Cost Exam 2

What is the advantage of using computerize source documents to prepare job-cost records? a) accuracy of the records - incorrect recording of amounts, incorrect job numbers, materials being "borrowed" for another job b) timeliness of the records - ensuring that the documents are available when needed c) safeguarding the records from events such as theft or fire d) none of the above

a) accuracy of the records - incorrect recording of amounts, incorrect job numbers, materials being "borrowed" for another job

For which of the following industries would job-order costing most likely not be appropriate? a) aircraft assembly b) cereal production c) home construction d) small business printing

b) cereal production

When is a company justified in inventorying scrap? a) A company is justified in inventorying scrap at the time a physical inventory is taken by the company. b) A company is not justified in inventorying scrap because scrap arises as a residual from the manufacturing​ process, and is not a product targeted for manufacture or sale by the firm. c) A company is justified in inventorying scrap when its estimated net realizable value is significant and the time between storing it and selling or reusing it is quite long. d) A company is not justified in inventorying scrap because scrap returned to the storeroom is sold​ quickly, so it is not assigned an inventory cost figure.

c) A company is justified in inventorying scrap when its estimated net realizable value is significant and the time between storing it and selling or reusing it is quite long.

How does a job-costing system differ from a process-costing system? a) A process-costing system allocates indirect costs to products; a job-costing system does not allocate indirect costs to products b) A job-costing system allocates indirect costs to products; a process-costing system does not allocate indirect costs to products c) A job-costing system assigns costs to distinct units; a process-costing system assigns costs to masses of similar units d) A job-costing system assigns costs to masses of similar units; a process-costing system assigns costs to distinct units

c) A job-costing system assigns costs to distinct units; a process-costing system assigns costs to masses of similar units

Which of the following describes the distinctive characteristic of FIFO computations in assigning costs to units completed and to units in ending work in​ process? a) Calculates the equivalent unit cost of all the work done to date and assigns this cost to equivalent units completed and transferred out of the​ process, and to equivalent units in ending​ work-in-process inventory. b) Standard costs are assigned first to complete beginning​ work-in-process inventory, next started and completed new​ units, and finally to start new units that are in ending​ work-in-process inventory. c) Assigns the cost of the previous accounting​ period's equivalent units in beginning​ work-in-process inventory to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning​ inventory, next started and completed new​ units, and finally to units in ending​ work-in-process inventory. d) none of the above

c) Assigns the cost of the previous accounting​ period's equivalent units in beginning​ work-in-process inventory to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning​ inventory, next started and completed new​ units, and finally to units in ending​ work-in-process inventory.

electronic data interchange (EDI) is helpful to managers because a) it increases manufacturing productivity b) it increases product quality c) it ensures that a purchase order is transmitted quickly and accurately to suppliers with minimum paperwork and costs d) it lowers manufacturing costs

c) it ensures that a purchase order is transmitted quickly and accurately to suppliers with minimum paperwork and costs

Select examples of two cost objects in companies using job costing a) Cost pool and cost allocation b) Direct costs and indirect costs c) Fixed costs and variable costs d) Products or jobs and responsibility center or departments

d) Products or jobs and responsibility center or departments

costing method for a landscaping company

job costing

Name the three inventory methods commonly associated with process costing

1. weighted average 2. first-in first-out 3. standard costing

Pemberton Manufacturing Corporation uses a process-costing system to manufacture printers for PCs. The following information summarizes operations for its NoToner model during the quarter ending September 30. Beginning WIP: 300 units, $70,000 DL Started: 900 units Completed: 800 units Ending WIP: 400 units Costs added: $600,000 Beginning​ work-in-process inventory was 50​% complete for direct labor. Ending​ work-in-process inventory was 50​% complete for direct labor. What is the total value of the direct labor in the ending​ work-in-process inventory using the​ weighted-average method? ​(Round your answer to the nearest​ dollar.) a) $134,000 b) $297,778 c) 840,000 d) $223,333

a) $134,000

Right Manufacturing Co. assembled the following cost data for job order #29: Direct manufacturing labor: $95,000 Indirect manufacturing labor: $15,000 Equipment depreciation: $1,100 Other indirect manufacturing costs: $1,300 Direct materials: $100,000 Indirect materials: $3,900 Manufacturing overhead overapplied: $1,900 What are the total manufacturing costs for job order #29 if the company uses normal job-order costing? a) $218,200 b) $214,300 c) $217,100 d) $216,300

a) $218,200

Kranston Manufacturing uses a​ process-costing system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations and costs for the month of May​, Year 5 Beginning WIP: 30,000 units Started: 140,000 units Completed: 100,000 units Ending WIP: 70,000 units Beginning inventory costs: materials, $66,000; direct labor, $20,000; and factory overhead, $17,000 Costs incurred: materials, $476,000; direct labor, $192,000; and factory overhead, $400,000 The beginning inventory was 30​% complete for materials and 35​% complete for conversion costs. The ending inventory was 30​% complete for materials and 40​% complete for conversion costs. Using the​ weighted-average method, the​ equivalent-unit conversion cost for May ​is: ​(Round your answer to the nearest​ cent.) a) $4.91 b) $4.63 c) $4.22 d) $6.29

a) $4.91

"In accounting for spoiled units, we are dealing with cost assignment rather than cost incurrence." Explain a) Accounting for spoiled goods deals with cost​ assignment, rather than with cost​ incurrence, because the existence of spoiled goods does not involve any additional cost beyond the amount already incurred. b) Accounting for spoiled goods deals with cost​ assignment, rather than with cost​ incurrence, because the units of production do not meet the specifications required by customers but are subsequently repaired and sold as good finished units. c) Accounting for spoiled goods deals with cost​ assignment, rather than with cost​ incurrence, because the residual material that results from manufacturing a product is not included in the cost. d) all of the above

a) Accounting for spoiled goods deals with cost​ assignment, rather than with cost​ incurrence, because the existence of spoiled goods does not involve any additional cost beyond the amount already incurred.

Which of the following describes the distinctive characteristic of​ weighted-average computations in assigning costs to units completed and to units in ending work in​ process? a) Calculates the equivalent unit cost of all the work done to date and assigns this cost to equivalent units completed and transferred out of the​ process, and to equivalent units in ending​ work-in-process inventory. b) Standard costs are assigned first to complete beginning​ work-in-process inventory, next started and completed new​ units, and finally to start new units that are in ending​ work-in-process inventory. c) Assigns the cost of the previous accounting​ period's equivalent units in beginning​ work-in-process inventory to the first units completed and transferred out of the process and assigns the cost of equivalent units worked on during the current period first to complete beginning​ inventory, next started and completed new​ units, and finally to units in ending​ work-in-process inventory. d) none of the above

a) Calculates the equivalent unit cost of all the work done to date and assigns this cost to equivalent units completed and transferred out of the​ process, and to equivalent units in ending​ work-in-process inventory.

Nobis Company uses an ABC system. Which of the following statements​ is/are correct with respect to​ ABC? I.Departmental costing systems are a refinement of ABC systems. II.ABC systems are useful in​ manufacturing, but not in merchandising or service industries. III.ABC systems can eliminate cost distortions because ABC develops cost drivers that have a​ cause-and-effect relationship with the activities performed. a) III only is correct b) I, II, and III are correct c) II and III only are correct d) none of the listed choices is correct

a) III only is correct

​"What has been regarded as normal spoilage in the past is not necessarily acceptable as normal spoilage in the present or​ future." Explain. a) Management effort can affect the spoilage rate. Many companies are relentlessly reducing their rates of normal​ spoilage, spurred on by competitors​ who, likewise, are continuously reducing costs. b) The definition of normal spoilage does not change for financial reporting purposes.​ However, for tax reporting​ purposes, it is updated each year by the US Treasury.​ Therefore, what has been regarded as normal spoilage in the​ past, for tax purposes is not necessarily acceptable as normal spoilage in the present or future. c) This statement is incorrect. Normal spoilage does not​ change, therefore, what has been regarded as normal spoilage in the past must be acceptable as normal spoilage in the present or future. d) The definition of normal spoilage is updated each year by the SEC.​ Therefore, what has been regarded as normal spoilage in the past is not necessarily acceptable as normal spoilage in the present or future.

a) Management effort can affect the spoilage rate. Many companies are relentlessly reducing their rates of normal​ spoilage, spurred on by competitors​ who, likewise, are continuously reducing costs.

​"In job​ costing, the costs of normal spoilage that occur while a specific job is being done are charged to the specific​ job." Do you​ agree? Explain a) No. Spoilage may be considered a normal characteristic of a given production cycle. The costs of normal spoilage caused by a random malfunction of a machine would be charged as a part of the manufacturing overhead allocated to all jobs. Normal spoilage attributable to a specific job is charged to that job. b) No. The costs of abnormal spoilage that occurs while a specific job is in process is charged to the specific job. The costs of abnormal spoilage caused by random malfunction of a machine would be charged to the job being produced when the machine malfunctioned. c) Yes. Spoilage may be considered a normal characteristic of a given production cycle. Normal spoilage and abnormal spoilage costs are included as other operating expenses. d) Yes. In​ job-costing systems all spoilage is attributable to a specific job and is charged to that job.

a) No. Spoilage may be considered a normal characteristic of a given production cycle. The costs of normal spoilage caused by a random malfunction of a machine would be charged as a part of the manufacturing overhead allocated to all jobs. Normal spoilage attributable to a specific job is charged to that job.

​"The costs of rework are always charged to the specific jobs in which the defects were originally​ discovered." Do you​ agree? Explain. a) No. Unless there are special reasons for charging normal rework to jobs that contained the bad​ units, the costs of extra​ materials, labor, and so on are usually charged to manufacturing overhead and allocated to all jobs. b) Yes. Rework​ (abnormal and​ normal) are always charged to the specific jobs where the defect was found and spread to all jobs through overhead allocation. c) No. The rework is always charged to the previous​ job, under the assumption that the problem occurred at the end of that job and transferred over to the next job. d) Yes. Rework​ (abnormal and​ normal) are charged to the specific​ jobs, but only to a loss account.

a) No. Unless there are special reasons for charging normal rework to jobs that contained the bad​ units, the costs of extra​ materials, labor, and so on are usually charged to manufacturing overhead and allocated to all jobs.

What problems might arise in estimating the degree of completion of semiconductor chips in a semiconductor plant? a) The accuracy of the estimates of completion depends on the care and skill of the estimator and the nature of the process. Semiconductor chips may differ substantially in the finishing necessary to obtain a final product. The amount of work necessary to finish a product may not always be easy to ascertain in advance. b) Department supervisors and line managers - individuals most familiar with the process - often make conversion cost estimates. Since these individuals have so many​ responsibilities, making the estimates is often too time consuming​ and, thus, cannot be completed in a timely manner. c) Estimating the degree of completion is usually difficult for direct material costs. Semiconductor chips may differ substantially in the amount of direct materials​ required, thus making the accuracy of the estimates of completion difficult. d) all of the above

a) The accuracy of the estimates of completion depends on the care and skill of the estimator and the nature of the process. Semiconductor chips may differ substantially in the finishing necessary to obtain a final product. The amount of work necessary to finish a product may not always be easy to ascertain in advance.

The controller of a retail company has just had a​ $50,000 request to implement an ABC system quickly turned down. A senior vice​ president, in rejecting the​ request, noted,​ "Given a​ choice, I will always prefer a​ $50,000 investment in improving things a customer sees or​ experiences, such as our shelves or our store layout. How does a customer benefit by our spending​ $50,000 on a supposedly better accounting​ system?" How should the controller​ respond? a) The new system will result in more accurate product costs which will influence pricing and product mix decisions. The system can also be used to reduce product costs which will lower selling prices. As a​ result, the customer will benefit from the new system. b) The new system will result in more accurate product costs but will not influence pricing and product mix decisions since only the controller will use the information provided by the new system. The benefits of a better accounting system show up in reducing the amount of time it takes the controller to provide internal reports to the management team. c) The benefits of a better accounting system have no impact on customers. The senior​ vice-president should​ understand, though, that improving the accuracy of internal reporting is what is most important. d) None of the above. The controller should realize that a better accounting system is not a good investment.

a) The new system will result in more accurate product costs which will influence pricing and product mix decisions. The system can also be used to reduce product costs which will lower selling prices. As a​ result, the customer will benefit from the new system.

Identify the main difference between journal entries in process costing and job costing a) There is often more than one​ work-in-process account in process costing - one for each process. b) The journal entries in process costing are posted to record the number of units as they are moved from one department to another. Journal entries in job costing are posted to record costs rather than number of units. c) The​ weighted-average method is used for the journal entries in process costing while the FIFO method is used for the journal entries in job costing. d) The journal entries in process costing are the same as those made in​ job-costing systems.

a) There is often more than one​ work-in-process account in process costing - one for each process.

Which of the following statements describing a key reason for product cost differences between simple costing systems and ABC systems is true? a) an ABC approach attempts to use cost drivers as the allocation base for indirect costs, whereas a simple costing system generally does not b) the ABC costing system has more indirect costs than a simple costing system, which classifies as many indirect costs as direct costs as possible c) an ABC costing system generally utilizes one or very few indirect cost pools to allocate costs, where a simple costing system uses multiple indirect cost pools to allocate costs d) an ABC approach focuses on the units of output as the fundamental cost objects, whereas a simple costing system generally does not

a) an ABC approach attempts to use cost drivers as the allocation base for indirect costs, whereas a simple costing system generally does not

Identify three major source documents used in job-costing systems a) job cost record (sheet), materials requisition record, and labor time record b) balance sheet, income statement, and cash flow statement c) accounts receivable aging report, accounts payable aging report, and inventory control report d) general journal, general ledger, and trial balance

a) job cost record (sheet), materials requisition record, and labor time record

Which of the following is a true statement regarding the treatment of scrap by a firm? a) revenue received from the sale of scrap on a job lower the total costs for that job b) scrap is separated between normal and abnormal scrap c) there are costs assigned to scrap d) scrap is always allocated to a specific job

a) revenue received from the sale of scrap on a job lower the total costs for that job

What are the main costs and limitations of implementing ABC systems? a) the measurements necessary to implement it require many calculations and can be costly to operate b) identifying the five-step decision-making process required to implement an ABC system is very time consuming c) the fact that ABC systems cannot be used for service and merchandising companies is its main limitation d) all of the above

a) the measurements necessary to implement it require many calculations and can be costly to operate

DVG Company uses job-order costing and has assembled the following cost data for the production and assembly of item X: Direct manufacturing labor wages: $32,000 Direct material used: $75,000 Indirect manufacturing labor: $3,500 Utilities: $450 Fire insurance: $470 Manufacturing overhead applied: $8,000 Indirect materials: $5,800 Depreciation on equipment: $550 Based on the above cost data, the manufacturing overhead for item X is: a) $550 under-allocated b) $2,770 under-allocated c) $2,770 over-allocated d) $550 over-allocated

b) $2,770 under-allocated

Penguin ​Products, Inc. incurred the following costs during December related to the production of its 100 comma 000 frozen ice cream cone specialty​ items Food product labor: $225,000 Ice cream cone ingredients: $330,000 Sales and marketing costs: $30,000 Factory overhead: $32,000 Normal food spoilage: $6,000 Abnormal spoilage: $3,000 What is the per unit inventory cost allocated to the​ company's frozen ice cream cone specialty items for December​? ​(Round your answer to the nearest​ cent.) a) $5.87 b) $5.93 c) $5.96 d) 6.23

b) $5.93

Sanjay Corporation uses a process costing system to manufacture laptop PCs. The following information summarizes operations for its VeryLife model during the quarter ending March 31. Beginning WIP: 120 units, $72,000 DM Started: 550 units Completed: 430 units Ending WIP: 240 units Costs added: $890,000 Beginning​ work-in-process inventory was 50​% complete for direct materials. Ending​ work-in-process inventory was 90​% complete for direct materials. What were the equivalent units for direct materials for the quarter using the FIFO​ method? a) 670 b) 586 c) 526 d) 610

b) 586

Select the major advantage of the FIFO method for purposes of planning and control a) A major advantage of FIFO is its ease of use for process industries that produce a wide variety of similar products and in complex conditions. b) A major advantage of FIFO is that managers can judge the performance in the current period independently from the performance in the preceding period. c) A major advantage of FIFO is the relative computational simplicity and its reporting of a​ more-representative average unit cost when input prices fluctuate markedly from month to month. d) all of the above

b) A major advantage of FIFO is that managers can judge the performance in the current period independently from the performance in the preceding period.

"Costs of abnormal spoilage are losses." explain a) Abnormal spoilage is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions. It has low total sales value compared to the total sales value of the product. Since the spoilage has a sales​ value, it is not considered a​ "lost cost". b) Abnormal spoilage is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions. Costs of abnormal spoilage are​ "lost costs", measures of inefficiency that should be written off directly as losses for the accounting period. c) Abnormal spoilage is spoilage that is inherent in a particular production process and would arise under efficient operating conditions.​ Therefore, costs of abnormal spoilage are not​ "lost costs". d) Costs of abnormal spoilage are​ "lost costs". In fact all types of​ spoilage, rework, and scrap are considered​ "lost costs", due to the product not being produced perfect and ready for sale from the beginning.

b) Abnormal spoilage is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions. Costs of abnormal spoilage are​ "lost costs", measures of inefficiency that should be written off directly as losses for the accounting period.

Why might an advertising agency use job costing for an advertising campaign by PepsiCo, whereas a bank might use process costing to determine the cost of checking account deposits? a) Job costing can be used to compute the cost of masses of similar services, in contrast process costing enables all the specific aspects of each job to be identified individually. b) Job costing enables all the specific aspects of each job to be identified, whereas process costing can be used to compute the cost of numerous identical or similar services c) An advertising agency provides the same service to all its clients, while a bank supplies its customers with specialized services. For that reason, an advertising agency would use job costing to monitor the costs of an advertising campaign by PepsiCo. d) Whenever a product or service is unique or distinct, process costing is the most efficient way to assign costs. Therefore since each banking transaction is unique, the banks use process costing to determine the cost of checking account deposits.

b) Job costing enables all the specific aspects of each job to be identified, whereas process costing can be used to compute the cost of numerous identical or similar services

"Transferred-in costs are those incurred in the preceding accounting period." Do you agree? Why? a) No.​ Transferred-in costs or current period costs are costs incurred only while the product is being processed within the current department. As the costs are incurred in the current​ period, they are transferred in and assigned to the units. b) No.​ Transferred-in costs or previous department costs are costs incurred in a previous department that have been charged to a subsequent department. These costs may be costs incurred in that previous department during this accounting period or a preceding accounting period. c) Yes.​ Transferred-in costs or previous department costs are only costs incurred in a preceding accounting period. As units move from one accounting period to​ another, the related costs are transferred by monthly journal entries. d) None of the above are correct.​ Transferred-in costs have nothing to do with costs incurred during any accounting period.

b) No.​ Transferred-in costs or previous department costs are costs incurred in a previous department that have been charged to a subsequent department. These costs may be costs incurred in that previous department during this accounting period or a preceding accounting period.

"Normal spoilage is planned spoilage." Discuss a) Normal spoilage is spoilage inherent in a particular production process. It arises even when the process is operated in an efficient manner. b) Normal spoilage is spoilage inherent in a particular production process that arises even under efficient operating conditions. Management decides the spoilage rate it considers normal depending on the production process. c) Normal spoilage is spoilage that is not inherent in a particular production process that arises even under efficient operating conditions. d) Normal spoilage is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions.

b) Normal spoilage is spoilage inherent in a particular production process that arises even under efficient operating conditions. Management decides the spoilage rate it considers normal depending on the production process.

"The inspection point is the key to the allocation of spoilage costs." Do you agree? Explain a) Yes, the point of inspection is the key to the assignment of spoilage costs. Normal spoilage costs attach solely to units transferred out.​ Thus, if units in ending work in process have passed​ inspection, they should not have normal spoilage costs added to them. b) Yes, the point of inspection is the key to the assignment of spoilage costs. Normal spoilage costs do not attach solely to units transferred out.​ Thus, if units in ending work in process have passed​ inspection, they should have normal spoilage costs added to them. c) No, the point of inspection is not the key to the assignment of spoilage costs. Normal spoilage costs attach solely to units transferred out.​ Thus, the units would not have normal spoilage costs added to them. d) Maybe, the point of inspection is the key to the assignment of spoilage costs. Spoilage costs are dependent on the units being manufactured and the manufacturing process itself.​ Thus, there is not enough information in this example to determine if the point of inspection is the key to the assignment of spoilage costs.

b) Yes, the point of inspection is the key to the assignment of spoilage costs. Normal spoilage costs do not attach solely to units transferred out.​ Thus, if units in ending work in process have passed​ inspection, they should have normal spoilage costs added to them.

Distinguish between actual costing and normal costing a) actual costing and normal costing differ in their use of actual or budgeted quantities of cost-allocation bases b) actual costing and normal costing differ in their use of actual or budgeted indirect-cost rates c) actual costing and normal costing differ in their use of actual or budgeted quantities of direct-cost inputs d) actual costing and normal costing differ in their use of actual or budgeted direct-cost rates

b) actual costing and normal costing differ in their use of actual or budgeted indirect-cost rates

What is an activity-based approach to designing a costing system? a) an activity-based approach traces direct costs to a cost object by using the actual direct-cost rates times the actual quantities of the direct-cost inputs. Indirect costs are allocated based on the actual indirect-cost rates time the actual quantities of the cost-allocation bases b) an activity-based approach refines a costing system by focusing on individual activities as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products or services c) an activity-based approach describes a particular costing approach that uses broad averages for assigning the cost of resources uniformly to cost objects d) an activity-based approach means making changes that result in cost numbers better measuring the way different cost objects, such as products, use different amounts of resources of the company. These changes require the assignment of costs to direct and indirect cost pools and the use of a single indirect-cost rate

b) an activity-based approach refines a costing system by focusing on individual activities as the fundamental cost objects. It uses the cost of these activities as the basis for assigning costs to other cost objects such as products or services

Why should managers worry about product over-costing or under-costing? a) averaging can result in inaccurate and misleading cost data. As such, companies may over-invest in products that have been over-costed, and under-invest in products that have been under-costed b) over-costing may result in competitors entering a market and taking market share for products that a company erroneously believes are low-margin or even unprofitable. Under-costing may result in companies selling products on which they are in fact losing money, when they erroneously believe them to be profitable c) over-costing products may lead to sales that actually result in losses because the sales may bring in less revenue than the cost of the resources they use. Under-costing products may lead to the loss market share to competitors selling similar products d) if prices of products are determined by the market based on consumer demands and competition, a product that is overcosted may appear more profitable that it actually is, while a product that is undercosted may appear less profitable than it actually is

b) over-costing may result in competitors entering a market and taking market share for products that a company erroneously believes are low-margin or even unprofitable. Under-costing may result in companies selling products on which they are in fact losing money, when they erroneously believe them to be profitable

identify the appropriate way(s) to dispose of under or overallocated overhead costs a) proration to all operating expense accounts, year-end write-off to miscellaneous expense, restatement of all overhead entries using budgeted indirect cost rates rather than actual indirect cost b) proration to work in process, finished goods and cost of goods sold, year-end write-off to cost of goods sold, restatement of all overhead entries using actual indirect cost rates rather than budgeted indirect cost rates c) proration to materials inventory, finished goods and cost of goods sold, year-end write-off to work in process inventory, restatement of all overhead entries using budgeted indirect cost rates rather than actual indirect cost d) no entry is required to dispose of over or under-allocated overhead

b) proration to work in process, finished goods and cost of goods sold, year-end write-off to cost of goods sold, restatement of all overhead entries using actual indirect cost rates rather than budgeted indirect cost rates

The following information concerns Wildwood Corporation's equivalent units in May: Beginning WIP (60%): 5,400 units Units started: 22,000 units Completed: 17,000 units Ending WIP (75%): 10,400 units Using the weighted-average method, what were Wildwood's May equivalent units? a) 27,400 b) 52,440 c) 24,800 d) 17,000

c) 24,800

Which of the following statements is true? a) ABC systems provide benefit to manufacturing companies only. Merchandising companies carry only merchandising (finished goods) inventory and service companies generally carry no inventory at all, and therefore, an ABC system would not apply to these companies b) ABC systems apply equally well to manufacturing and retail-oriented merchandising companies, but not to distribution-oriented merchandising companies, which carry only finished goods inventory, or to service companies, which do not carry inventory c) ABC systems apply equally well to​ manufacturing, merchandising and service companies. d) ABC systems apply equally well to manufacturing and merchandising​ companies, but not to service companies. Service companies generally carry no​ inventory, and​ therefore, an ABC system would provide​ little, if​ any, benefit

c) ABC systems apply equally well to​ manufacturing, merchandising and service companies.

All of the following are accurate regarding the treatment of normal or abnormal spoilage by a firm with the exception of: a) Normal spoilage is capitalized as part of inventory cost. b) Abnormal spoilage is excluded in the standard cost of a manufactured product. c) Abnormal spoilage has no financial statement impact. d) Normal and abnormal spoilage units affect the equivalent units of production.

c) Abnormal spoilage has no financial statement impact.

Why should the FIFO method be called a modified or department FIFO method? a) Each department carries units transferred in during a given period at its own unit cost​ (determined by the actual costs incurred during the​ period). This provides the ability to track costs on a pure FIFO basis throughout a series of processes. b) FIFO is applied within each department to compile the cost of units transferred in. As a practical​ matter, however, units transferred out during a given period usually are carried at a single unit cost​ (i.e., determined by top management at the beginning of the​ period). Otherwise, the attempt to track costs on a pure FIFO basis throughout a series of processes would be cumbersome. c) FIFO is applied within each department to compile the cost of units transferred out. As a practical​ matter, however, units transferred in during a given period usually are carried at a single average unit cost​ (i.e., the average cost of units transferred out of the preceding​ department). Otherwise, the attempt to track costs on a pure FIFO basis throughout a series of processes would be cumbersome. d) none of the above

c) FIFO is applied within each department to compile the cost of units transferred out. As a practical​ matter, however, units transferred in during a given period usually are carried at a single average unit cost​ (i.e., the average cost of units transferred out of the preceding​ department). Otherwise, the attempt to track costs on a pure FIFO basis throughout a series of processes would be cumbersome.

In process costing, why are costs often divided into two main classifications? a) Process costing systems separate costs into cost categories according to the inventory method being used. Indirect costs are used under the​ weighted-average method and direct costs are used under the FIFO method. b) Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process.​ Often, only two cost​ classifications, fixed and variable​ costs, are necessary. Fixed costs are only added at the start of the process and variable costs are added at the end. c) Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process.​ Often, only two cost​ classifications, direct materials and conversion​ costs, are necessary. Direct materials are frequently added at the start or end of the process and conversion costs are often added throughout the process d) Process costing systems separate costs into cost categories according to the type of product or service being provided. Direct materials are applicable only to the manufacture of a product and conversion costs are applicable only when a service is being provided.

c) Process costing systems separate costs into cost categories according to the timing of when costs are introduced into the process.​ Often, only two cost​ classifications, direct materials and conversion​ costs, are necessary. Direct materials are frequently added at the start or end of the process and conversion costs are often added throughout the process

Why is it important to classify costs into a cost hierarchy? a) it allows managers to evaluate the importance of costs in the manufacturing process. If costs were not classified into a cost hierarchy, managers would be unable to assess the importance of each cost incurred in manufacturing the product b) although costs in different cost pools relate to different cost-allocation bases, all cost-allocation bases are unit-level. Classifying costs into a cost hierarchy allows managers to spread costs evenly across all units c) costs in different cost pools relate to different cost-allocation bases and not all cost-allocation bases are unit-level. If costs were not classified into a cost hierarchy, the alternative would be to consider all costs as unit-level costs, leading to misallocation of those costs that are not unit-level costs d) costs in different cost pools relate to only one cost-allocation base and cost-allocation bases are always unit-level. Classifying costs into a cost hierarchy allows managers to spread costs evenly across all units

c) costs in different cost pools relate to different cost-allocation bases and not all cost-allocation bases are unit-level. If costs were not classified into a cost hierarchy, the alternative would be to consider all costs as unit-level costs, leading to misallocation of those costs that are not unit-level costs

Select four decisions for which ABC information is useful a) product-cost cross subsidization, converting product-sustaining costs into unit-level costs, identifying cost objects, and predicting gross profit b) identifying problems and uncertainties, obtaining information, making predictions about the future, and choosing among alternatives c) pricing and product mix, cost reduction and process improvement, product design, and decisions for planning and managing activities d) allocating direct material costs, allocating direct labor costs, identifying direct manufacturing overhead cost pools, and identifying indirect manufacturing overhead cost pools

c) pricing and product mix, cost reduction and process improvement, product design, and decisions for planning and managing activities

Identify the ways in which a house construction company may use job-cost information a) to report profit results to shareholders, and to report taxable profits to tax authorities b) to divide the total costs of constructing all the houses by the total number of houses built to obtain an average cost of each house, and to apply the average per-unit cost to each of the identical or similar houses built in that period c) to determine the profitability of individual jobs, to assist in bidding on future jobs, and to evaluate professionals who are in charge of managing individual jobs d) none of the above

c) to determine the profitability of individual jobs, to assist in bidding on future jobs, and to evaluate professionals who are in charge of managing individual jobs

Dinners Co. produces frozen dinners for the health conscious consumer. During the quarter ended September ​30, the company had the following cost​ data: Dinner ingredients: $3,600,000 Preparation labor: $650,000 Sales and marketing costs: $325,000 Plant production overhead: $75,000 Normal food spoilage: $70,000 Abnormal food spoilage: $52,000 General and administrative expenses: $95,000 Based on the cost​ data, what is the total amount of period expenses reflected in the​ company's income statement for the quarter ended September ​30? a) $420,000 b) $542,000 c) $547,000 d) $472,000

d) $472,000

Under Winding Corporation's job costing system, manufacturing overhead is applied to WIP using a predetermined annual overhead rate. During October, year 1, Winding's transactions included the following: Direct materials issued to production: $220,000 Indirect materials issued: $14,000 Manufacturing overhead incurred: $260,000 Manufacturing overhead applied: $229,000 Direct manufacturing labor costs: $218,000 Winding had neither beginning nor ending work in process inventory. What was the cost of jobs completed and transferred to finished goods in October? a) $712,000 b) $653,000 c) $698,000 d) $667,000

d) $667,000

"The unit cost of normal spoilage is the same as the unit cost of abnormal spoilage." Do you agree? Explain a) Yes. If normal and abnormal spoilage are detected at the same point in the production​ cycle, their unit costs would be the same. b) No. If abnormal spoilage is detected at a different point in the production cycle than normal​ spoilage, then unit costs would differ. c) Yes. There is no difference in the unit cost of normal and abnormal spoilage. Normal spoilage and abnormal spoilage are due to inefficiencies in the production process. d) Both A and B are correct.

d) Both A and B are correct.

Conroe Company is reviewing the data provided by its management accounting system. Which of the following statements​ is/are correct? I.A cost driver is a causal factor that increases the total cost of a cost object. II.Cost drivers may be volume based or activity based. III.Cost drivers are normally the largest cost in the manufacturing process. a) I, II, and III are correct b) II and III only are correct c) I only is correct d) I and II only are correct

d) I and II only are correct

Assuming beginning work in process is zero, the equivalent units of production computed using FIFO versus weighted average will have the following relationship: a) Weighted-average equivalent units are always greater than FIFO equivalent units. b) FIFO equivalent units will be less than​ weighted-average equivalent units. c) FIFO equivalent units will be greater than​ weighted-average equivalent units. d) Weighted-average equivalent units will be equal to FIFO equivalent units.

d) Weighted-average equivalent units will be equal to FIFO equivalent units.

"The standard-costing method is particularly applicable to process-costing situations." Do you agree? Why? a) No.​ Standard-cost procedures are never appropriate to​ process-costing systems under any circumstance. b) Yes.​ Standard-cost procedures are particularly appropriate to​ process-costing systems, but only when the products prices are relatively the same price and do not vary. c) No.​ Standard-cost procedures are not particularly appropriate to​ process-costing systems where there are various combinations of materials and operations used to make a wide variety of similar products. It is better to use the​ weighted-average method, which simplifies all calculations. d) Yes.​ Standard-cost procedures are particularly appropriate to​ process-costing systems where there are various combinations of materials and operations used to make a wide variety of similar products.​ Standard-cost procedures also avoid the intricacies involved in detailed tracking with​ weighted-average or FIFO methods when there are frequent price variations over time

d) Yes.​ Standard-cost procedures are particularly appropriate to​ process-costing systems where there are various combinations of materials and operations used to make a wide variety of similar products.​ Standard-cost procedures also avoid the intricacies involved in detailed tracking with​ weighted-average or FIFO methods when there are frequent price variations over time

Which of the following are examples of industries that use process-costing systems? a) pharmaceutical b) oil refining c) semiconductor chips d) all of the above

d) all of the above

Identify the reason(s) why most organizations use an annual period rather than a weekly or monthly period to compute budgeted indirect-cost rates a) the numerator reason - the longer time period, the less influence of seasonal patterns b) the denominator reason - the longer the time period, the less the effect of variations in output levels on the allocation of fixed costs c) neither a nor b d) both a and b

d) both a and b

Does increasing the number of​ indirect-cost pools guarantee an increase in the accuracy of product or service​ costs? a) Yes, increasing the number of​ indirect-cost pools will always increase the homogeneity of the cost pools​ themselves, and​ will, in​ turn, improve the accuracy of the indirect costs allocated to product or service costs. b) No, increasing the number of​ indirect-cost pools does not guarantee increased accuracy of product or service costs. If the existing cost pool is not​ homogeneous, accuracy will increase only if the increased cost pools themselves increase in homogeneity. c) No, increasing the number of​ indirect-cost pools does not guarantee increased accuracy of product or service costs. If the existing cost pool is already​ homogeneous, increasing the number of cost pools will not increase accuracy d) both b and c

d) both b and c

identify three different debit entries to the WIP control t-account under normal costing a) direct materials purchased, indirect manufacturing labor paid to employees, manufacturing overhead incurred b) direct materials purchased, completion and transfer of jobs to finished goods, sale of completed goods c) direct materials purchased, manufacturing overhead incurred, completion and transfer of jobs to finished goods d) direct materials used, direct manufacturing labor billed to a job, manufacturing overhead allocated to a job

d) direct materials used, direct manufacturing labor billed to a job, manufacturing overhead allocated to a job

A company might use budgeted costs rather than actual costs to compute direct labor rates because a) the budgeted costs are more accurate b) the budgeted costs will result in a higher gross margin c) the budgeted cost will result in lower corporate income taxes d) it may be difficult to trace direct labor costs to jobs as they are completed

d) it may be difficult to trace direct labor costs to jobs as they are completed

Which of the following does not accurately describe the application of job-order costing? a) indirect manufacturing labor and indirect materials are part of the actual manufacturing costs incurred b) finished goods that are purchased by customers will directly impact cost of goods sold c) direct materials and direct manufacturing labor are included in total manufacturing costs d) manufacturing overhead costs incurred is used to determine total manufacturing costs

d) manufacturing overhead costs incurred is used to determine total manufacturing costs

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