Reference no: EM13783071

1. A major purpose of cost accounting is to

a. classify all costs as operating or nonoperating.
b. measure, record, and report period costs.
c. provide information to stockholders for investment decisions.
d. measure, record, and report product costs.

2. The two basic types of cost accounting systems are

a. job order and job accumulation systems.
b. job order and process cost systems.
c. process cost and batch systems.
d. job order and batch systems.

3. A process cost system would most likely be used by a company that makes

a. motion pictures.
b. repairs to automobiles.
c. breakfast cereal.
d. college graduation announcements.

4. Which of the following would be accounted for using a job order cost system?

a. The production of personal computers
b. The production of automobiles
c. The refining of petroleum
d. The construction of a new campus building

5.Process costing is used when

a. the production process is continuous.
b. production is aimed at filling a specific customer order.
c. heterogeneous products are involved.
d. costs are to be assigned to specific jobs.

6. Process costing is not used when

a. homogeneous goods are being produced.
b. large volumes are produced.
c. jobs have distinguishing characteristics.
d. a series of connected manufacturing processes is necessary.

7. An important feature of a job order cost system is that each job

a. must be similar to previous jobs completed.
b. has its own distinguishing characteristics.
c. must be completed before a new job is accepted.
d. consists of one unit of output.

8. The flow of costs in a job order cost system

a. involves accumulating manufacturing costs incurred and assigning the accumulated costs to work done.
b. cannot be measured until all jobs are complete.
c. measures product costs for a set time period.
d. generally follows a LIFO cost flow assumption.

9. In a job order cost accounting system, the Raw Materials Inventory account is

a. an expense.
b. a control account.
c. not used.
d. a period cost.

10. When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is

a. Finished Goods Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
b. Work In Process Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
c. Raw Materials Inventory
Work In Process Inventory
d. Finished Goods Inventory
Work In Process Inventory

11. The two major steps in the flow of costs are

a. allocating and assigning.
b. acquiring and accumulating.
c. accumulating and assigning.
d. accumulating and amortizing.

12. The Raw Materials Inventory account is

a. a subsidiary account.
b. debited for invoice costs and freight costs chargeable to the purchaser.
c. debited for purchase discounts taken.
d. debited for purchase returns and allowances.

13. Records of individual items of raw materials would not be maintained

a. electronically.
b. manually.
c. on stores ledger cards.
d. in the Raw Materials Inventory account.

14. Cost of raw materials are debited to Raw Materials Inventory when the

a. materials are ordered.
b. materials are received.
c. materials are put into production.
d. the bill for the materials is paid.

15. Raw Materials Inventory records are also referred to as

a. the Raw Materials control account.
b. the stores ledger cards.
c. the purchases journal.
d. periodic inventory records.

16. After all postings have been completed, the sum of the balances in the raw materials subsidiary ledger should equal the

a. balance in the Raw Materials Inventory control account.
b. cost of materials charged to Work in Process Inventory.
c. cost of materials purchased.
d. cost of the materials placed into production.

17. Factory labor costs

a. are accumulated in a control account.
b. do not include pension costs.
c. include vacation pay.
d. are based on workers net pay.

18. Factory Labor is a(n)

a. expense account.
b. control account.
c. subsidiary account.
d. manufacturing cost clearing account.

19. Kline Manufacturing has the following labor costs:

Factory-Gross wages $117,000
Factory-Net wages 96,000
Employer Payroll Taxes Payable 15,000

20.The entry to record the cost of factory labor and the associated payroll tax expense will include a debit to Factory Labor for

a. $132,000.
b. $117,000.
c. $111,000.
d. $102,000.

21. Factory labor costs

a. accumulate in advance of utilization.
b. accumulate in a control account.
c. include sick pay earned by factory workers.
d. accumulate in the Factory Labor Expense account.

22. Which of the following is not a control account?

a. Manufacturing Overhead
b. Factory Labor
c. Accounts Receivable
d. Raw Materials Inventory

23. Manufacturing Overhead would not have a subsidiary account for

a. utilities.
b. property taxes.
c. insurance.
d. raw materials inventory.

24. The entry to record the acquisition of raw materials on account is

a. Work in Process Inventory
Accounts Payable
b. Manufacturing Overhead
Raw Materials Inventory
Accounts Payable
c. Accounts Payable
Raw Materials Inventory
d. Raw Materials Inventory
Accounts Payable

25. Job cost sheets constitute the subsidiary ledger for the

a. Finished Goods Inventory account.
b. Cost of Goods Sold account.
c. Work In Process Inventory account.
d. Cost of Goods Manufactured account.

26. A materials requisition slip showed that direct materials requested were $30,000 and indirect materials requested were $6,000. The entry to record the transfer of materials from the storeroom is

a. Work In Process Inventory ................................................... 30,000
Raw Materials Inventory .............................................. 30,000
b. Direct Materials ..................................................................... 30,000
Indirect Materials .................................................................. 6,000
Work in Process Inventory .......................................... 36,000
c. Manufacturing Overhead ..................................................... 36,000
Raw Materials Inventory .............................................. 36,000
d. Work In Process Inventory ................................................... 30,000
Manufacturing Overhead ..................................................... 6,000
Raw Materials Inventory .............................................. 36,000

27. The job cost sheet does not show

a. costs chargeable to a specific job.
b. the total costs of a completed job.
c. the unit cost of a completed job.
d. the cost of goods sold.

28. Under an effective system of internal control, the authorization for issuing materials is made

a. orally.
b. on a prenumbered materials requisition slip.
c. by the accounting department.
d. by anyone on the production line.

29. A copy of the materials requisition slip

a. is routed to the treasurer's office for payment.
b. becomes the subsidiary ledger for the Work in Process Inventory.
c. can be used as a subsidiary ledger for Raw Materials Inventory.
d. is retained by the storeroom, and the original is sent to accounting.

30. Materials requisition slips are costed

a. by production supervisors.
b. by factory personnel who work on the production line.
c. after the goods have been sold.
d. using any of the inventory costing methods.

31. Postings to control accounts in a costing system are made

a. monthly.
b. daily.
c. annually.
d. semi-annually.

32. Which of the following shows entries only to control accounts?

a. Factory Labor
Wages Payable
b. Work in Process
Factory Labor
Raw Materials Inventory
Wages Payable
c. Work in Process
Manufacturing Overhead
Raw Materials Inventory
d. Factory Labor
Raw Materials Inventory
Accounts Payable
Wages Payable

34. A time ticket does not indicate the

a. employee's name.
b. account to be charged.
c. number of personal exemptions claimed by the employee.
d. job number.

35. Time tickets should be approved by

a. the audit committee.
b. co-workers.
c. the employee's supervisor.
d. the payroll department.

35. If the entry to assign factory labor shows only a debit to Work In Process Inventory, then all labor costs were

a. direct labor.
b. indirect labor.
c. overtime related.
d. regular hours.

36. The principal accounting record used in assigning costs to jobs is

a. a job cost sheet.
b. the cost of goods manufactured schedule.
c. the Manufacturing Overhead Control account.
d. the stores ledger cards.

37. The following information is available for completed Job No. 402: Direct materials, $20,000; direct labor, $30,000; manufacturing overhead applied, $15,000; units produced, 5,000 units; units sold, 4,000 units. The cost of the finished goods on hand from this job is

a. $10,000.
b. $65,000.
c. $13,000.
d. $52,000.

38. The labor costs that have been identified as indirect labor should be charged to

a. manufacturing overhead.
b. direct labor.
c. the individual jobs worked on.
d. salary expense.

39. Manufacturing overhead is applied to each job

a. at the time when the overhead cost is incurred.
b. by means of a predetermined overhead rate.
c. at the end of the year when actual costs are known.
d. only if the overhead costs can be directly traced to that job.

40. The predetermined overhead rate is based on the relationship between

a. estimated annual costs and actual activity.
b. estimated annual costs and expected annual activity.
c. actual monthly costs and actual annual activity.
d. estimated monthly costs and actual monthly activity.

41. The predetermined overhead rate is
a. determined on a moving average basis throughout the year.
b. not calculated until actual overhead costs are incurred.
c. determined at the beginning of the year.
d. determined at the end of the current year.

42. In calculating a predetermined overhead rate, a recent trend in automated manufacturing operations is to choose an activity base related to

a. direct labor hours.
b. indirect labor dollars.
c. machine hours.
d. raw material dollars.

43. If annual overhead costs are expected to be $600,000 and direct labor costs are expected to be $1,000,000, then

a. $1.67 is the predetermined overhead rate.
b. for every dollar of manufacturing overhead, 60 cents of direct labor will be assigned.
c. for every dollar of direct labor, 60 cents of manufacturing overhead will be assigned.
d. a predetermined overhead rate cannot be determined.

44. Overhead application is recorded with a
a. credit to Work in Process Inventory.
b. credit to Manufacturing Overhead.
c. debit to Manufacturing Overhead.
d. credit to job cost sheets.

45. At the beginning of the year, Monroe Company estimates annual overhead costs to be $600,000 and that 300,000 machine hours will be operated. Using machine hours as a base, the amount of overhead applied during the year if actual machine hours for the year was 315,000 hours is

a. $157,500.
b. $571,429.
c. $315,000.
d. $630,000.

46. The predetermined overhead rate may be computed using all of the following activity bases except
a. direct labor costs.
b. direct labor hours.
c. machine hours.
d. indirect labor costs.

47. Historically, the activity base used in computing the predetermined overhead rate has been
a. machine hours.
b. direct labor costs.
c. direct labor hours.
d. direct labor costs or direct labor hours.

48. At the end of each month, the sum of the costs shown on the job cost sheets should equal the balance in
a. Cost of Goods Sold.
b. Finished Goods Inventory.
c. Manufacturing Overhead.
d. Work in Process Inventory.

49. Each of the following costs can be assigned to specific jobs on the basis of actual costs incurred except
a. direct materials.
b. direct labor.
c. manufacturing overhead.
d. All of these costs can be assigned based on actual costs.

50. The predetermined overhead rate is computed using
a. actual overhead costs.
b. applied overhead costs.
c. estimated overhead costs.
d. predetermined overhead costs.

51. In determining total manufacturing costs on the cost of goods manufactured schedule,
a. beginning work in process inventory should have a zero balance.
b. actual manufacturing overhead costs appear as a deduction.
c. manufacturing overhead applied is added to direct materials and direct labor.
d. ending work in process inventory is deducted from beginning work in process inventory.

Use the following information for questions 81-82.

Becker Company developed the following data for the current year:
Beginning work in process inventory $ 60,000
Direct materials used 36,000
Actual overhead 72,000
Overhead applied 54,000
Cost of goods manufactured 66,000
Total manufacturing costs 180,000

 Becker Company's direct labor cost for the year is
a. $18,000.
b. $90,000.
c. $54,000.
d. $72,000.

82. Becker Company's ending work in process inventory is
a. $174,000.
b. $120,000.
c. $114,000.
d. $54,000.

 Reich Manufacturing Company developed the following data:

Beginning work in process inventory $ 90,000
Direct materials used 70,000
Actual overhead 110,000
Overhead applied 80,000
Cost of goods manufactured 120,000
Ending work in process 200,000

Reich Manufacturing Company's total manufacturing costs for the period are
a. $240,000.
b. $230,000.
c. $180,000.
d. cannot be determined from the data provided.

 Which of the following is not used in assigning manufacturing costs to work in process inventory?
a. Actual manufacturing overhead
b. Time tickets
c. Materials requisitions
d. Predetermined overhead rate

. On the cost of goods manufactured schedule, the cost of goods manufactured agrees with the
a. balance of Finished Goods Inventory at the end of the period.
b. total debits to Work in Process Inventory during the period.
c. amount transferred from Work in Process Inventory to Finished Goods during the period.
d. debits to Cost of Goods Sold during the period.

 Gannon Company had the following information at December 31:
Finished goods inventory, January 1 $20,000
Finished goods inventory, December 31 60,000
If the cost of goods manufactured during the year amounted to $840,000 and annual sales were $1,100,000, the amount of gross profit for the year is

a. $260,000.
b. $800,000.
c. $300,000.
d. $220,000.

 Winter Company incurred direct materials costs of $500,000 during the year. Manufactur-ing overhead applied was $90,000 and is applied at the rate of 60% of direct labor costs. Winter Company's total manufacturing costs for the year were

a. $740,000.
b. $644,000.
c. $590,000.
d. $944,000.

. Cost of goods sold is obtained from
a. analysis of all the control accounts in the cost system.
b. the finished goods inventory records.
c. the work in process inventory records.
d. the Raw Materials Inventory control account.

 In a job order cost system, a credit to Manufacturing Overhead will be accompanied by a debit to
a. Cost of Goods Manufactured.
b. Finished Goods Inventory.
c. Work in Process Inventory.
d. Raw Materials Inventory.

. Debits to Work in Process Inventory are accompanied by a credit to all but one of the following accounts:
a. Raw Materials Inventory.
b. Factory Labor.
c. Manufacturing Overhead.
d. Cost of Goods Sold.

Which of the following is not viewed as part of accumulating manufacturing costs in a job order cost system?
a. Cost of goods sold is recognized
b. Raw materials are purchased
c. Factory labor is incurred
d. Manufacturing overhead is incurred

 Which of the following is not viewed as part of assigning manufacturing costs in a job order cost system?
a. Manufacturing overhead is applied
b. Raw materials are used
c. Manufacturing overhead is incurred
d. Completed goods are recognized

 The entry to recognize cost of goods sold includes a credit to
a. Cost of Goods Sold.
b. Finished Goods Inventory.
c. Sales.
d. Work in Process Inventory.

 Total manufacturing costs include
a. actual overhead costs.
b. applied overhead costs.
c. budgeted overhead costs.
d. estimated overhead costs.

 When monthly financial statements are prepared, underapplied overhead will appear as
a. unearned revenue.
b. a current asset.
c. "Other Revenues and Gains," on the income statement.
d. a reduction to cost of goods sold.

 If manufacturing overhead has been underapplied during the year, the adjusting entry at the end of the year will show a
a. debit to Manufacturing Overhead.
b. credit to Cost of Goods Sold.
c. debit to Work in Process Inventory.
d. debit to Cost of Goods Sold.

 If manufacturing overhead has been overapplied during the year, the adjusting entry at the end of the year will show a
a. debit to Manufacturing Overhead.
b. credit to Finished Goods Inventory
c. debit to Cost of Goods Sold.
d. credit to Work in Process Inventory.

 The existence of under- or overapplied overhead at the end of the month
a. is expected to be offset in future months.
b. indicates that an error has been made.
c. requires a retroactive adjustment to the cost of all jobs completed.
d. is written off as a bad estimate expense.

 Conceptually, any under- or overapplied overhead at the end of the year should be allocated among all of the following except
a. cost of goods sold.
b. ending work in process inventory.
c. ending raw materials inventory.
d. ending finished goods inventory.

 If at the end of the year, Manufacturing Overhead has been overapplied, it means that
a. actual overhead costs were greater than the overhead assigned to jobs.
b. actual overhead costs were less than the overhead assigned to jobs.
c. overhead has not been applied to jobs still in process.
d. cost of goods will have to be increased by the amount of the overapplied overhead.

 If the Manufacturing Overhead account has a debit balance at the end of a period, it means that
a. actual overhead costs were less than overhead costs applied to jobs.
b. actual overhead costs were greater than overhead costs applied to jobs.
c. actual overhead costs were equal to overhead costs applied to jobs.
d. no jobs have been completed.

 If the manufacturing overhead costs applied to jobs worked on were greater than the actual manufacturing costs incurred during a period, overhead is said to be
a. underapplied.
b. overapplied.
c. in error.
d. prepaid.

 At the end of the year, any balance in the Manufacturing Overhead account is generally eliminated by adjusting
a. Work In Process Inventory.
b. Finished Goods Inventory.
c. Cost of Goods Sold.
d. Raw Materials Inventory.

 If Manufacturing Overhead has a credit balance at the end of the period, then
a. overhead has been underapplied.
b. the overhead assigned to Work in Process Inventory is less than the overhead incurred.
c. overhead has been overapplied.
d. management must take corrective action.

 The Manufacturing Overhead account shows debits of $20,000, $24,000, and $28,000 and one credit for $76,000. Based on this information, manufacturing overhead
a. has been overapplied.
b. has been underapplied.
c. has not been applied.
d. shows a zero balance.

106. When monthly financial statements are prepared, a difference between actual overhead and overhead applied will appear on
a. the balance sheet.
b. the income statement.
c. the statement of stockholders' equity.
d. none of the financial statements.

 When monthly financial statements are prepared, overapplied overhead will appear as
a. unearned revenue.
b. a current asset.
c. a loss on the income statement under "Other Expenses and Losses."
d. miscellaneous expense.

 Overapplied overhead means that the overhead assigned to work in process is

a. less than the actual overhead.
b. less than the estimated overhead costs.
c. greater than the overhead incurred.
d. greater than the estimated overhead costs.

 A credit balance in the Manufacturing Overhead account at the end of the period indicates that

a. actual overhead was greater than estimated overhead costs.
b. overhead was underapplied.
c. actual overhead was less than estimated overhead costs.
d. actual overhead was less than applied overhead.

 Underapplied overhead is

a. reported as unearned revenue in the balance sheet.
b. added to the Manufacturing Overhead account.
c. added to Cost of Goods Sold.
d. credited to Cost of Goods Sold.