Ch. 1 & 2 Test #1 Accounting II

Period costs are costs that are incurred for the production requirements of a certain period. A. True. B. False.

B. False.

If the amount of factory overhead cost incurred exceeds the amount applied, the factory overhead account will have a: A. Debit balance and be underapplied. B. Credit balance and be underapplied. C. Credit balance and be overapplied. D. Debit balance and be overapplied.

A. Debit balance and be underapplied.

Which of the following costs are conversion costs? A. Direct labor cost and factory overhead cost. B. Direct materials cost and direct labor cost. C. Factory overhead cost. D. Direct materials cost and factory overhead cost.

A. Direct labor cost and factory overhead cost.

A manufacturer may employ a job order cost system for some of its products and a process cost system for others. A. True. B. False.

A. True.

What is the primary criterion for the preparation of managerial accounting reports? A. Relevance of the reports. B. Manager needs. C. Timing of the reports. D. Cost of the reports.

B. Manager needs.

Who are the individuals charged with the responsibility for directing the day-to-day operations of a business? A. Investors. B. Managers. C. Shareholders. D. Customers.

B. Managers.

Which of the following is most associated with managerial accounting? A. Must follow GAAP. B. May rely on estimates and forecasts. C. Is prepared for users outside the organization. D. Always reports on the entire entity.

B. May rely on estimates and forecasts.

Managerial accounting reports are: A. Prepared according to GAAP. B. Prepared according to management needs. C. Prepared periodically only. D. Related to the entire business entity only.

B. Prepared according to management needs.

Which of the following is a period cost? A. Depreciation on factory lunchroom furniture. B. Salary of telephone receptionist in the sales office. C. Salary of a security guard for the factory parking lot. D. Computer chips used by a computer manufacturer.

B. Salary of telephone receptionist in the sales office.

The basis for recording direct and indirect labor costs incurred is a summary of the period's: A. Job order cost sheets. B. Time tickets. C. Employees' earnings records. D. Clock cards.

B. Time tickets.

At the end of the fiscal year, the balance in Factory Overhead is small. The balance would be: A. Transferred to work in process. B. Transferred to cost of goods sold. C. Transferred to finished goods. D. Allocated between work in process and finished goods.

B. Transferred to cost of goods sold.

A plant manager's salary is: A. A direct cost and an indirect cost. B. A direct cost. C. An indirect cost. D. A period cost.

C. An indirect cost.

Which of the following costs are NOT included in finished goods inventory? A. Direct labor. B. Factory overheard. C. Chief's financial officer's salary. D. Direct materials.

C. Chief's financial officer's salary.

The details concerning the costs incurred on each job order are accumulated in a work in process account and supported by a: A. Stock ledger. B. Materials ledger. C. Cost ledger. D. Creditors ledger.

C. Cost Ledger.

The cost of a manufactured product generally consists of which of the following costs? A. Direct materials cost and factory overhead cost only. B. Direct labor cost and factory overhead cost only. C. Direct labor cost, direct materials cost, and factory overhead cost. D. Direct materials cost and direct labor cost only.

C. Direct labor cost, direct materials cost, and factory overhead cost.

Which of the following is a product cost? A. Salary of a sales manager. B. Advertising for a particular product. C. Drill bits for a drill press used in the plant assembly area. D. Salary of the company receptionist.

C. Drill bits for a drill press used in the plant assembly area.

The controller's staff often consists of several management accountants. All of the following would most likely be on the controller's staff EXCEPT: A. General accountants. B. Budgets and budget analysts. C. Investments and shareholder relations managers. D. Cost accountants.

C. Investments and shareholder relations managers.

Accounting designed to meet the needs of decision makers inside the business is: A. General accounting. B. Financial accounting. C. Managerial accounting. D. External accounting.

C. Managerial accounting.

In a job order cost accounting system, when goods that have been ordered are received, the receiving department personnel count, inspect the goods, and complete a: A. Purchase order. B. Sales invoice. C. Receiving report. D. Purchase requisition.

C. Receiving report.

Which of the following is NOT a reason a service firm would use a job order costing system? A. To help control costs. B. To determine client billing. C. To determine department costs within the firm. D. To determine profit.

C. To determine department costs within the firm.

Recording jobs completed would include a credit to: A. Factory overhead. B. Finished goods. C. Work in process. D. Cost of goods sold.

C. Work in process.

Work in process inventory on December 31 of the current year is $44,000. Work in process inventory increased by 60% during the year. Cost of goods manufactured amounts to $275,000. What are the total manufacturing costs incurred in the current year? A. $291,500 B. $302,000 C. $275,750 D. $233,750

A. $291,500.

In a job order cost accounting system, the entry to record the flow of direct materials into production is to: A. Debit Work in Process, credit Materials. B. Debit Materials, credit Work in Process. C. Debit Factory Overhead, credit Materials. D. Debit Work in Process, credit Supplies.

A. Debit Work in Process, credit Materials.

Depreciation on factory plant and equipment is an example of factory overhead cost. A. True. B. False.

A. True.

Each amount in the work in process subsidiary ledger in a job order costing system is called a job cost sheet. A. True. B. False.

A. True.

For an automative repair shop, the wages of mechanics would classified as direct labor cost. A. True. B. False.

A. True.

If the cost of materials is not a significant portion of the total product cost, the materials may be classified as part of factory overhead cost. A. True. B. False.

A. True.

If the undersupplied factory overhead amount is immaterial, it is transferred to Cost of Goods Sold at the end of the fiscal year. A. True. B. False

A. True.

Job order cost accounting systems may be used for planning and controlling a service business. A. True. B. False.

A. True.

Managerial accounting provides useful information to managers on product costs. A. True. B. False.

A. True.

The Vice Presidents of Human Resources and the controller hold line positions in most large organizations. A. True. B. False.

B. False, the staff department does.

A job order cost system would be appropriate for a crude oil refining business. A. True. B. False.

B. False.

Direct labor cost is an example of a period cost. A. True. B. False.

B. False.

The recording of the factory labor incurred for general factory use would include a debit to: A. Factory overhead. B. Wages payable. C. Wages expense. D. Cost of goods sold.

A. Factory overhead.

Which of the following is the correct flow of manufacturing costs? A. Raw materials, work in process, finished goods, cost of goods sold. B. Raw materials, finished goods, cost of goods sold, work in process. C. Work in process, finished goods, raw materials, cost of goods sold. D. Cost of goods sold, raw materials, work in process, finished goods.

A. Raw materials, work in process, finished goods, cost of goods sold.

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. A. True. B. False.

A. True.

A process cost accounting system is best used by manufacturers of like units of product that are not distinguishable from each other during a continuous production process. A. True. B. False.

A. True.

A staff department has no direct authority over a line department. A. True. B. False.

A. True.

A staff department or unit is one that provides services, assistance, and advice to the departments with line or other staff responsibilities. A. True. B. False.

A. True.

Controlling is the process of monitoring operating results and comparing actual results with the expected results. A. True. B. False.

A. True.

Conversion cost is the combination of direct labor cost and factory overhead cost. A. True. B. False.

A. True.

Cost accounting systems measure, record, and report product costs. A. True. B. False.

A. True.

Depreciation expense on factory equipment is part of factory overhead cost. A. True. B. False.

A. True.

Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within expected ranges. A. True. B. False.

A. True.

Managerial accounting information includes both historical and estimated data. A. True. B. False.

A. True.

Managerial accounting reports are designed to meet the specific needs of a company's management. A. True. B. False.

A. True.

Materials are transferred from the storeroom to the factory in response to materials requisitions. A. True. B. False.

A. True.

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

A. True.

The controller's staff consists of management accountants responsible for systems and procedures, general accounting, budgets, taxes, and cost accounting. A. True. B. False.

A. True.

The direct labor and overhead costs of providing services to clients are accumulated in a work in process account. A. True. B. False.

A. True.

Using the job order cost system, service organizations are able to bill customers on a weekly or monthly basis, even when the job has not been completed. A. True. B. False.

A. True.

In most business organizations, the chief management accountant is called the: A. Chief accounting officer. B. Controller. C. Chairman of the board. D. Chief executive officer.

B. Controller.

Each document in the cost ledger is called a: A. Finished goods sheet. B. Stock record. C. Materials requisition. D. Job cost sheet.

D. Job cost sheet.

Products Costs=

Direct materials+ Direct labor+ Factory overhead.

Period Costs=

Sales salaries expense+Office salaries expense (NOT RELATED TO PRODUCT)

In order to be useful to managers, managerial accounting reports should possess all of the following characteristics EXCEPT: A. Provide objective measures of past operations and subjective estimates about future decisions. B. Be prepared in accordance with generally accepted accounting principles. C. Be provided at any time management needs information. D. Be prepared to report information for any unit of the business to support decision making.

B. Be prepared in accordance with generally accepted accounting principles.

Which of the following is an example of direct labor cost for a cell phone manufacturer? A. Cost of oil lubricants for factory machinery. B. Cost of wages of assembly worker. C. Salary of plant supervisor. D. Cost of phone components.

B. Cost of wages of assembly worker.

The entries to record cost and sale of a finished good on account is: A. Debit Cost of Goods Sold, credit Finished Goods. B. Debit Cost of Goods Sold, credit Finished Goods, debit Accounts Receivable, credit Sales. C. Debit Sales Expense, credit Finished Goods, credit Cash, credit Accounts Receivable. D. Debit Work in Process, credit Finished Goods, debit Accounts Receivable, credit Sales.

B. Debit Cost of Goods Sold, credit Finished Goods, debit Accounts Receivable, credit Sales.

Prime costs are: A. Direct materials and factory overhead. B. Direct materials and direct labor. C. Direct labor and factory overhead. D. Period costs and factory overhead.

B. Direct materials and direct labor.

Which of the following is an example of a factory overhead cost? A. Repair and maintenance cost on the administrative building. B Factory heating and lighting cost. C. Insurance premiums on salespersons' automobiles. D. President's salary.

B. Factory heating and lighting cost.

For a construction contractor, the wages of carpenters would be classified as factory overhead cost. A. True. B. False.

B. False, direct labor cost.

Managerial accounting uses only past data in reports to aid management in the decision making process. A. True. B. False.

B. False, historical & estimated data.

Managerial accounting reports must be prepared according to generally accepted accounting principles. A. True. B. False.

B. False, prepared to management needs.

Goods that are part way through the manufacturing process, but not yet complete, are referred to as materials inventory. A. True. B. False.

B. False, work in process inventory.

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

B. False.

A report analyzing how many products need to be sold to cover operating costs is not typically a managerial accounting report. A. True. B. False.

B. False.

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

B. False.

Job order cost accounting systems can be used only for companies that manufacture a product. A. True. B. False.

B. False.

On the balance sheet for a manufacturing business, the cost of direct materials, direct labor, and factory overhead, which have entered into the manufacturing process but are associated with products that have not been finished, are reported as direct materials inventory. A. True. B. False.

B. False.

The cost of materials and labor that do not enter directly into the finished product are classified as cost of goods sold. A. True. B. False.

B. False.

The job order costing system is not used by service organizations. A. True. B. False.

B. False.

The payment of dividends is an example of a cost. A. True. B. False.

B. False.

Goods that are partially completed by a manufacturer are: A. Merchandise inventory. B. Work in process inventory. C. Finished goods inventory. D. Materials inventory.

B. Work in process inventory.

Compute conversion costs given the following data: direct materials, $347,500; direct labor, $196,300; factory overhead, $187,900; and selling expenses, $45,290. A. 543,800. B. 187,900 C. 731,700 D. 384,200

D. 384,200. Conversion=DL+FOH

A company manufactured 50,000 units of a product at a cost of $450,000. It sold 45,000 units at $15 each. The gross profit is: A. $750,000 B. $240,000 C. $600,000 D. $270,000

D. 450,000/50,000=$9. $15-$9=$6*45,000= $270,000.

Which of the following is an example of direct materials cost for an automobile manufacturer? A. Cost of oil lubricants for factory machinery. B. Cost of wages of assembly worker. C. Salary of production supervisor. D. Cost of interior upholstery.

D. Cost of interior upholstery.

Period costs include: A. Current assets on the balance sheet. B. Current liabilities on the balance sheet. C. Operating costs that are shown on the income statement when products are sold. D. Operating costs that are shown on the income statement in the period in which they are incurred.

D. Operating costs that are shown on the income statement in the period in which they are incurred.

Which of the following is NOT true in regards to direct materials for a bakery? A. Flour and sugar would probably be direct materials. B. Eggs would probably be a direct material. C. Oil to lubricate factory machines would not be a direct material. D. Paper cupcake liners, that become part of the product, must be accounted for as direct materials.

D. Paper cupcake liners, that become part of the product, must be accounted for as direct materials.

Which of the following are basic phases of the management process? A. Supervising and directing. B. Decision making and supervising. C. Organizing and directing. D. Planning and controlling.

D. Planning and controlling.