EXAM 4 QUESTIONS
Fortner Company has no beginning work in process; 9,000 units are transferred out and 3,000 units in end- ing work in process are one-third finished as to con- version costs and fully complete as to materials cost. If total materials cost is $60,000, the unit materials cost is: (a) $5.00. (b) $5.45 rounded. (c) $6.00. (d) No correct answer is given.
(a) $60,000 4 (9,000 1 3,000 units) 5 $5.00 per unit, not (b) $5.45 (rounded), (c) $6.00, or (d) no correct answer is given.
In Crawford Company, the predetermined overhead rate is 80% of direct labor cost. During the month, Crawford incurs $210,000 of factory labor costs, of which $180,000 is direct labor and $30,000 is indirect labor. Actual overhead incurred was $200,000. The amount of overhead debited to Work in Process Inven- tory should be: (a) $200,000. (b) $144,000. (c) $168,000. (d) $160,000.
11. (b) Work in Process Inventory should be debited for $144,000 ($180,000 3 80%), the amount of manufacturing overhead applied, not (a) $200,000, (c) $168,000, or (d) $160,000.
. Raw materials are assigned to a job when: (a) the job is sold. (b) the materials are purchased. (c) the materials are received from the vendor. (d) the materials are issued by the materials storeroom.
6. (d) Raw materials are assigned to a job when the materials are issued by the materials storeroom, not when (a) the job is sold, (b) the materials are purchased, or (c) the materials are received from the vendor.
1. Managerial accounting: (a) is governed by generally accepted accounting principles. (b) places emphasis on special-purpose information. (c) pertains to the entity as a whole and is highly aggregated. (d) is limited to cost data.
b) Managerial accounting emphasizes special-purpose information. The other choices are incorrect because (a) financial accounting is governed by generally accepted accounting principles, (c) financial accounting pertains to the entity as a whole and is highly aggregated, and (d) cost accounting and cost data are a subset of management accounting.
Which of the following is not an element of manufacturing overhead? (a) Sales manager's salary. (b) Plant manager's salary. (c) Factory repairman's wages. (d) Product inspector's salary.
(a) The sales manager's salary is not directly or indirectly associated with the manufacture of the finished product. The other choices are incorrect because (b) the plant manager's salary, (c) the factory repairman's wages, and (d) the product inspector's salary are all elements of manufacturing overhead
Which of the following costs are classified as a period cost? (a) Wages paid to a factory custodian. (b) Wages paid to a production department supervisor. (c) Wages paid to a cost accounting department supervisor. (d) Wages paid to an assembly worker.
(c) Wages paid to a cost accounting department supervisor would be included in administrative expenses and classified as a period cost. The other choices are incorrect because (a) factory custodian wages are indirect labor which is manufacturing over- head and a product cost, (b) production department supervisor wages are indirect labor which is manufacturing overhead and a product cost, and (d) assembly worker wages is direct labor and is a product cost.
Direct materials are a (a) Product cost=YES Period Cost=YES OH Cost=NO (b) Product cost=YES Period Cost=NO OH Cost=NO (c) Product cost=YES Period Cost= YES OH Cost=YES (d) Product cost=NO Period Cost=NO OH Cost=NO
3. (b) Direct materials are a product cost only. Therefore, choices (a), (c), and (d) are incorrect as direct materials are not manufac- turing overhead or a period cost.
The source of information for assigning costs to job cost sheets are: (a) invoices, time tickets, and the predetermined overhead rate. (b) materials requisition slips, time tickets, and the actual overhead cost. (c) materials requisition slips, payroll register, and the predetermined overhead rate. (d) materials requisition slips, time tickets, and the predetermined overhead rate.
7. (d) Materials requisition slips are used to assign direct materials, time tickets are used to assign direct labor, and the predetermined overhead rate is used to assign manufacturing overhead to job cost sheets. The other choices are incorrect because (a) materials requisition slips, not invoices, are used to assign direct materials; (b) the predetermined overhead rate, not the actual overhead costs, is used to assign manufacturing overhead; and (c) time tickets, not the payroll register, are used to assign direct labor.
In RYZ Company, there are zero units in beginning work in process, 7,000 units started into production, and 500 units in ending work in process 20% com- pleted. The physical units to be accounted for are: (a) 7,000. (c) 7,500. (b) 7,360. (d) 7,340.
(a) There are 7,000 physical units to be accounted for (0 units in beginning inventory 1 7,000 units started), not (b) 7,360, (c) 7,500, or (d) 7,340.
KLM Company uses the FIFO method to compute equivalent units. It has no beginning work in process; 9,000 units are started and completed and 3,000 units in ending work in process are one-third completed. All material is added at the beginning of the process. If total materials cost is $60,000, the unit materials cost is: (a) $5.00. (b) $6.00. (c) $6.67 (rounded). (d) No correct answer is given.
(a) Unit materials cost is $5.00 [$60,000 4 (9,000 1 3,000)]. Therefore, choices (b) $6.00, (c) $6.67 (rounded), and (d) no correct answer are incorrect
A production cost report: (a) is an external report. (b) shows both the production quantity and cost data related to a department. (c) shows equivalent units of production but not physical units. (d) contains six sections.
(b) A production cost report shows costs charged to a department and costs accounted for. The other choices are incorrect because a production cost report (a) is an internal, not external, report; (c) does show physical units; and (d) is prepared in four steps and does not contain six sections.
13. At the end of an accounting period, a company using a job order cost system calculates the cost of goods manufactured: (a) from the job cost sheet. (b) from the Work in Process Inventory account. (c) by adding direct materials used, direct labor incurred, and manufacturing overhead incurred. (d) from the Cost of Goods Sold account.
(b) At the end of an accounting period, a company using a job costing system prepares the cost of goods manufactured from the Work in Process Inventory account, not (a) the job cost sheet; (c) by adding direct materials used, direct labor incurred, and manufac- turing overhead incurred; or (d) from the Cost of Goods Sold Account.
After passage of the Sarbanes-Oxley Act: (a) reports prepared by managerial accountants must by audited by CPAs. (b) CEOs and CFOs must certify that financial state- ments give a fair presentation of the company's operating results. (c) the audit committee, rather than top management, is responsible for the company's financial statements. (d) reports prepared by managerial accountants must comply with generally accepted accounting prin- ciples (GAAP).
(b) CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results. The other choices are incorrect because (a) reports prepared by financial (not managerial) accountants must be audited by CPAs; (c) SOX clarifies that top management, not the audit committee, is responsible for the company's financial statements; and (d) reports by financial (not managerial) accountants must comply with GAAP.
Conversion costs are the sum of: (a) fixed and variable overhead costs. (b) labor costs and overhead costs. (c) direct material costs and overhead costs. (d) direct labor and indirect labor cost
(b) Conversion costs are the sum of labor costs and overhead costs, not (a) the sum of fixed and variable overhead costs, (c) direct material costs and overhead costs, or (d) direct labor and indirect labor costs.
. The management of an organization performs several broad functions. They are: (a) planning, directing, and selling. (b) planning, directing, and controlling. (c) planning, manufacturing, and controlling. (d) directing, manufacturing, and controlling
(b) Planning, directing, and controlling are the broad functions performed by the management of an organization. The other choices are incorrect because (a) selling is performed by the sales group in the organization, not by management; (c) manufacturing is performed by the manufacturing group in the organization, not by management; and (d) manufacturing is performed by the manufacturing group in the organization, not by management.
In making journal entries to assign raw materials costs, a company using process costing: (a) debits Finished Goods Inventory. (b) often debits two or more work in process accounts. (c) generally credits two or more work in process accounts. (d) credits Finished Goods Inventory
(b) The debit is often to two or more work in process accounts, not (a) a debit to Finished Goods Inventory, (c) credits to two or more work in process accounts, or (d) a credit to Finished Goods Inventory.
Hollins Company uses the FIFO method to compute equivalent units. It has 2,000 units in beginning work in process, 20% complete as to conversion costs, 25,000 units started and completed, and 3,000 units in ending work in process, 30% complete as to conver- sion costs. All units are 100% complete as to materials. Equivalent units for materials and conversion costs are, respectively: (a) 28,000 and 26,600. (b) 28,000 and 27,500. (c) 27,000 and 26,200. (d) 27,000 and 29,600.
(b) The equivalent units for materials are 28,000 [25,000 started and completed 1 (3,000 3 100%)]. The equivalent units for conversion costs are 27,500 [(2,000 3 80%) 1 25,000 1 (3,000 3 30%)]. Therefore, choices (a) 28,000, 26,600; (c) 27,000, 26,200; and (d) 27,000, 29,600 are incorrect.
The Mixing Department's output during the period consists of 20,000 units completed and transferred out, and 5,000 units in ending work in process 60% complete as to materials and conversion costs. Begin- ning inventory is 1,000 units, 40% complete as to materials and conversion costs. The equivalent units of production are: (a) 22,600. (c) 24,000. (b) 23,000. (d) 25,000.
(b) The equivalent units of production is the sum of units completed and transferred out (20,000) and the equivalent units of ending work in process inventory (5,000 units 3 60%), or 20,000 1 3,000 5 23,000 units, not (a) 22,600 units, (c) 24,000 units, or (d) 25,000 units.
Toney Company uses the FIFO method to compute equivalent units. It has unit costs of $10 for materials and $30 for conversion costs. If there are 2,500 units in ending work in process, 100% complete as to materials and 40% complete as to conversion costs, the total cost assignable to the ending work in process inventory is: (a) $45,000. (c) $75,000. (b) $55,000. (d) $100,000.
(b) The total cost assignable to the ending work in process is $55,000 [($10 3 2,500) 1 ($30 3 2,500 3 40%)]. Therefore, choices (a) $45,000, (c) $75,000, and (d) $100,000 are incorrect.
Largo Company has unit costs of $10 for materials and $30 for conversion costs. If there are 2,500 units in ending work in process, 40% complete as to con- version costs, and fully complete as to materials cost, the total cost assignable to the ending work in process inventory is: (a) $45,000. (b) $55,000 (c) $75,000. (d) $100,000.
(b) [(2,500 units 3 100% complete) 3 $10] 1 [(2,500 units 3 40% complete) 3 $30] or $25,000 1 $30,000 5 $55,000, not (a) $45,000, (c) $75,000, or (d) $100,000.
Cost of goods available for sale is a step in the calculation of cost of goods sold of: (a) amerchandisingcompanybutnotamanufacturing company. (b) a manufacturing company but not a merchandising company. (c) a merchandising company and a manufacturing company. (d) neither a manufacturing company nor a merchan- dising company.
(c) Both a merchandising company and a manufacturing company use cost of goods available for sale to calculate cost of goods sold. Therefore, choices (a) only a merchandising company, (b) only a manufacturing company, and (d) neither a manufacturing company or a merchandising company are incorrect.
For the year, Redder Company has cost of goods man- ufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is: (a) $450,000. (b) $500,000. (c) $550,000. (d) $600,000.
(c) Cost of goods sold is computed as Beginning finished goods inventory ($200,000) 1 Cost of goods manufactured ($600,000) 2 Ending finished goods inventory ($250,000), or $200,000 1 $600,000 2 $250,000 5 $550,000. Therefore, choices (a) $450,000, (b) $500,000, and (d) $600,000 are incorrect.
In a process cost system, manufacturing overhead: (a) is assigned to finished goods at the end of each accounting period. (b) is assigned to a work in process account for each job as the job is completed. (c) is assigned to a work in process account for each production department on the basis of a predeter- mined overhead rate. (d) is assigned to a work in process account for each production department as overhead costs are incurred.
(c) In a process cost system, manufacturing overhead is assigned to a work in process account for each production department on the basis of a predetermined overhead rate, not (a) a finished goods account, (b) as the job is completed, or (d) as overhead costs are incurred.
Indirect labor is a: (a) nonmanufacturing cost. (b) raw material cost. (c) product cost. (d) period cost.
(c) Indirect labor is a product cost because it is part of the effort required to produce a product. The other choices are incorrect because (a) indirect labor is a manufacturing cost because it is part of the effort required to produce a product, (b) indirect labor is not a raw material cost because raw material costs only include direct materials and indirect materials, and (d) indirect labor is not a period cost because it is part of the effort required to produce a product.
Mora Company has 2,000 units in beginning work in process, 20% complete as to conversion costs, 23,000 units transferred out to finished goods, and 3,000 units in ending work in process 3313 % complete as to conversion costs.The beginning and ending inventory is fully complete as to materials costs. Equivalent units for materials and conversion costs are, respectively: (a) 22,000, 24,000. (c) 26,000, 24,000. (b) 24,000, 26,000. (d) 26,000, 26,000.
(c) The equivalent units for materials are 26,000 (23,000 units transferred out plus 3,000 in ending work in process inventory). The equivalent units for conversion costs are 24,000 (23,000 transferred out plus 331y3% of the ending work in process inventory or 1,000). Therefore, choices (a) 22,000, 24,000; (b) 24,000, 26,000; and (d) 26,000, 26,000 are incorrect.
Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion? (a) Just-in-time inventory. (b) Total quality management. (c) Balanced scorecard. (d) Activity-based costing.
(d) Activity-based costing attempts to allocate manufacturing overhead in a more meaningful fashion. Therefore, choices (a) just- in-time inventory, (b) total quality management, and (c) balanced scorecard are incorrect.
Which of the following costs would a computer manufacturer include in manufacturing overhead? (a) The cost of the disk drives. (b) The wages earned by computer assemblers. (c) The cost of the memory chips. (d) Depreciation on testing equipment.
(d) Depreciation on testing equipment would be included in manufacturing overhead because it is indirectly associated with the finished product. The other choices are incorrect because (a) disk drives would be direct materials, (b) computer assembler wages would be direct labor, and (c) memory chips would be direct materials.
In a process cost system, the flow of costs is: (a)work in process, cost of goods sold, finished goods. (b) finished goods, work in process, cost of goods sold. (c) finished goods, cost of goods sold, work in process. (d) work in process, finished goods, cost of goods sold.
(d) In a process cost system, the flow of costs is work in process, finished goods, cost of goods sold. Therefore, choices (a), (b), and (c) are incorrect
In a production cost report, units to be accounted for are calculated as: (a) Units started into production + Units in ending work in process. (b) Units started into production - Units in begin- ning work in process. (c) Units transferred out + Units in beginning work in process. (d) Units started into production + Units in beginning work in process.
(d) In a production cost report, units to be accounted for are calculated as Units started in production + Units in beginning work in process, not (a) Units in ending work in process, (b) minus Units in beginning work in process, or (c) Units transferred out.
Indicate which of the following statements is not cor- rect. (a) Both a job order and a process cost system track the same three manufacturing cost elements— direct materials, direct labor, and manufacturing overhead. (b) A job order cost system uses only one work in pro- cess account, whereas a process cost system uses multiple work in process accounts. (c) Manufacturing costs are accumulated the same way in a job order and in a process cost system. (d) Manufacturing costs are assigned the same way in a job order and in a process cost system.
(d) Manufacturing costs are not assigned the same way in a job order and in a process cost system. Choices (a), (b), and (c) are true statements.
Which of the following items is not characteristic of a process cost system? (a) Once production begins, it continues until the finished product emerges. (b) The products produced are heterogeneous in nature. (c) The focus is on continually producing homogeneous products. (d) When the finished product emerges, all units have precisely the same amount of materials, labor, and overhead.
. (b) The products produced are homogeneous, not heterogeneous, in nature. Choices (a), (c), and (d) are incorrect because they all represent characteristics of a process cost system.
1. Cost accounting involves the measuring, recording, and reporting of: (a) product costs (b) future costs. (c) manufacturing processes. (d) managerial accounting decisions.
1. (a) Cost accounting involves the measuring, recording, and reporting of product costs, not (b) future costs, (c) manufacturing processes, or (d) managerial accounting decisions.
A cost of goods manufactured schedule shows beginning and ending inventories for: (a) raw materials and work in process only. (b) work in process only. (c) raw materials only. (d) raw materials, work in process, and finished goods.
10. (a) A cost of goods manufactured schedule shows beginning and ending inventories for raw materials and work in process only. Therefore, choices (b) work in process only and (c) raw materials only are incorrect. Choice (d) is incorrect because it does not include finished goods.
The formula for computing the predetermined manufacturing overhead rate is estimated annual overhead costs divided by an expected annual operating activity, expressed as: (a) direct labor cost. (c) machine hours. (b) direct labor hours. (d) Any of the above
10. (d) Any of the activity measures mentioned can be used in computing the predetermined manufacturing overhead rate. Choices (a) direct labor cost, (b) direct labor hours), and (c) machine hours can all be used in computing the predetermined manufacturing overhead rate, but (d) is a better answer.
The formula to determine the cost of goods manufactured is: (a) Beginning raw materials inventory 1 Total manufacturing costs 2 Ending work in process inventory. (b) Beginning work in process inventory + Total manufacturing costs -Ending finished goods inventory. (c) Beginning finished good inventory 1 Total manufacturing costs 2 Ending finished goods inventory. (d) Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory.
11. (d) The formula to determine the cost of goods manufactured is Beginning work in process inventory + Total manufacturing costs - Ending work in process inventory. The other choices are incorrect because (a) raw material inventory, (b) ending finished goods inventory, and (c) beginning finished goods inventory and ending finished goods inventory are not part of the computation.
Mynex Company completes Job No. 26 at a cost of $4,500 and later sells it for $7,000 cash. A correct entry is: (a) debit Finished Goods Inventory $7,000 and credit Work in Process Inventory $7,000. (b) debit Cost of Goods Sold $7,000 and credit Finished Goods Inventory $7000s (c) debit Finished Goods Inventory $4,500 and credit Work in Process Inventory $4,500. (d) debit Accounts Receivable $7,000 and credit Sales Revenue $7,000.
12. (c) When a job costing $4,500 is completed, Finished Goods Inventory is debited and Work in Process Inventory is credited for $4,500. Choices (a) and (b) are incorrect because the amounts should be for the cost of the job ($4,500), not the sale amount ($7,000). Choice (d) is incorrect because the debit should be to Cash, not Accounts Receivable.
Which of the following statements is true? (a) Job order costing requires less data entry than process costing. (b) Allocation of overhead is easier under job order costing than process costing. (c) Job order costing provides more precise costing for custom jobs than process costing. (d) The use of job order costing has declined because more companies have adopted automated accounting systems.
14. (c) Job order costing provides more precise costing for custom jobs than process costing. The other choices are incorrect because (a) job order costing often requires significant data entry, (b) overhead allocation is a problem for all costing systems, and (d) the use of job order costing has increased due to automated accounting systems.
Corporate social responsibility refers to: (a) the practice by management of reviewing all business processes in an effort to increase productivity and eliminate waste. (b) an approach used to allocate overhead based on each product's use of activities. (c) the attempt by management to identify and eliminate constraints within the value chain. (d) efforts by companies to employ sustainable busi- ness practices with regard to employees and the environment.
14. (d) Corporate social responsibility refers to efforts by companies to employ sustainable business practices with regard to employees and the environment. The other choices are incorrect because (a) defines lean manufacturing, (b) refers to activity-based costing, and (c) describes the theory of constraints.
At end of the year, a company has a $1,200 debit bal- ance in Manufacturing Overhead. The company: (a) makes an adjusting entry by debiting Manufac- turing Overhead Applied for $1,200 and crediting Manufacturing Overhead for $1,200. (b) makes an adjusting entry by debiting Manufacturing Overhead Expense for $1,200 and crediting Manufacturing Overhead for $1,200. (c) makes an adjusting entry by debiting Cost of Goods Sold for $1,200 and crediting Manufacturing Over- head for $1,200. (d) makes no adjusting entry because differences between actual overhead and the amount applied are a normal part of job order costing and will average out over the next year.
15. (c) The company would make an adjusting entry for the underapplied overhead by debiting Cost of Goods Sold for $1,200 and crediting Manufacturing Overhead for $1,200, not by debiting (a) Manufacturing Overhead Applied for $1,200 or (b) Manufacturing Overhead Expense for $1,200. Choice (d) is incorrect because at the end of the year, a company makes an entry to eliminate any balance in Manufacturing Overhead.
Manufacturing overhead is underapplied if: (a) actual overhead is less than applied. (b) actual overhead is greater than applied. (c) the predetermined rate equals the actual rate. (d) actual overhead equals applied overhead.
16. (b) Manufacturing overhead is underapplied if actual overhead is greater than applied overhead. The other choices are incorrect because (a) if actual overhead is less than applied, then manufacturing overhead is overapplied; (c) if the predetermined rate equals the actual rate, the actual overhead costs incurred equal the overhead costs applied, neither over- nor underapplied; and (d) if the actual overhead equals the applied overhead, neither over- nor underapplied occurs.
2. A company is more likely to use a job order cost system if: (a)it manufactures a large volume of similar products. (b) its production is continuous. (c) it manufactures products with unique characteristics.
2. (c) A job costing system is more likely for products with unique characteristics. The other choices are incorrect because a process cost system is more likely for (a) large volumes of similar products or (b) if production is continuous. (d) is incorrect because the choice of a costing system is not dependent on whether a periodic or perpetual inventory system is used.
3.In accumulating raw materials costs, companies debit the cost of raw materials purchased in a perpetual system to: (a) Raw Materials Purchases. (b) Raw Materials Inventory. (c) Purchases. (d) Work in Process.
3. (b) In a perpetual system, purchases of raw materials are debited to Raw Materials Inventory, not (a) Raw Materials Purchases, (c) Purchases, or (d) Work in Process.
When incurred, factory labor costs are debited to: (a) Work in Process. (b) Factory Wages Expense. (c) Factory Labor. (d) Factory Wages Payable.
4. (c) When factory labor costs are incurred, they are debited to Factory Labor, not (a) Work in Process, (b) Factory Wages Expense, or (d) credited to Factory Labor (they are debited to Factory Labor and credited to Factory Wages Payable).
The flow of costs in job order costing: (a) begins with work in process inventory and ends with finished goods inventory. (b) begins as soon as a sale occurs. (c) parallels the physical flow of materials as they are converted into finished goods. (d) is necessary to prepare the cost of goods manufactured schedule.
5. (c) Job order costing parallels the physical flow of materials as they are converted into finished goods. The other choices are incorrect because job order costing begins (a) with raw materials, not work in process, and ends with finished goods; and (b) as soon as raw materials are purchased, not when the sale occurs. (d) is incorrect because the cost of goods manufactured schedule is prepared from the Work in Process account and is only a portion of the costs in a job order system.
In recording the issuance of raw materials in a job order cost system, it would be incorrect to: (a) debit Work in Process Inventory. (b) debit Finished Goods Inventory. (c) debit Manufacturing Overhead. (d) credit Raw Materials Inventory.
8. (b) Finished Goods Inventory is debited when goods are transferred from work in process to finished goods, not when raw materials are issued for a job. Choices (a), (c), and (d) are true statements.
The entry when direct factory labor is assigned to jobs is a debit to: (a) Work in Process Inventory and a credit to Factory Labor. (b) Manufacturing Overhead and a credit to Factory Labor. (c) Factory Labor and a credit to Manufacturing Overhead. (d) Factory Labor and a credit to Work in Process Inventory.
9. (a) When direct factory labor is assigned to jobs, the entry is a debit to Work in Process Inventory and a credit to Factory Labor. The other choices are incorrect because (b) Work in Process Inventory, not Manufacturing Overhead, is debited; (c) Work in Process Inventory, not Factory Labor, is debited and Factory Labor, not Manufacturing Overhead, is credited; and (d) Work in Process Inven- tory, not Factory Labor, is debited and Factory Labor, not Work in Process Inventory, is credited.
