1. Managerial accounting information:
A. Is used mainly by external users.
B. Involves gathering information about costs for planning and control decisions.
C. Is generally the only accounting information available to managers.
D. Can be used for control purposes but not for planning purposes.
E. Has little to do with controlling costs.
2. Which of the following items represents a difference between financial and managerial accounting?
A. Users of the information.
B. Flexibility of practices.
C. Timeliness and time dimension of the information reported.
D. Nature of the information.
E. All of the above.
3. Continuous improvement:
A. Is a measure of profits.
B. Is a measure of costs.
C. Rejects the notion of "good enough."
D. Is not applicable to most businesses.
E. Is possible only in service businesses.
4. The model whose goal is to eliminate waste while satisfying the customer and providing a positive return to the company is:
A. Total quality management.
B. Managerial accounting.
C. Customer orientation.
D. Continuous improvement.
E. Lean business model.
5. A direct costs is a cost that is:
A. Identifiable as controllable.
B. Variable with respect to the volume of activity.
C. Fixed with respect to the volume of activity.
D. Traceable to a cost object.
E. Sunk with respect to a cost object.
6. An opportunity cost is:
A. An uncontrollable cost.
B. A cost of potential benefit lost.
C. A change in the cost of a component.
D. A direct cost.
E. A sunk cost.
7. Costs that are incurred as part of the manufacturing process but are not clearly associated with specific units of product or batches of production, including all manufacturing costs other than direct material and direct labor costs, are called:
A. Administrative expenses.
B. Nonmanufacturing costs.
C. Sunk costs.
D. Factory overhead.
E. Preproduction costs.
8. The salary paid to the supervisor of an assembly line would normally be classified as:
A. Direct labor.
B. Indirect labor.
C. A period cost.
D. A general cost.
E. An assembly cost.
9. A mixed cost:
A. Requires the future outlay of cash and is relevant for future decision making.
B. Does not change with changes in the volume of activity within the relevant range.
C. Is directly traceable to a cost object.
D. Contains a combination of fixed costs and variable costs.
E. Has already been incurred and cannot be avoided so it is irrelevant for decision making.
10. Last year, Smith Company sold 10,000 units of its only product. If sales increase by 15%
in the current year, how will unit variable cost and unit fixed cost be affected?
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
11. Which of the following costs would not be classified as factory overhead?
A. Property taxes on maintenance machinery.
B. Expired insurance on factory equipment.
C. Wages of the factory janitor.
D. Metal doorknobs used on wood cabinets produced.
E. Small tools used in production.
12. Costs that flow directly to the current income statement are called:
A. Period costs.
B. Product costs.
C. General costs.
D. Balance sheet costs.
E. Capitalized costs.
13. A company's prime costs total $3,000,000 and its conversion costs total $7,000,000. If direct materials are $1,000,000 and factory overhead is $5,000,000, then direct labor is:
14. Ajax Company accumulated the following account information for the year:
Using the above information, total factory overhead costs would be:
A. $ 9,800.
E. $ 7,800.
Use the following information from Hardy Co. for the current year:
15. Hardy Co.'s cost of goods manufactured for the current year is:
16. Use the following data to determine the cost of goods manufactured.
C. $ 96,600.
17. The two basic types of cost accounting systems are:
A. Job order costing and perpetual costing.
B. Job order costing and customized product costing.
C. Job order costing and customized service costing.
D. None of the above
E. All of the above
18. A job order cost accounting system would best fit the needs of a company that makes:
A. Shoes and apparel.
D. Custom machinery.
E. Pencils and erasers.
19. Dell Builders manufactures each house to customer specifications. It most likely would use:
A. Capital process costing.
B. A periodic inventory system.
C. Unique costing
D. Job order costing
E. Activity-based costing
20. A job cost sheet shows information about each of the following items except:
A. The direct labor costs assigned to the job.
B. The name of the customer.
C. The costs incurred by the marketing department in selling the job.
D. The overhead costs assigned to the job.
E. The direct materials costs assigned to the job.
21. The job order cost sheets used by Garza Company revealed the following:
Job No. 125 was completed during May and Jobs No. 124 and 125 were shipped to customers in May. What were the company's cost of goods sold for May and the goods in process inventory on May 31?
A. $3,200; $ 900.
B. $2,900; $1,200.
C. $1,200; $2,900.
D. $1,700; $1,200.
E. $4,100; $ 0.
22. A company that uses a job order cost accounting system would make the following entry to record the flow of direct materials into production:
A. debit Work in Process, credit Cost of Goods Sold
B. debit Work in Process, credit Materials
C. debit Work in Process, credit Factory Overhead
D. debit Factory Overhead, credit Materials
E. debit Finished Goods, credit Materials
23. A company has an overhead application rate of 125% of direct labor costs. How much overhead would be allocated to a job if it required total labor costing $20,000?
A. $ 5,000.
B. $ 16,000.
C. $ 25,000.
24. O.K. Company uses a job order cost accounting system and allocates its overhead on the basis of direct labor costs. O.K. expects to incur $800,000 of overhead during the next period, and expects to use 50,000 labor hours at a cost of $10.00 per hour. What is O.K. Company's overhead application rate?
25. The R&R Company's production costs for August are: direct labor, $13,000; indirect labor, $6,500; direct materials, $15,000; property taxes on production equipment, $800; heat, lights and power, $1,000; and insurance on plant and equipment, $200. R&R Company's factory overhead incurred for August is:
A. $ 2,000.
B. $ 6,500.
C. $ 8,500.
26. If one unit of Product X used $2.50 of direct materials and $3.00 of direct labor, sold for $8.00, and was assigned overhead at the rate of 30% of direct labor costs, how much gross profit was realized from this sale?
27. At the current year-end, Hardly Company found that its overhead was underapplied by $2,500, and this amount was not deemed to be a material amount. Based on this information, Hardly should
A. Close the $2,500 to Cost of Goods Sold.
B. Close the $2,500 to Finished Goods Inventory.
C. Do nothing about the $2,500, since it is not material, and it is likely that overhead will be overapplied by the same amount next year.
D. Carry the $2,500 to the income statement as "Other Expense"
E. Carry the $2,500 to the next period.
28. Estimated overhead and direct labor costs for the year were $112,500 and $125,000, respectively. During the year, actual overhead was $107,400 and actual direct labor cost was $120,000. The entry to close the over- or underapplied overhead at year-end, assuming an immaterial amount, would include:
A. A debit to Cost of Goods Sold for $600.
B. A credit to Factory Overhead for $600.
C. A credit to Finished Goods Inventory for $600.
D. A debit to Goods in Process Inventory for $600.
E. A credit to Cost of Goods Sold for $600.
29. Which of the following five types of products is least likely to be produced in a process manufacturing system?
A. Compact disks.
B. Slacks for casual wear.
C. Baseball hats.
E. Oil paintings.
30. A measure of the productivity of a process with respect to its use of direct materials, direct labor, or overhead, and an expression of the activity of a process as the number of units that would have been processed during a period if all effort had been applied to units that were started and finished during the period, is called:
A. Manufacturing overhead.
B. Units in process.
C. A job cost sheet.
D. Equivalent units of production.
E. Process cost summary.
Aniston Enterprises manufactures stylish hats for sophisticated women. All materials are introduced at the beginning of the manufacturing process in the Cutting Department. Conversion costs are incurred uniformly throughout the manufacturing process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Information for the Cutting Department for the month of May 2007 follows:
Goods in Process, April 30 ---50,000 units
100% complete for direct materials; 40% complete for conversion costs
actual costs of direct materials was $70,500; actual conversion costs were $34,050
Units started in May --- 225,000
Units completed in May --- 200,000
Goods in Process, May 31 --- 75,000 units
100% complete for direct materials; 20% complete for conversion costs
Direct materials added in May $342,000 actual costs
Conversion costs added in May $352,950 actual costs
31. If Aniston Enterprises uses the FIFO method of process costing, the equivalent units of work
completed in May 2007 were:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
32. If Aniston Enterprises uses the FIFO method of process costing, the costs per equivalent unit for
May 2007 were:
A. A Above.
B. B Above.
C. C Above.
D. D Above.
E. E Above.
33. Which of the following characteristics applies to process cost accounting and 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.
34. Hou Company applies factory overhead to its production departments on the basis of 90% of direct labor costs. In the Assembly Department, Hou had $125,000 of direct labor cost, and in the Finishing Department, Hou had $35,000 of direct labor cost. The entry to apply overhead to these production departments is:
35. Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?
A. In most manufacturing environments, it is not possible to conduct a physical count of units.
B. Companies often use a combination of a process costing and job order costing systems.
C. In most process costing systems, direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.
D. All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods inventory may not have been completed in a single time period.
E. In most cases, there is no difference between physical units and equivalent units of production.
36. The following data are available for a company's manufacturing activities:
If materials are added when the production process begins and direct labor is applied uniformly throughout the process, what are the equivalent units for direct materials and for direct labor, respectively?
A. 16,250; 19,250.
B. 16,250; 21,750.
C. 21,000; 19,250.
D. 19,250; 18,750.
E. 21,000; 22,250.
37. At the beginning of the recent period, there were 900 units of product in a department, one-third completed. These units were finished and an additional 5,000 units were started and completed during the period. 800 units were still in process at the end of the period, one-fourth completed. The equivalent units produced by the department were:
A. 6,700 units.
B. 5,900 units.
C. 5,800 units.
D. 5,500 units.
E. 8,500 units.
38. A company uses a process cost accounting system. Its Sewing Department's beginning inventory consisted of 50,000 units (1/4 complete with respect to direct labor and overhead). The Sewing Department started and finished 120,000 units this period. Its ending inventory consists of 40,000 units (1/4 complete with respect to direct labor and overhead). All direct materials are added at the beginning of the process. What are the equivalent units of production for the Sewing Department for direct materials and for direct labor and overhead, respectively?
A. 160,000; 120,000.
B. 120,000; 157,500.
C. 167,500; 167,500.
D. 160,000; 162,500.
E. 160,000; 167,500.
Medina Corp. had the following information available for the year:
39. If the weighted average inventory method were used, the equivalent units for the year would be
40. During the current period, Department A finished and transferred 50,000 units to Department B. Of the 50,000 units, 20,000 were 1/5 complete at the beginning of the period and 30,000 were started and completed during the period. Also during the period, 10,000 units were started but brought only to a stage of being 3/5 completed. If $13,000 of overhead was charged to Department A during the period, how much overhead should be allocated to the ending goods in process inventory?
41. A company uses a process cost accounting system. Its Assembly Department's beginning inventory consisted of 50,000 units, 3/4 complete with respect to direct labor and overhead. The department started and finished 127,500 units this period. The ending inventory consists of 40,000 units that are 1/4 complete with respect to direct labor and overhead. All direct materials are added at the beginning of the process. The department incurred direct labor costs of $24,000 and overhead costs of $32,000 for the period. The direct labor cost per equivalent unit is:
42. Which of the following statements is most accurate?
A. In process costing, estimating the degree of completion of units is usually more accurate for conversion costs than for direct materials.
B. The weighted average method uses the stage of completion of the current period's beginning goods in process inventory account in calculating equivalent units.
C. The weighted average method focuses on the total costs and total equivalent units completed to date; this is the major difference between the weighted average method and the FIFO method of calculating equivalent units of production.
D. The FIFO method of calculating equivalent units of production merges the work and the costs of the beginning inventory with the work and the costs done during the current period.
E. It is not possible for there to be a significant difference between the cost of completed units between the weighted average and the FIFO methods.
43. 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.
44. Equivalent units of production are equal to:
A. The number of units that could have been completed if all effort had been applied to units that were started and completed that period.
B. The number of finished units actually produced that period.
C. The number of units introduced into the process that period.
D. The number of units still in process that period.
E. Physical units that were completed this period from all effort being applied to them.
45. Which of the following is not one of the four steps in accounting for production activity in a period?
A. Determine over or underapplied overhead.
B. Analyze the physical flow of units.
C. Analyze equivalent units.
D. Determine cost per equivalent unit.
E. Prepare a cost reconciliation.