accounting 2 FINAL

True

A cost can be a payment of cash for the purpose of generating revenues.

True

A law firm would use a job order cost system to accumulate all of the costs associated with a particular client engagement, such as lawyer time, copying charges, filing fees, and overhead.

False

A low operating leverage is normal for highly automated industries.

False

A manufacturing business reports just two types of inventory on its balance sheet: work in process inventory and finished goods inventory.

True

A mixed cost has characteristics of both variable and fixed costs.

True

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

False

A receiving report is prepared when purchased materials are first received by the manufacturing department.

machine hours

A widely used activity base for developing factory overhead rates in highly automated settings is

managerial accounting

Accounting designed to meet the needs of decision makers inside the business is

factory burden

Another term for factory overhead is

decreases

As production increases, the fixed cost per unit

stay the same

As production increases, variable costs per unit

True

Depreciation on factory plant and equipment is an example of factory overhead cost.

False

Direct labor cost is an example of a period cost.

True

Direct materials and direct labor costs are examples of variable costs of production.

job cost sheet

Each document in the cost ledger is called a

balance sheet as a current asset

Finished goods inventory is reported on the

separated into their variable and fixed cost components

For purposes of analysis, mixed costs are

True

For purposes of analysis, mixed costs can generally be separated into their variable and fixed components.

work in process inventory

Goods that are partially completed by a manufacturer are

True

If direct materials cost per unit increases, the break-even point will increase.

factory overhead cost

If the cost of a direct material is a small portion of total production cost, it may be classified as part of

True

If the underapplied factory overhead amount is immaterial, it is transferred to Cost of Goods Sold at the end of the fiscal year.

True

In a job order cost accounting system for a service business, materials costs are normally included as part of overhead.

debit Work in Process, credit Materials

In a job order cost accounting system, the entry to record the flow of direct materials into production is to

receiving report

In a job order cost accounting system, when goods that have been ordered are received, the receiving department personnel count the goods, inspect the goods, and complete a

variable costs and fixed costs

In cost-volume-profit analysis, all costs are classified into which of the following two categories?

True

In most business organizations, the chief management accountant is called the controller.

False

Information about costs developed through a job order cost system cannot be used to evaluate an organization's cost performance.

False

Job order cost accounting systems can be used only for companies that manufacture a product

cost accounting systems

Job order costing and process costing are

True

Managerial accounting information includes both historical and estimated data.

prepared according to management needs

Managerial accounting reports are

False

Managerial accounting reports must be prepared according to generally accepted accounting principles.

true

Managerial accounting reports must be useful to the user of the information.

evaluate the company's stock performance

Managers use managerial information for all of the following except to

True

Managers use managerial information to evaluate performance of a company's operation.

false

Total fixed costs change as the level of activity changes.

conversion cost

What term refers to the cost of changing direct materials into a finished manufactured product?

There is no limit.

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as the number of products does not exceed

managers

Who are the individuals charged with the responsibility for directing the day-to-day operations of a business?

cost of goods manufactured plus ending work in process minus manufacturing costs incurred during the current period

Beginning work in process is equal to

true

Break-even analysis is one type of cost-volume-profit analysis.

the excess of sales revenue over variable cost

Contribution margin is

False

Conversion costs are the combination of direct labor, direct material, and factory overhead costs.

False

Conversion costs consist of product costs and period costs.

True

Cost accounting systems measure, record, and report product costs.

changes as the related activity changes

Cost behavior refers to the manner in which a cost

true

Cost behavior refers to the manner in which a cost changes as the related activity changes.

False

Cost of oil used to lubricate factory machinery and equipment is an example of a direct materials cost.

Costs cannot be properly classified into fixed and variable costs.

Cost-volume-profit analysis cannot be used if which of the following occurs?

period costs

Costs that are incurred in generating revenues during the period, but are not involved in the manufacturing process, are referred to as

Materials 190,000 Accounts Payable 190,000

Materials purchased on account during the month totaled $190,000. Materials requisitioned and placed in production totaled $165,000. The journal entry to record the material purchase on account is

True

Non-manufacturing costs are generally classified into two categories: selling and administrative.

False

Period costs include direct materials and direct labor.

True

Planning is the process of developing the company's objectives or goals and translating these objectives into courses of action.

False

Product costs include direct labor and advertising expense.

time tickets

The basis for recording direct and indirect labor costs incurred is a summary of the period's

same as the profit-volume ratio

The contribution margin ratio is the

True

The cost of wages paid to employees directly involved in converting materials to finished product is classified as direct labor cost.

direct labor cost

The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished products is classified as a

margin of safety

The difference between the current sales revenue and the sales at the break-even point is called the

materials requisition

The document authorizing the issuance of materials from the storeroom is a

True

The document that serves as the basis for recording direct labor on a job cost sheet is the time ticket.

False

The dollars available from each unit of sales to cover fixed cost and profit are the unit variable cost.

debit Work in Process, credit Wages Payable

The entry to record the flow of direct labor costs into production in a job order cost accounting system is to

False

The inventory accounts generally maintained by a manufacturing firm are only finished goods and materials.

False

The job order costing system is not used by service organizations.

True

The point in operations at which revenues and expenses are exactly equal is called the break-even point.

management

The primary goal of managerial accounting is to provide information to

False

The process cost system is appropriate where few products are manufactured and each product is made to customers' specifications.

Factory Overhead

The recording of the application of factory overhead costs to jobs would include a credit to

Factory Overhead

The recording of the factory labor incurred for general factory use would include a debit to

True

The relevant range is useful for analyzing cost behavior for management decision-making purposes.

cost-volume-profit analysis

The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed

fixed costs, variable costs, and mixed costs

The three most common cost behavior classifications are

contribution margin ratio

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

predicting customer demand

Understanding how costs behave is useful to management for all the following reasons except

True

Unit variable cost does not change as the number of units of activity changes.

False

Variable costs are costs that remain constant in total dollar amount as the level of activity changes.

False

When goods are sold, their costs are transferred from Work in Process to Finished Goods.

job order cost and process cost systems

Which of the following are the two main types of cost accounting systems for manufacturing operations?

unit variable cost increases

Which of the following conditions would cause the break-even point to increase?

chief financial officer's salary

Which of the following costs are not included in finished goods inventory?

factory heating and lighting cost

Which of the following is an example of a factory overhead cost?

adhere to GAAP

Which of the following is not a characteristic of useful managerial accounting reports?

depreciation of factory equipment and machines

Which of the following is part of factory overhead cost?

estimated total factory overhead costs divided by estimated activity base

Which of the following is the formula to calculate the predetermined factory overhead rate?

usefulness to management

Which of the following is the principal reason for preparing managerial accounting reports?