. machine hours b. direct labor hours c. units processed d. direct labor dollars

a. machine hours

In the alternative three-variance method, the amount of over- or underapplied factory overhead is analyzed as: a. spending, idle capacity, and efficiency variances b. volume, variable efficiency, and fixed efficiency variances c. volume, variable efficiency, and spending variances d. controllable, spending, and idle capacity variances

a. spending, idle capacity, and efficiency variances

If the total materials variance (actual cost of materials used compared with the standard cost of the standard amount of materials required) for a given operation is favorable, why must this variance be further evaluated as to price and usage? a. There is no need to further evaluate the total materials variance if it is favorable. b. It is done so that management can evaluate the efficiency of the purchasing and production functions. c. Generally accepted accounting principles require that all variances be analyzed in three stages. d. All variances must appear in the annual report to equity owners for proper disclosure.

b. It is done so that management can evaluate the efficiency of the purchasing and production functions.

Which of the following statements about job-order cost sheets is true? a. All job-order cost sheets serve as the general ledger control account for Work in Process Inventory. b. Job-order cost sheets can serve as subsidiary ledger information for both Work in Process Inventory and Finished Goods Inventory. c. Job-order cost sheets show costs for direct material and direct labor, but not for manufacturing overhead since it is an applied amount. d. If material requisition forms are used, job-order cost sheets do not need to be maintained

b. Job-order cost sheets can serve as subsidiary ledger information for both Work in Process Inventory and Finished Goods Inventory.

In job order costing, when materials are returned to the storekeeper that were previously issued to the factory for cleaning supplies, the journal entry should be made to: a. Materials Work in Process b. Materials Factory Overhead c. Purchases Returns Work in Process d. Work in Process Materials

b. Materials Factory Overhead

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity yields: a. Combined price--quantity variance. b. Price variance. c. Volume variance. d. Mix variance.

b. Price variance.

If a company follows a practice of isolating variances at the earliest point in time, what would be the appropriate time to isolate and recognize a direct material price variance? a. When material is issued b. When material is purchased c. When purchase order is originated d. When material is used in production

b. When material is purchased

Under job order cost accumulation, the factory overhead control account controls: a. job order cost sheets b. factory overhead analysis sheets c. cost reports by processes d. materials inventories

b. factory overhead analysis sheets

Overapplied factory overhead would result if: a. a firm incurred a significant amount of overhead b. factory overhead costs incurred were less than costs charged to production c. factory overhead costs incurred were unreasonably large in relation to units produced d. the plant were operated at less than normal capacity

b. factory overhead costs incurred were less than costs charged to production

Of the following variances, the one that is most useful in assessing the performance of the Purchasing Department is the: a. materials price usage variance b. materials purchase price variance c. overhead price variance d. idle capacity variance

b. materials purchase price variance

If the chief accountant of a firm has to prepare an operating budget for the coming year, the first budget to be prepared is the a. purchases budget. b. sales budget. c. cash budget. d. capital budget.

b. sales budget.

A credit balance in the labor efficiency variance indicates that: a. actual rate and actual hours exceed standard rate and standard hours b. standard hours exceed actual hours c. standard rate and standard hours exceed actual rate and actual hours d. actual hours exceed standard hours

b. standard hours exceed actual hours

A characteristic of a process costing system is that: a. standard costs are not applicable b. work in process inventory is restated in terms of completed units c. it requires a lot more detailed accounting than does a job order system d. costs are accumulated by order

b. work in process inventory is restated in terms of completed units

Which one of the following is true concerning standard costs? a. Standard costs are estimates of costs attainable only under the most ideal conditions, but rarely practicable. b. Unfavorable variances, material in amount, should be investigated, but large favorable variances need not be investigated. c. If properly used, standards can help motivate employees. d. Standard costs are difficult to use with a process costing system

c. If properly used, standards can help motivate employees.

In a process costing system, how is the unit cost affected in a production cost report when materials are added in a department subsequent to the first department and the added materials result in additional units? a. The first department's unit cost is increased, but it does not necessitate an adjustment of the transferred-in unit cost. b. The first department's unit cost is increased, which necessitates an adjustment of the transferred-in unit cost. c. The first department's unit cost is decreased, which necessitates an adjustment of the transferred-in unit cost. d. The first department's unit cost is decreased, but it does not necessitate an adjustment of the transferred-in unit cost

c. The first department's unit cost is decreased, which necessitates an adjustment of the transferred-in unit cost.

Costs to be incurred after the split-off point are most useful for: a. assessing sales realization values for allocating joint costs accurately b. determining the levels of joint production c. assessing the desirability of further processing d. adjusting inequities in the joint cost allocation procedure

c. assessing the desirability of further processing

In accounting for beginning inventory costs, the method that allows the addition of beginning inventory costs with costs incurred during the period is referred to as: a. last-in, first-out b. first-in, first-out c. average d. first-in, last-out

c. average

Process costing techniques should be used in assigning costs to products a. whenever standard-costing techniques should not be used. b. if a product is manufactured on the basis of each order received. c. if a product is composed of mass-produced homogeneous units. d. when production is only partially completed during the accounting period.

c. if a product is composed of mass-produced homogeneous units.

Assuming that there was no beginning work in process inventory and the ending work in process inventory is 50% complete as to conversion costs, the number of equivalent units as to conversion costs would be: a. more than the units completed b. the same as the units placed in process c. less than the units placed in process d. less than the units completed

c. less than the units placed in process

The following components of production that can be allocated as joint costs when a single manufacturing process produces several salable products are: a. overhead and materials only b. indirect production costs only c. materials, labor, and overhead d. materials and labor only

c. materials, labor, and overhead

The characteristic that is most often used to distinguish a product as either a joint product or a by-product is the: a. amount of separable product costs that are incurred in processing b. amount (i.e., weight, inches, etc.) of the product produced in the manufacturing process c. relative sales value of the products produced in the process d. amount of labor used in processing the product

c. relative sales value of the products produced in the process

An equivalent unit of material or conversion cost is equal to: a. the amount of material or conversion cost necessary to start a unit of production into work in process b. a unit of work in process inventory c. the amount of material or conversion cost necessary to complete one unit of production d. 50% of the material or conversion cost of a unit of finished goods inventory, assuming a linear production pattern

c. the amount of material or conversion cost necessary to complete one unit of production

The labor efficiency variance is computed as: a. the difference between standard and actual hours, multiplied by the difference between standard and actual rates b. the difference between standard and actual rates, multiplied by standard hours c. the difference between standard and actual hours, multiplied by standard rate d. the difference between standard and actual rates, multiplied by actual hours

c. the difference between standard and actual hours, multiplied by standard rate

A loss that occurs uniformly throughout a production process is referred to as a _______________?

continuous production loss

All manufacturing costs other than direct materials are referred to as ___________

conversion cost

Variances resulting from materials price changes that are to be passed on to customers are: a. charged to a special loss account b. charged to cost of goods sold c. carried as a special credit to inventory accounts d. allocated to inventories and cost of goods sold

d. allocated to inventories and cost of goods sold

The trend in job-order costing is to a. use accounting software to change the focal point of the job-order system. b. eliminate the data entry function for the accounting system. c. create an Intranet to share information between competitors. d. automate the data collection and data entry functions.

d. automate the data collection and data entry functions.

When added materials in subsequent departments result in an increase of the units produced, the unit transferred-in costs will: a. be accounted for under the fifo costing method b. be reclassified as new materials c. be increased to provide for the additional units d. be decreased as they are spread over more units

d. be decreased as they are spread over more units

A purchases budget a. is affected by a firm's inventory policy only if the firm purchases on credit. b. is needed only if a firm does not pay for its merchandise in the same period as it is purchased. c. is the same thing as a production budget. d. does not reflect early payment discounts granted by vendors.

d. does not reflect early payment discounts granted by vendors.

The primary difference between the FIFO and weighted average methods of process costing is a. in the treatment of current period production costs. b. none of the above. c. in the treatment of spoiled units. d. in the treatment of beginning Work in Process Inventory.

d. in the treatment of beginning Work in Process Inventory.

The allocation of joint costs to individual products is useful primarily for purposes of: a. determining the best market price b. determining whether to produce one of the joint products c. evaluating whether an output is a main product or a by-product d. inventory costing

d. inventory costing

The assignment of raw material costs to the major end products resulting from refining a barrel of crude oil is best described as: a. incremental costing b. differential costing c. variable costing d. joint costing

d. joint costing

Both the budgeted quantity of material to be purchased and the budgeted quantity of material to be consumed can be found in the a. cash budget. b. production budget. c. pro forma income statement. d. material purchases budget.

d. material purchases budget.

Supplies needed for use in the factory are issued on the basis of: a. job cost sheets b. time tickets c. factory overhead analysis sheets d. materials requisitions

d. materials requisitions

A debit balance in a direct labor efficiency variance account indicates that: a. all of the above b. the number of units produced was less than the number of units budgeted for the period c. actual total direct labor costs incurred were less than standard direct labor costs allowed for the units produced d. the standard hours allowed for the units produced were less than actual direct labor hours used

d. the standard hours allowed for the units produced were less than actual direct labor hours used

A credit to Work in Process Inventory represents a. work still in process. b. the application of overhead to production. c. raw material put into production. d. the transfer of completed items to Finished Goods Inventory.

d. the transfer of completed items to Finished Goods Inventory.

The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when a. beginning and ending Work in Process Inventories are each 50 percent complete. b. t.e goods produced are homogeneous. c. there is no ending Work in Process Inventory. d. there is no beginning Work in Process Inventory.

d. there is no beginning Work in Process Inventory.

Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process during this period is equal to the a. units started this period in the process plus the beginning Work in Process Inventory. b. units started and completed this period in the process. c. beginning inventory this period for the process. d. units started and completed this period plus the units in ending Work in Process Inventory.

d. units started and completed this period plus the units in ending Work in Process Inventory.

If a substandard product can be reworked, it is known as a ________

defect

When production is completed on a job, finished goods are transferred to the ________ account.

finished goods

This source document shows the total cost incurred to manufacture a particular order and it contains the job number, job description and name and address of customer.

job cost sheet

When indirect materials are added to a job, the ________ account is debited.

manufacturing overhead

The document that results from the budgeting process is referred to as the

master budget

A company that manufactures sugar will use a _________ costing system to track production costs

process

If a substandard product cannot be reworked, it is known as __________

spoilage

The difference between a standard and an actual quantity, price, or rate is a ?

variance

The costing method that includes beginning work-in-process inventory in the computation of equivalent units is the ________ method

FIFO

The starting point for any master budget is the ?

Sales budget

When performing input-output variance analysis in standard costing, "standard hours allowed" is a means of measuring: a. Actual output at standard hours. b. Actual output at actual hours. c. Standard output at standard hours. d. Standard output at actual hours.

a. Actual output at standard hours.

The materials purchase price variance, in a standard cost system, is obtained by multiplying the: a. Actual quantity purchased by the difference between actual price and standard price. b. Standard quantity purchased by the difference between actual price and standard price. c. Standard price by the difference between standard quantity purchased and standard quantity used. d. Actual price by the difference between actual quantity purchased and standard quantity used.

a. Actual quantity purchased by the difference between actual price and standard price.

How should an efficiency variance that is material in amount be treated at the end of an accounting period? a. Allocated among work in process inventory, finished goods inventory, and cost of goods sold b. Charged or credited to cost of goods manufactured c. Allocated among cost of goods manufactured, finished goods inventory, and cost of goods sold d. Reported as a deferred charge or credit

a. Allocated among work in process inventory, finished goods inventory, and cost of goods sold

What is the normal year-end treatment of immaterial variances recognized in a cost accounting system utilizing standards? a. closed to Cost of Goods Sold in the period in which they arose b. allocated among cost of goods manufactured and ending work in process inventory c. capitalized as a cost of ending finished goods inventory d. reclassified to deferred charges until all related production is sold

a. closed to Cost of Goods Sold in the period in which they arose