ACCY2 Ch.1 Exam Multiple Choice Review

If manufacturing overhead is underapplied, then: A) actual manufacturing overhead cost is less than estimated manufacturing overhead cost. B) the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred. C) the predetermined overhead rate is too high. D) the Manufacturing Overhead account will have a credit balance at the end of the year.

the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.

Overapplied manufacturing overhead would result if:

manufacturing overhead costs incurred were less than manufacturing overhead costs charged to production.

If sales volume increases and all other factors remain constant, then the: A) contribution margin ratio will increase. B) break-even point will decrease. C) margin of safety will increase. D) net operating income will decrease.

margin of safety will increase.

During September at Renfro Corporation, $65,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record this requisition would include a debit to Manufacturing Overhead of: A) $65,000 B) $4,000 C) $0 D) $61,000

$4,000 to Manufacturing Overhead

Maysonet Corporation uses a job-order costing system and has provided the following partially completed T-account summary for the past year. Work in Process (Debit) (Credit) Balance 1/1 : 18,000 Credits Debits : 520,000 Balance 12/31: 34,000 The cost of completed jobs transferred from Work in Process to Finished Goods during the year was: A) $520,000 B) $572,000 C) $538,000 D) $504,000

$504,000 (520,000 + 18,000 - 34,000) = $504,000

On December 1, Mogro Corporation had $26,000 of raw materials on hand. During the month, the Corporation purchased an additional $60,000 of raw materials. During December, $62,000 of raw materials were requisitioned from the storeroom for use in production. The debits entered in the Raw Materials account during the month of December total: A) $26,000 B) $86,000 C) $60,000 D) $62,000

$60,000

Gallon Corporation had $24,000 of raw materials on hand on April 1. During the month, the Corporation purchased an additional $52,000 of raw materials. During April, $62,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $2,000. The debits to the Work in Process account as a consequence of the raw materials transactions in April total: A) $60,000 B) $62,000 C) $0 D) $52,000

$60,000 $62,000 (wip) - $2,000 (indirect materials)

Saint Johns Corporation uses a job-order costing system and has provided the following partially completed summary T-accounts for the just completed period: Work in process Overhead applied = (273,000) Manufacturing overhead (Debit) = (200,000)

$73,000 Overapplied Total overheads applied ($273,000) - Manf. Overhead (200,000) = $73,000 overapplied

To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used? A) (Fixed expenses + Target net profit)/Total contribution margin B) (Fixed expenses + Target net profit)/Contribution margin ratio C) Fixed expenses/Contribution margin per unit D) Target net profit/Contribution margin ratio

(Fixed expenses + Target net profit)/Contribution margin ratio

Which of the following statements is correct with regard to a CVP graph? A) A Cost-Volume-Profit graph shows the maximum possible profit. B) A Cost-Volume-Profit graph shows the break-even point as the intersection of the total sales revenue line and the total expense line. C) A Cost-Volume-Profit graph assumes that total expense varies in direct proportion to unit sales. D) A Cost-Volume-Profit graph shows the operating leverage as the gap between total sales revenue and total expense at the actual level of sales.

A Cost-Volume-Profit graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.

Which of the following would usually be found on a job cost sheet under a normal cost system? Actual direct material cost Actual manufacturing overhead cost A) Yes Yes B) Yes No C) No Yes D) No No

Actual direct material cost (Yes) , Actual manufacturing overhead cost (No)

Which of the following is an example of a period cost in a company that makes clothing? A) Fabric used to produce men's pants. B) Advertising cost for a new line of clothing. C) Factory supervisor's salary. D) Monthly depreciation on production equipment.

Advertising cost for a new line of clothing.

If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will: A) decrease. B) increase. C) not change. D) change but direction cannot be determined.

C) not change.

Which of the following is true regarding the contribution margin ratio of a company that produces only a single product? A) As fixed expenses decrease, the contribution margin ratio increases. B) The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit. C) The contribution margin ratio will decline as unit sales decline. D) The contribution margin ratio equals the selling price per unit less the variable expense ratio.

Contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit

The cost of electricity for running production equipment is classified as: Conversion cost Period cost A) Yes No B) Yes Yes C) No Yes D) No No

Conversion cost (Yes), Period Cost (No)

Tomlison Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year: Cost of goods manufactured $1,589,000 Cost of goods sold (unadjusted) $1,517,000 The journal entry to record the unadjusted Cost of Goods Sold is:

Cost of Goods Sold: 1,517,000 (debit) Finished Goods: 1,517,000 (credit)

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of goods manufactured is computed according to which of the following equations? A) Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory − Beginning work in process inventory B) Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory − Ending work in process inventory C) Cost of goods manufactured = Total manufacturing costs + Beginning finished goods inventory − Ending finished goods inventory D) Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory − Beginning finished goods inventory

Cost of goods manufactured = Total manufacturing costs + Beg. work in process inventory − End. work in process inventory

The costs of direct materials are classified as: Conversion cost Manufacturing cost Prime cost A) Yes Yes Yes B) No No No C) Yes Yes No D) No Yes Yes

D) Conversion Cost? (No), Manf. cost? (Yes), Prime cost?(Yes)

Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle? Direct Cost Fixed Cost A) Yes Yes B) Yes No C) No Yes D) No No

Direct Cost: (No) Fixed Cost: (Yes)

Which of the following costs is classified as both a prime cost and a conversion cost? A) Direct materials. B) Direct labor. C) Variable overhead. D) Fixed overhead.

Direct labor

Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level varies? A) Direct materials. B) Direct labor. C) Fixed manufacturing overhead. D) Variable costs.

Fixed manufacturing overhead

When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true? A) Work in Process will decrease. B) Cost of Goods Sold will increase. C) Net income will decrease. D) Gross margin will increase.

Gross margin will increase.

Which of the following is an assumption underlying standard CVP analysis? A) In multiproduct companies, the sales mix is constant. B) In manufacturing companies, inventories always change. C) The price of a product or service is expected to change as volume changes. D) Fixed expenses will change as volume increases.

In multiproduct companies, the sales mix is constant.

A factory supervisor's wages are classified as: Indirect labor Fixed manufacturing overhead A) No No B) Yes Yes C) Yes No D) No Yes

Indirect labor (yes), Fixed Manufacturing Overhead (yes)

Refer to the T-account below: (Debit) (Credit) Balance: 30,000 (8): 9,000 Entry (8) could represent which of the following? A) Payment of insurance for the upcoming period. B) Insurance cost incurred on the factory which is added to the Manufacturing Overhead account. C) Overhead cost applied to Work in Process. D) Overhead cost applied to Finished Goods.

Insurance cost incurred on the factory which is added to the Manufacturing Overhead account

Which of the following statements about using a plantwide overhead rate based on direct labor is correct? A) Using a plantwide overhead rate based on direct labor-hours will ensure that direct labor costs are correctly traced to jobs. B) Using a plantwide overhead rate based on direct labor costs will ensure that direct labor costs will be correctly traced to jobs. C) It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver. D) The labor theory of value ensures that using a plantwide overhead rate based on direct labor will do a reasonably good job of assigning overhead costs to jobs.

It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

In a job-order costing system, indirect labor cost is usually recorded as a debit to: A) Manufacturing Overhead. B) Finished Goods. C) Work in Process. D) Cost of Goods Sold.

Manufacturing Overhead.

Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as: A) direct materials. B) a period cost. C) administrative expense. D) manufacturing overhead.

Manufacturing overhead

Which of the following statements is correct in describing manufacturing overhead? A) Manufacturing overhead when combined with direct materials cost forms conversion cost. B) Manufacturing overhead consists of all manufacturing cost except for prime cost. C) Manufacturing overhead is a period cost. D) Manufacturing overhead when combined with direct labor cost forms prime cost.

Manufacturing overhead consists of all manufacturing cost except for prime cost

Assigning manufacturing overhead to a specific job is complicated by all of the below except: A) Manufacturing overhead is an indirect cost that is either impossible or difficult to trace to a particular job. B) Manufacturing overhead is incurred only to support some jobs. C) Manufacturing overhead consists of both variable and fixed costs. D) The average cost of actual fixed manufacturing overhead expenses will vary depending on how many units are produced in a period.

Manufacturing overhead is incurred only to support some jobs.

Refer to the T-account below: (Debit)= 159,000 , (Credit) = 167,000 , Balance = 8,000 The ending balance of $8,000 represents which of the following? A) Underapplied overhead. B) Manufacturing overhead that will be carried over to the next period. C) Overapplied overhead. D) A bookkeeping error.

Overapplied overhead

Refer to the T-account below: (Debit) = 154,000 (Credit) = 150,000 Balance : 4.000

Overhead cost applied to Work in Process.

In a job-order costing system that is based on machine-hours, which of the following formulas is correct? A) Predetermined overhead rate = Actual manufacturing overhead ÷ Actual machine-hours B) Predetermined overhead rate = Actual manufacturing overhead ÷ Estimated machine-hours C) Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours D) Predetermined overhead rate = Estimated manufacturing overhead ÷ Actual machine-hours

Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

Which of the following statements about product costs is true? A) Product costs are deducted from revenue when the production process is completed. B) Product costs are deducted from revenue as expenditures are made. C) Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets. D) Product costs appear on financial statements only when products are sold.

Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets.

Which of the following is unlikely to be classified as a fixed cost with respect to the number of units produced and sold? A) Property taxes on a headquarters building. B) Legal department salaries. C) Cost of leasing the company's mainframe computer. D) Production supplies.

Production supplies

In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the "Total raw materials available" is computed by adding together the "Beginning raw materials inventory" and: A) Ending raw materials inventory B) Raw materials used in production C) Purchases of raw materials D) Indirect materials included in manufacturing overhead

Purchases of raw materials

Refer to the T-account below: (Debit) (Credit) Balance : 15,000 75,000 (5) : 85,000 Balance = 25,000 Entry (5) could represent which of the following? A) Payments for raw materials. B) Requisitions of raw materials to be used in production. C) Purchases of raw materials. D) Overhead cost applied to Work in Process.

Purchases of raw materials.

Which of the following statements is true? 1. Overhead can be applied slowly as a job is worked on. 2. Overhead can be applied when the job is completed. 3. Overhead should be applied to any job not completed at year-end in order to properly value the work in process inventory.

Statements I, II, and III are all true.

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory? A) The cost of the glue in a chair. B) The amount paid to the individual who stains a chair. C) The workman's compensation insurance of the supervisor who oversees production. D) The factory utilities of the department in which production takes place.

The amount paid to the individual who stains a chair.

Refer to the T-account below: (Debit) (Credit) Balance : 30,000 (12) 270,000 (4) 90,000 (6) 70,000 (8) 110,000 Entry (12) could represent which of the following? A) Direct labor cost incurred in production. B) Purchases of raw materials. C) The cost of goods manufactured transferred to Finished Goods. D) The cost of indirect materials incurred in production.

The cost of goods manufactured transferred to Finished Goods.

Break-even analysis assumes that: A) Total revenue is constant. B) Unit variable expense is constant. C) Unit fixed expense is constant. D) Selling prices must fall in order to generate more revenue.

Unit variable expense is constant.

Which of the following statements concerning direct and indirect costs is NOT true? A) Whether a particular cost is classified as direct or indirect does not depend on the cost object. B) A direct cost is one that can be easily traced to the particular cost object. C) The factory manager's salary would be classified as an indirect cost of producing one unit of product. D) A particular cost may be direct or indirect, depending on the cost object.

Whether a particular cost is classified as direct or indirect does not depend on the cost object.

The journal entry to record applying overhead during the production process is:

Work in Process (Debit) Manufacturing Overhead (Credit)

Farrel Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year: Direct labor cost $574,000 Manufacturing overhead: Indirect labor cost $163,000 Other manufacturing overhead costs incurred $584,000 What is the journal entry to record the direct and indirect labor costs incurred during the year?

Work in Process - 574,000 (debit) Manufacturing Overhead - 163,000 (debit) Wages Payable 737,000 - (credit)

In a job-order costing system, manufacturing overhead applied is recorded as a debit to: A) Raw Materials inventory. B) Finished Goods inventory. C) Work in Process inventory. D) Cost of Goods Sold.

Work in Process inventory.

An example of a committed fixed cost is: A) management training seminars. B) a long-term equipment lease. C) research and development. D) advertising.

a long-term equipment lease.

If the contribution margin is not sufficient to cover fixed expenses: A) total profit equals total expenses. B) contribution margin is negative. C) a loss occurs. D) variable expenses equal contribution margin.

a loss occurs.

Depreciation on a personal computer used in the marketing department of a manufacturing company would be classified as: A) a product cost that is fixed with respect to the company's output. B) a period cost that is fixed with respect to the company's output. C) a product cost that is variable with respect to the company's output. D) a period cost that is variable with respect to the company's output.

a period cost that is fixed with respect to the company's output.

Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year? Contribution Margin Ratio Break-even point A) Increase Decrease B) Decrease Decrease C) Increase No effect D) Decrease No effect

a) Contribution margin ratio : Increase Break-even point : Decrease

The salary paid to the president of a company would be classified on the income statement as a(n): A) administrative expense. B) direct labor cost. C) manufacturing overhead cost. D) selling expense.

administrative expense

Manufacturing overhead includes: A) all direct material, direct labor and administrative costs. B) all manufacturing costs except direct labor. C) all manufacturing costs except direct labor and direct materials. D) all selling and administrative costs.

all manufacturing costs except direct labor and direct materials.

Differential costs can: A) only be fixed costs. B) only be variable costs. C) be either fixed or variable. D) be sunk costs.

be either fixed or variable.

Direct costs: A) are incurred to benefit a particular accounting period. B) are incurred due to a specific decision. C) can be easily traced to a particular cost object. D) are the variable costs of producing a product.

can be easily traced to a particular cost object.

Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs: A) started in process during the period. B) in process during the period. C) completed and sold during the period. D) completed during the period.

completed during the period.

Product costs that have become expenses can be found in: A) period costs. B) selling expenses. C) cost of goods sold. D) administrative expenses.

cost of goods sold.

Firlit Corporation incurred $69,000 of actual Manufacturing Overhead costs during October. During the same period, the Manufacturing Overhead applied to Work in Process was $70,000. The journal entry to record the incurrence of the actual Manufacturing Overhead costs would include a: A) debit to Work in Process of $70,000 B) credit to Work in Process of $70,000 C) debit to Manufacturing Overhead of $69,000 D) credit to Manufacturing Overhead of $69,000

debit to Manufacturing Overhead of $69,000

Gullett Corporation had $26,000 of raw materials on hand on November 1. During the month, the Corporation purchased an additional $75,000 of raw materials. The journal entry to record the purchase of raw materials would include a: A) debit to Raw Materials of $101,000 B) credit to Raw Materials of $75,000 C) debit to Raw Materials of $75,000 D) credit to Raw Materials of $101,000

debit to Raw Materials of $75,000 (purchased during month)

Gullett Corporation had $46,000 of raw materials on hand on November 1. During the month, the Corporation purchased an additional $95,000 of raw materials. The journal entry to record the purchase of raw materials would include a: A) debit to Raw Materials of $141,000 B) credit to Raw Materials of $95,000 C) debit to Raw Materials of $95,000 D) credit to Raw Materials of $141,000

debit to Raw Materials of $95,000 (because it was purchased during the month)

During July at Loeb Corporation, $83,000 of raw materials were requisitioned from the storeroom for use in production. These raw materials included both direct and indirect materials. The indirect materials totaled $4,000. The journal entry to record the requisition from the storeroom would include a: A) debit to Work in Process of $79,000 B) debit to Work in Process of $83,000 C) credit to Manufacturing Overhead of $4,000 D) debit to Raw Materials of $83,000

debit to Work in Process of $79,000 (83,000 - 4,000)

Fixed costs expressed on a per unit basis: A) increase with increases in activity. B) decrease with increases in activity. C) are not affected by activity. D) should be ignored in making decisions since they cannot change.

decrease with increases in activity.

Prime cost consists of: A) direct labor and manufacturing overhead. B) direct materials and manufacturing overhead. C) direct materials and direct labor. D) direct materials, direct labor and manufacturing overhead.

direct materials and direct labor

A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will: A) decrease the degree of operating leverage. B) decrease the contribution margin. C) have no effect on the break-even volume. D) have no effect on the contribution margin ratio.

have no effect on the break-even volume.

When the level of activity decreases within the relevant range, the fixed cost per unit will: A) decrease. B) increase. C) remain the same. D) The effect cannot be predicted.

increase

The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): A) period cost. B) direct material cost. C) indirect material cost. D) opportunity cost.

indirect material cost.

If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in: A) unit contribution margin. B) revenue. C) variable expense. D) net operating income.

net operating income.

In a job-order costing system, which of the following events would trigger recording data on a job cost sheet? A) the purchase of direct materials B) the payment of fire insurance on the factory building C) the payment for product advertising D) none of the choices

none of the choices

Which of the following would not affect the break-even point? A) number of units sold B) variable expense per unit C) total fixed expense D) selling price per unit

number of units sold

A cost incurred in the past that is not relevant to any current decision is classified as a(n): A) period cost. B) opportunity cost. C) sunk cost. D) differential cost.

sunk cost

The term that refers to costs incurred in the past that are not relevant to a decision is: A) marginal cost. B) indirect cost. C) period cost. D) sunk cost.

sunk cost

When manufacturing overhead is applied to production, it is added to: A) the Cost of Goods Sold account. B) the Raw Materials account. C) the Work in Process account. D) the Finished Goods inventory account.

the Work in Process account.

In the standard cost formula Y = a + bX, what does the "X" represent? A) total cost B) total fixed cost C) the level of activity D) variable cost per unit

the level of activity

Which of the following is correct? The break-even point occurs on the Cost-Volume-Profit graph where: A) total profit equals total expenses. B) total profit equals total fixed expenses. C) total contribution margin equals total fixed expenses. D) total variable expenses equal total contribution margin.

total contribution margin equals total fixed expenses.

In the standard cost formula Y = a + bX, what does the "Y" represent? A) total cost B) total fixed cost C) total variable cost D) variable cost per unit

total cost

For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a: A) fixed cost. B) mixed cost. C) step-variable cost. D) variable cost.

variable cost.

Within the relevant range, variable costs can be expected to: A) vary in total in direct proportion to changes in the activity level. B) remain constant in total as the activity level changes. C) increase on a per unit basis as the activity level increases. D) increase on a per unit basis as the activity level decreases.

vary in total in direct proportion to changes in the activity level.

ngrum Corporation produces and sells two products. In the most recent month, Product R38T had sales of $20,000 and variable expenses of $7,400. Product X08S had sales of $39,000 and variable expenses of $6,170. The fixed expenses of the entire company were $41,160. If the sales mix were to shift toward Product R38T with total sales remaining constant, the overall break-even point for the entire company: A) would not change. B) would increase. C) would decrease. D) could increase or decrease.

would increase.