Exam #3

A company's file of job cost sheets for finished but unsold jobs equals the balance in the Finished Goods Inventory account. True False

The correct answer is 'True'.

An example of a service department is the human resources department. True False

The correct answer is 'True'.

Cost accounting systems accumulate costs and then assign them to products or services. True False

The correct answer is 'True'.

In a process cost accounting system, the cost of the finished goods from one department are transferred to the next department. True False

The correct answer is 'True'.

Joint costs can be allocated either using a physical basis or a value basis. True False

The correct answer is 'True'.

When a process cost accounting system records the purchase of raw materials, the Raw Materials Inventory account is debited. True False

The correct answer is 'True'.

A clock card is a source document that an employee uses to report how much time was spent working on a job or on overhead and that is used to determine the amount of direct labor to charge to the job or to determine the amount of indirect labor to charge to factory overhead. True False

The correct answer is 'False'.

A time ticket is a source document an employee uses to record the number of hours at work and that is used each pay period to determine the total labor cost. True False

The correct answer is 'False'.

Generally, it does not matter how cost allocations are designed and explained, because most employees do not care whether the allocations appear to be fair or not. True False

The correct answer is 'False'.

In process costing there is never a balance remaining in Factory Overhead that needs to be closed at period end. True False

The correct answer is 'False'.

In producing oat bran, the joint cost of milling the oats into bran, oatmeal, and animal feed is considered a direct cost to the oat bran, because the oat bran cannot be produced without incurring the joint cost. True False

The correct answer is 'False'.

Process cost accounting systems are used only by companies that manufacture physical products; meaning that companies and other organizations that provide services to their customers do not use process cost accounting. True False

The correct answer is 'False'.

Alton Company has an overhead application rate of 160% and allocates overhead based on direct materials. During the current period, direct labor is $50,000 and direct materials used are $80,000. Determine the amount of overhead Alton Company should record in the current period. a. $ 31,250 b. $ 50,000 c. $ 80,000. d. $ 128,000. e. $ 208,000.

The correct answer is: $ 128,000.

A company pays $15,000 per period to rent a small building that has 10,000 square feet of space. This cost is allocated to the company's three departments on the basis of the amount and value of the space occupied by each. Department One occupies 2,000 square feet of ground-floor space, Department Two occupies 3,000 square feet of ground-floor space, and Department Three occupies 5,000 square feet of second-floor space. If rents for comparable floor space in the neighborhood average $2.20 per square foot for ground-floor space and $1.10 per square foot for second-floor space and the rent is allocated based on the total value of the space, Department One should be charged rent expense for the period of: a. $4,400. b. $4,000. c. $3,000. d. $2,200. e. $2,000.

The correct answer is: $4,000.

A production department's output for the most recent month consisted of 10,000 units completed and transferred to the next stage of production and 10,000 units in ending goods in process inventory. The units in ending goods in process inventory were 50% complete with respect to both direct materials and conversion costs. There were 1,000 units in beginning goods in process inventory, and they were 70% complete with respect to both direct materials and conversion costs. Calculate the equivalent units of production for the month, assuming the company uses the weighted average method. a. 10,000 units. b. 10,300 units. c. 15,000 units. d. 15,300 units. e. 10,700 units.

The correct answer is: 15,000 units.

Que Corporation uses a process cost accounting system. The company manufactured certain goods at a cost of $800 and sold them on credit to Are Corporation for $1,075. The complete journal entry to be made by Que at the time of this sale is: a. Accounts Receivable--Are Corporation...1,075Cost of Goods Sold...800Sales...1,075Finished Goods Inventory...800 b. Accounts Receivable--Are Corporation...1,075Finished Goods Inventory....800Sales...275 c. Cost of Goods Sold..1,075Sales...1,075 d. Finished Goods Inventory...800Sales...1,075Accounts Receivable-Are Corporation..1,075Cost of Goods Sold...800 e. Accounts Receivable -- Are Corporation...1,075Selling expense...800Sales....1,075Cost of Goods Sold.....800

The correct answer is: Accounts Receivable--Are Corporation...1,075 Cost of Goods Sold...800 Sales...1,075 Finished Goods Inventory...800

The allocation bases for assigning indirect costs include: a. Only physical bases. b. Only cost bases. c. Only value bases. d. Only unit bases. e. Any appropriate and reasonable bases.

The correct answer is: Any appropriate and reasonable bases.

A sawmill bought a shipment of logs for $40,000. When cut, the logs produced a million board feet of lumber in the following grades:Type 1 - 400,000 bd. ft. priced to sell at $0.12 per bd. ft.Type 2 - 400,000 bd. ft. priced to sell at $0.06 per bd. ft.Type 3 - 200,000 bd. ft. priced to sell at $0.04 per bd. ft.How much cost should be allocated to Type 1 and Type 2, respectively? a. Choice A b. Choice B c. Choice C d. Choice D e. Choice E

The correct answer is: Choice D

A basis for allocating the cost of a resource to an activity cost pool or allocating the cost of an activity cost pool to a cost object is a(n): a. Direct factor. b. Indirect factor. c. Cost driver. d. Joint cost. e. Opportunity cost.

The correct answer is: Cost driver

A factor that causes the cost of an activity to go up or down is a(n): a. Direct factor. b. Indirect factor. c. Cost driver. d. Product cost. e. Contribution factor.

The correct answer is: Cost driver.

The purchase of raw materials on account in a process costing system is recorded with a: a. Debit to Purchases and credit to Cash. b. Debit to Purchases and a credit to Accounts Payable. c. Debit to Raw Materials Inventory and a credit to Accounts Payable. d. Debit to Accounts Payable and a credit to Raw Materials Inventory. e. Debit to Goods in Process Inventory and a credit to Accounts Payable

The correct answer is: Debit to Raw Materials Inventory and a credit to Accounts Payable.

Which of the following characteristics applies to process cost accounting but not to job order cost accounting? a. Use of a predetermined overhead rate. b. Identifiable lots of production. c. Equivalent units of production. d. Labor time ticket for each employee. e. Use of a single Goods in Process account.

The correct answer is: Equivalent units of production.

The Dina Corp. has applied overhead to jobs during the period as follows: The application of overhead has resulted in a $5,600 credit balance in the Factory Overhead account, and this amount is not material. The entry to dispose of this remaining factory overhead balance is: a. Cost of Goods Sold...5,600Factory Overhead...5,600 b. Factory Overhead...5,600Cost of Goods Sold...5,600 c. Factory Overhead...5,600Goods in Process...5,600 d. Goods in Process...5,600Factory Overhead...5,600 e. No entry is needed.

The correct answer is: Factory Overhead...5,600 Cost of Goods Sold...5,600

Job order costing systems normally use: a. Periodic inventory systems. b. Perpetual inventory systems. c. Real inventory systems. d. General inventory systems. e. All of these.

The correct answer is: Perpetual inventory systems.

Target cost is calculated as a. direct costs + desired profit b. direct costs - desired profit c. expected selling price - direct costs d. expected selling price - desired profit e. expected selling price + desired profit

The correct answer is: expected selling price - desired profit