managerial accounting exam practice learnsmart
job xyz has a total manufacturing cost of 600$. If the mark-up percentage is 40% the job will sell for _____$.
$840
the cost of unused capacity formula
(capacity-actual) x POHR
the journal entry to record $10,000 in manufacturing overhead applied to job #40
(debits) work in prcocess $10,000 (credits) manufacturing overhead $10,000
net income
(gross margin) - (total selling and administration expenses)
journal entry to record $20,000 in depreciation on factory equipment is
- debit manufacturing overhead $20,000 - credit Accumulating Depreciation $20,000
labor charges that can NOT be traced to a job are considered
- indirect labor - MO
a dress manufacture would consider relatively inxpensive thread to be
- indirect materials - manufacturing overhead
3 manufacturing cost categories
-DM -MO -DL
indirect labor costs include
-assembly-line assistant supervisor salary -factory security guard wages
manufacturing overhead costs:
-consist of many different items -are indirect costs
when goods are sold on account, what accounts are credited?
-finished goods -sales
INDIRECT labor is apart of what category of costs
CC
what account is debited when goods are sold on account?
COGS and accounts recievable
MO cost is included in what category of costs
Conversion costs
conversion costs totaled
DL + MO
prime costs totaled
DM + DL
widely used allocation bases in manufacturing are
Direct Labor-Hours Direct Labor Costs Units of Product Machine-Hours,
lubricants used to grease a production machine in a manufacturing company
Mfg O/H
conversion costs include
Mfg. overhead and DL
a normal cost system assigns overhead to jobs using
POHR
(est MO / est direct labor hours) is also know the
POHR per direct labor hour
the formula for applying overhead to a specific job is:
POHR x amount of allocation base incurred by job
direct material cost is a
Prime cost
(T/F) direct materials cost is NOT considered a conversion cost
True
an allocation base should be
a cost driver
which of the following would NOT be considered a job in a service firm that uses job-order costing?
a tax dept. in an accounting firm
all manufacturing costs are assigned to units of product and all nonmanufacturing costs are treated as period cost under _____ costing.
absorption
which kind of costing do companies use in their management reports?
absorption
What is the MOST common approach to product costing throughout the world.
absorption costing
shipped finished goods to a customer on credit, but sale was not recorded and costs of the finished goods were incorrectly included on period's balance sheet as part of finished goods inventory. Which statements correct concerning the effects of this error?
accounts receivable was understated inventory was overstated sales were understated COGS was understated
in activity-based absorption costing, what causes teh consumption of overhead resources?
activity
salary paid to president of company classified on the income statement as an
administrative exp.
A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n) _______ _______.
allocation base
the process used to assign overhead costs is called overhead _____.
application or overhead allocation
The total cost of a job is calculated by adding the total of direct labor cost, direct materials cost and
applied manufacturing overhead cost
maintenance and depreciation of test equipment are examples of _____ costs.
appraisal
test and inspection of in-process goods
appraisal
costs incurred to identify defective products before they are shipped to customers are
appraisal costs
costs incurred to identify DEFECTIVE products BEFORE they are shipped to customers are called _____ or _____costs.
appraisal or inspection
car codes can be used to
automatically record and post direct labor costs to jobs
setting up equipment, placing purchase orders, and arranging shipments are all examples of ______-level activities.
batch-level
differential costs can:
be either fixed or variable
NON-Mfg costs include
commissions and ceO salary
within the relevant range of activity, fixed costs remain:
constant in total
direct labor is part of what two kinds of costs?
conversion cost and prime cost
a factor that causes overhead costs is called a
cost driver
an activity ______ pool relates to a single activity measure in the activity-based approach.
cost pool
classified as an external cost on a quality cost report
customer returns arising from quality problems
which accounts are debited in the journal entry to record manufacturing labor costs?
debit work in process and debit manufacturing overhead
a journal entry that debits manufacturing overhead and credits accumulated depreciation records:
depreciation on factory equipment
a change in revenue between two alternative is known as _______ or _______ revenue.
differential or incremental revenue
costs that can be easily traced to a specific product are called _____ costs.
direct
when labor costs are incurred, only _____ costs are added directly to the work in process account.
direct labor
automobile assemblyman are classifed as
direct labor cost
wages of assembly line workers can be traced to a specific product or service and are considered
direct labor cost
a journal entry that debits manufacturing overhead and credits accounts payable could NOT record the incurrence of
direct labor costs
materials that become an important component of the finished product whose cost can be easily and conveniently traced to the finished product are ______ ______.
direct materials
lost sales arising from a reputation for poor quality
external
the U.S. absorption costing for ______ financial reports.
external
a job order costing system may inaccuratly assign costs to jobs due to:
inappropriate allocation base
the adjustment for underapplied overhead
increases COGS and decreases net income
period costs are always expensed on income statement in the period in which they are
incurred
factory supervisors salaries and factory maintenance personnel are examples of
indirect labor costs
reentering data because of keying errors
internal failure
product costs are also called _____ costs, and "_____" to units of product as they are purchased for resale or produced
inventoriable; attach
a multiple POHR system is more accurate than plantwide overhead rate system because
it can reflect differences across departments in how overhead costs are incurred
Companies that make many different products each period use _______-_______ costing.
job-order costing
a service firm that would use a job-costing system
law firm
what account is debited to record indirect labor costs?
manufacturing overhead
which account is credited when manufacturing overhead is applied?
manufacturing overhead
24 hr. pizza co. lowers reduces its flame and natural gas usage by a percentage, so the cost of natural gas would be described as a
mixed cost
the contribution approach to the income statement preparation
organizes costs according to their variable and fixed cost behavior
costs involved in selling a product are called
period costs
a normal costing system applies overhead by job by multiplying a(n) _____ rate by the ______ amount of the allocation base incurred by the job.
predetermined; actual
technical support provided to suppliers
prevention
designing and advertising a product are _____ - level activites
product-level activities
costs involved in making a product are called
products costs
classifed as a PREVENTION cost on a quality cost report
quality training
the journal entry to recordthe purchase of materials debits:
raw materials
differential cost analysis for net income or loss from proposal considers change in ________ by subtracting both ______ and ________ costs.
revenues; variable; fixed
classified as an internal failure cost on a quality cost report
rework labor and overhead
contribution margin is
sales less variable production, variable selling, and variable administrative expenses
a hour by hour summary of an employee's activities throughout a day is found on the _____ _____.
time ticket
using the mixed cost formula, "a" represents
total fixed MO cost
sales minus all thing
variable
costs assigned to units under absorption costing
variable and fixed manufacturing costs
number of units produced / total cost
variable cost behavior give the exact unit cost
in the past 8 months, a corporations experiencing a steady increase in it costs per unit. even though total costs have remained stable. This cost per unit increase may be due to _____ because the corporation's level of activity is _____.
variable cost, increasing
the average manufacturing cost per unit tends to
vary from one period to the next
withing the relevant range, variable costs can be expected to
vary in total in direct proportion to changes in activity level
a journal entry debiting COGS and crediting Finished goods is made when:
when goods are sold
direct materials are recorded on the job cost sheet when the
when materials are issued to the job
materials requisition forms are used for
-controlling the flow of materials into production -making journal entries in accounting periods
a journal entry that debits Manufacturing overhead and credits Accounts payable could be made to record:
-factory utilities expense -rent expense on factory equipment
a job cost sheet includes 3 things
-materials -labor -mo *All charged to the job
POHR based on budgeted activity
-products are charges for resources they don't use -unit product costs flutuate depending on budgeted activity
a bill of materials contains
-quantity of each direct material needed to complete a unit of product -type of each direct material needed to complete a unit of product
teh unit product cost is the same as
-the total job divided by the # of units -average product cost per unit
companies assign costs to products and services to:
-understand product profitability -value ending inventory -pricing products
in describing the cost formula (or mixed cost) equation, Y=a+bx, X represents the level of _____.
activity
when a company creates rates based on the actions it performs, it is employing an approach called _____-_______ costing.
activity-based
a journal entry that debits work in process and credits manufacturing overhead
application of manufacturing overhead costs
test and inspection of incoming materials
apprasial
a journal entry that debits finished goods and credits work in process records the:
completion of a job
a _____ cost that can be easily and conveniently traced to a specific cost object, whereas a _____ cost cannot be easily and conveniently traced to a cost object
direct; indirect
the cost of jobs unfinished at the end of a period are included in:
ending work in process inventory
classified as an appraisal cost on a quality cost report
final product testing and inspection
when jobs are sold their costs are transferred out of:
finished goods
the type and quantity of materials to be drawn from teh storeroom and the job that will be charged for the materials is specified on the
materials requisition form
activity-based absorption costing uses ____ cost pools than traditional approach
more
POHR is calculated when
the period begins
too much fixed overhead maybe applied to products when the predeterminded overhead rate is based on estmated activity (T/F)
true
independent variable
x
one reason to use a POHR is to eliminate the effect of seasonal factors (T/F)
TRUE
Smith, Inc. uses a job-order costing system with the predetermined overhead rate of $12 per machine-hour. The job cost sheet for Job #42A listed $12,000 in direct labor cost, $18,000 in direct materials cost, 1,200 direct labor-hours and 1,100 machine-hours. The total cost of Job #42A is $
Total cost of Job #42A = Direct materials + direct labor + predetermined overhead rate X actual machine-hours = $18,000 + $12,000 + ($12 per machine-hour X 1,100 machine-hours) = $43,200
activity measure in acitivity-based absorption costing is used as an _______ base.
allocation base
inventoriable costs
always expensed in the same period related products are produced.
why do companies use a POHR rather than an actual overhead rate?
an actual overhead rate is not known until the end of the period.
activity based absorption costing:
assign overhead based on events that consume overhead resources
when POHR are based on capacit , critics suggest the cost of unused capacity should:
disclosed separately on the income statement
To calculate the unit product cost using the job cost sheet:
divide the total job cost by the number of units produced
journal entry to record completion of a job would be
dm + dl + applied manufacturing overhead and debit finished goods and credit work in process
to calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract ______.
ending raw materials inventory and indirect materials used
formula for POHR
est MO cost / est allocation base
difference between overhead applied to work in process and actual overhead is
overapplied or underapplied
as the level of activity DECREASES, how will mixed cost in total and per unit behave?
per unit it will increase, but in total it will decrease
when all overhead is assigned using direct-labor hours,the company has chosen to use an ________ POHR.
plantwide
costs incurred in an attempt to lower the number of products manufactured with defects are _____ _____.
prevention costs
Contribution Approach
separates costs into fixed and variable components to the income statement
the activity based approach tends to
shift costs from high-volume to low volume products
When all overhead is assigned using direct-labor hours, the company has chosen to use a plantwide rate otherwise known as
single predetermined overhead rate
when a company's job cost sheets are viewed collectively, they form what is known as a(n):
subsidiary ledger
a cost incurred in the past that is not relevant to any current decision is classifed as a(n):
sunk cost
a cost never relevant and should be disreguared when making decisions
sunk cost
the value of work in process is equal to
the cost of all unfinished jobs
why is the unit product cost different from the cost that would be incurred if another additional unit were produced?
the cost to produce another unit is the incremental or marginal cost
total estimate are at capacity is generally larger than total estimated overhead at the expected level of activity (T/F)
true
manufacturing is applied with a debit to:
work in process
partially complete units are contained in the _____ _____ _____ inventory.
work in process
when a job is completed, which account is credited?
work in process
dependent variable
y