ACC 255-Final Exam

A manufacturer may report three inventories in its balance sheet: (1) raw materials, (2) work in process, and (3) finished goods. Indicate in what sequence these inventories generally appear on a balance sheet

3,2,1

Cost-volume-profit analysis includes all of the following assumptions except A.the behavior of costs is curvilinear throughout the relevant range. B.costs can be classified accurately as either variable or fixed. C.changes in activity are the only factors that affect costs. D.all units produced are sold.

A

Which one of the following describes the break-even point? A.It is the point where total sales equals total variable costs plus total fixed costs. B.It is the point where the contribution margin equals zero. C.It is the point where total variable costs equal total fixed costs. D.It is the point where total sales equals total fixed costs.

A

Variable costs are costs that A.vary in total directly and proportionately with changes in the activity level. B.remain the same per unit at every activity level. C.neither of these D.both of these.

Both A and B

At the break-even point A.sales equal total variable costs. B.contribution margin equals total variable costs. C.contribution margin equals total fixed costs. D.sales equal total fixed costs.

C

In a manufacturing company, the cost of factory labor consists of all of the following except A.Employer payroll taxes. B.Fringe benefits incurred by the employer. C.Net earnings of factory workers. D.Gross earnings of factory workers.

C. Net earnings of factory workers.

Usually, under- or overapplied overhead is considered to be an adjustment to

Cost of Goods Sold.

Which of the following costs would a computer manufacturer include in manufacturing overhead?

Depreciation on testing equipment.

On average, studies have shown that the smallest component of total manufacturing cost is A.direct materials. B.direct labor. C.manufacturing overhead. D.factory overhead.

Direct Labor

Manufacturing overhead includes all of the following except A.depreciation. B.direct materials. C.indirect labor. D.maintenance.

Direct Materials

Which group of costs consists of only product costs? A.Direct labor, direct materials, and selling expenses B.Indirect labor, factory building depreciation, administrative expenses C.Factory maintenance, sales commissions, salaries paid to sales clerks D.Direct labor, indirect labor, factory utilities

Direct labor, indirect labor, factory utilities

What are the three manufacturing costs?

Direct materials, direct labor, and manufacturing overhead

Planning is the process of keeping the company's activities on track. T/F

FALSE

Companies generally list manufacturing inventories in the order of completion—raw materials, work in process, and finished goods. t/f

False

Manufacturers compute cost of goods sold by adding the beginning finished goods inventory to the cost of goods purchased and subtracting the ending finished goods inventory. t/f

False

Which of the following is not one of the four steps involved in calculating unit costs under activity-based costing? A.Assign manufacturing overhead costs for each cost pool to products, using the overhead rates. B.Identify the cost driver that has a minor correlation to the costs accumulated in the activity cost pool. C.Identify and classify the major activities involved in the manufacture of specific products, and allocate manufacturing overhead costs to the appropriate cost pools. D.Compute the overhead rate per cost driver.

Identify the cost driver that has a minor correlation to the costs accumulated in the activity cost pool

Which of the following statements is true about managerial accounting?

It provides more detailed information than financial accounting does.

This type of accounting places emphasis on special-purpose information.

Managerial Accounting

One key difference appears when comparing the income statements of a manufacturing company to a merchandising company. What is that difference?

Manufacturing companies use cost of goods manufactured and merchandising companies use cost of goods purchased.

Which of the following are considered to be management's three broad functions?

Planning, directing, and controlling

A process cost system would be used for all of the following except the A.manufacture of cereal. B.refining of petroleum. C.printing of wedding invitations. D.production of automobiles.

Printing wedding invitations

What type of costs are direct materials?

Product Cost

On a CVP income statement

Sales - Variable costs = Contribution margin

Which of the following costs are classified as a period cost?

Wages paid to a cost accountant department supervisor.

The cost applicable to units that have been started into production but not completed is shown as

Work in process inventory

Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion?

activity base costing

Manufacturing overhead is under applied if

actual overhead is greater than applied.

Under just-in-time processing A.raw materials are received just in time for use in production. B.subassembly parts are completed just in time for use in assembling finished goods. C.finished goods are completed just in time to be sold. D.all of these

all of these

The process of keeping the company's activities on track is

controlling

If the amount of underapplied overhead is immaterial, companies will debit underapplied overhead to

cost of goods sold

The principal difference between a merchandising and a manufacturing income statement is the

cost of goods sold section.

Activity-based costing is most appropriate to use when labor costs are a(n) ___________ proportion of total product costs and the manufacturing process is __________.

decreasing complex

When is it appropriate to use direct labor as a basis for assigning overhead costs to products?

direct labor constitutes as a significant part of total product automated

Which of the following would not be an overhead activity cost pool? A.Shipping B.Direct materials C.Packaging D.Inspecting and testing

direct materials

The primary objective of just-in-time processing is to

eliminate or reduce all manufacturing

When incurred, factory labor costs are debited to

factory labor

A process cost system is used when a company manufactures a large volume of unique products. t/f

false

At the break-even point, contribution margin equals total variable costs. t/f

false

Each entry to Work in Process Inventory must be accompanied by a corresponding posting to one or more job cost sheets. t/f

false

Labor costs are debited to Work in Process Inventory when they are incurred. t/f

false

The cost of goods manufactured schedule shows actual overhead costs rather than applied manufacturing overhead. t/f

false

The cost of the beginning work in process plus the total manufacturing costs for the current period is the cost of goods manufactured. t/f

false

The format of a CVP income statement is Sales - Cost of goods sold - Operating expenses = Net Income. t/f

false

Assigning manufacturing costs to work in process results in credits to all of the following except

finished goods inventory

When a completed job is sold an entry is made crediting

finished goods inventory

When a job is completed in a job order cost accounting system, the cost of the job is transferred to

finished goods inventory

CVP analysis considers the interrelationships among all of the following components except

fixed costs per unit.

As the complexity of a product's manufacturing operation increases, the number of activities and cost drivers used in an activity-based cost system will likely A.increase. B.stay about same. C.decrease. D.vary randomly.

increase

Examples of recent trends in the economic environment of U.S. businesses are

increasing deregulation, increasing global competition, and a shift toward providing services rather than goods.

Contribution margin

is revenue remaining after deducting variable costs and may be expressed as contribution margin per unit.

A company is more likely to use a job costing system if

it manufactures products with unique characteristics.

Many companies have significantly lowered inventory levels and costs using

just in time inventory

What is the primary barrier to using activity-based costing in a service company?

large portion of overhead costs are company wide costs

In recent years, as production has become more automated, there has been a significant trend toward use of _______________as the activity base in assigning overhead.

machine hours

What overhead allocation basis is used by many companies with automated manufacturing processes to reduce product cost distortions?

machine hours

Work in Process Inventory is debited for all of the following except

manufacturing overhead incurred

Costs that change in total but not proportionately with changes in the activity level are A.fixed costs. B.mixed costs. C.semifixed costs. D.variable costs.

mixed costs

What is the primary benefit of activity-based costing?

more accurate product costing

When comparing a traditional income statement to a CVP income statement

net income will always by identical on both

For which of the following activities will direct labor hours and direct labor cost be an appropriate cost driver? A.Drilling oil wells B.Equipment setups C.Engineering changes D.Painting

painting

The flow of costs in job order costing

parallels the physical flow of materials as they are converted into finished goods.

Cost accounting involves each of the following except the A.measuring of product costs. B.recording of product costs. C.reporting of product costs. D.processing of product costs.

processing of product costs

A cost of goods manufactured schedule shows beginning and ending inventories for

raw materials and work in process only.

Product costs include each of the following except A.direct labor. B.direct materials. C.manufacturing overhead. D.selling and administrative expenses.

selling and administrative

Which of the following is an overhead activity cost pool for a manufacturer? A.Direct labor B.Setting up machines C.Direct materials D.All of these are considered overhead activity cost pools for a manufacturer.

setting up machines

Contribution margin is

the amount available to cover fixed costs and contribute to income for the company

The relevant range is

the range over which the company expects to operate during a year

A cost driver is a factor or activity that has a direct cause-effect relationship with the resources consumed. t/f

true

Activity-based costing is used in service industries as well as manufacturing. t/f

true

Cost-volume-profit analysis assumes that changes in activity are the only factors that affect costs. t/f

true

Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product. t/f

true

Margin of safety is the difference between actual sales and sales at the break-even point.

true

Margin of safety measures how far sales can drop before a company will be operating at a loss. t/f

true

Target net income is an income objective for individual product lines set by management. t/f

true

The formula for computing the break-even point in sales dollars for a company with multiple products or multiple divisions is fixed costs divided by weighted average contribution margin ratio. t/f

true

The range over which a company expects to operate during a year is called the relevant range of the activity index. t/f

true

An example of a mixed cost is A.direct materials. B.supervisory salaries. C.utility costs. D.property taxes.

utility cost

When the company assigns factory labor costs to jobs, the direct labor cost is debited to

work in process inventory