CHAPTER 19 Question 1 Which of the following manufacturers is most likely to use a job order cost accounting system? Answer A soft drink producer. A flour mill A gold mining operation. A builder of offshore oil rigs. All of the above. Question 2 Which of the following would be considered factory overhead using a job order cost system? Answer Direct materials. Direct labor. Depreciation on factory buildings. Salesperson's salary. None of the above. Question 3 In a job order cost accounting system, which account would be debited when raw materials are purchased for use in production? Answer Factory Overhead. Goods in Process Inventory. Raw Materials Inventory. Accounts Payable. None of the above. Question 4 In a job order cost accounting system, which account would be debited when raw materials are transferred into production? Answer Goods in Process Inventory. Factory Overhead. Raw Materials Inventory. Finished Goods Inventory None of the above. Question 5 Which of the following is true about the Factory Payroll account? Answer It is debited to accrue wages that are utilized in production. It is credited to transfer the labor to a specific job. It is treated as a temporary account, which holds the cost until it can be allocated to the proper balance sheet account. It should not have a balance at the end of the accounting period. All of the above. Question 6 In a job order cost accounting system, which account would be credited when time tickets related to a specific job are recorded? Answer Factory Payroll. Factory Overhead. Finished Goods Inventory. Goods in Process Inventory. None of the above. Question 7 Which of the following would be considered a major aim of a job order costing system? Answer To determine the costs of producing each job or lot. To compute the cost per unit. To include separate records for each job to track the costs. All of the above. None of the above. Question 8 The predetermined overhead rate is $12.00 per direct labor hour. Job 213 required 420 direct labor hours of which 300 hours were incurred during the current accounting period. How much overhead should be applied to Job 213 during the current accounting period? Answer $2,556. $5,040. $3,600. $8,640. None of the above. Question 9 If management predicts total direct labor costs of $100,000 and total overhead costs of $200,000, what is the predetermined overhead rate based on direct labor costs? Answer 50%. 100%. 200%. Cannot be determined. None of the above. Question 10 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: Answer a. Cost of Goods Sold…………………..5,600 Factory Overhead…………………………….5,600 b. Factory Overhead…………………….5,600 Cost of Goods Sold…………………………..5,600 c. Factory Overhead……………………..5,600 Cost of Goods Sold…………………………..5,600 d. Cost of Goods Sold……………………5,600 Factory Overhead…………………………….5,600 e. No entry is needed CHAPTER 20 Question 1 The beginning goods in process were 7,000 units, which were 40% complete as to labor and overhead. During the accounting period, 24,000 units were started. One thousand units remain in process and are 60% completed. What is the number of units completed and transferred to finished goods during the accounting period? Answer 31,000. 30,000. 29,000. 23,000. 18,000. Question 2 Which of the following is true with regard to process costing? Answer The measurement focus is on the individualized process. The costing method combines materials, labor, and overhead in the process of producing products. The ultimate goal is to be able to calculate the cost per unit. All of the above. None of the above. Question 3 Which of the following statements is true about recording the transfer from the last production department to finished goods inventory? Answer There is a credit to the Finished Goods Inventory account. There is a debit to the Goods in Process Inventory account for the last production department. There is a credit to the Goods in Process Inventory account for the first production department. There is a debit to the Finished Goods Inventory account. None of the above. Question 4 Equivalent units of production are equal to: Answer The number of units that could have been completed if all effort had been applied to units that were started and completed that period. The number of finished units actually produced that period. The number of units introduced into the process that period. The number of units still in process that period. Physical units that were completed this period from all effort being applied to them. Question 5 Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment? Answer In most manufacturing environments, it is not possible to conduct a physical count of units. Companies often use a combination of a process costing and job order costing systems. 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. 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. In most cases, there is no difference between physical units and equivalent units of production. Question 6 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. Calculate the equivalent units of production for the month, assuming the company uses the weighted average method. Answer 10,000 units. 10,300 units. 15,000 units. 15,300 units. 10,700 units. Question 7 A company uses a process cost accounting system. 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. Assuming the weighted average method, the direct labor cost per equivalent unit (rounded to the nearest cent) is: Answer $0.14. $0.16. $0.17. $0.30. $0.37. Question 8 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. Using the weighted average method, the equivalent units produced by the department were: Answer 5,000 units. 5,900 units. 6,100 units. 5,500 units. 6,700 units. Question 9 A system of accounting in which the costs of each process are accumulated separately and then assigned to the units of product that passed through the process is a: Answer General cost accounting system. Process cost accounting system. Job order cost accounting system. Manufacturing cost accounting system. Goods in process accounting system. Question 10 Direct labor and indirect labor are recorded, respectively, to: Answer Factory Overhead and Goods in Process. Goods in Process and Finished Goods. Finished Goods and Goods in Process. Goods in Process and Factory Overhead. Cost of Goods Sold and Finished Goods. CHAPTER 21 Question 1 Which of the following statements is true regarding the use of multiple rates in assigning overhead costs? Answer Using multiple departmental rates is best suited for companies that make only one product. Using multiple rates is easier and less time consuming. The use of multiple rates always ends up in more accurate costing. When a company has many products that consume different amounts of indirect resources, a multiple rate allocation can help better allocate overhead costs. All of the above. Question 2 When a manager has no authority to make purchase decisions and changes with regard to a certain cost, what term should be used to refer to that cost? Answer Uncontrollable cost. Indirect expense. Escapable expense. Controllable cost. Shared cost. Question 3 Which of the following statements is true regarding responsibility accounting? Answer A responsibility accounting system usually divides a company into subunits called responsibility centers. The manager of each center is evaluated on how well the center forms. Responsibility accounting does not place blame, but instead it is used to identify opportunities for improving performance. All of the above. None of the above. Question 4 Expenses that are easily traced and assigned to a specific department because they are incurred for the sole benefit of that department are called: Answer Direct expenses. Indirect expenses. Controllable expenses. Uncontrollable expenses. Fixed expenses. Question 5 The salaries of employees who spend all their time working in one department are: Answer Variable expenses. Indirect expenses. Direct expenses. Responsibility expenses. Unavoidable expenses. Question 6 A difficult problem in calculating the total costs and expenses of a department is: Answer Determining the gross profit ratio. Assigning direct costs to the department. Assigning indirect expenses to the department. Determining the amount of sales of the department. Determining the direct expenses of the department. Question 7 The most useful allocation basis for the departmental costs of an advertising campaign for a storewide sale is likely to be: Answer Floor space of each department. Relative number of items each department had on sale. Number of customers to enter each department. An equal amount of cost for each department. Total sales of each department. Question 8 Dresden, Inc., has four departments. Information about these departments follows: Direct Costs………………… Sq. Feet of space………….. Number of employees…….. Maintenance $ 18,000 500 2 Cutting Assembly $ 30,000 $ 70,000 1,000 2,000 3 16 Packaging $ 45,000 3,000 4 If maintenance costs are allocated to the other departments based on floor space occupied by each, the amount of maintenance cost allocated to the Cutting Department is: Answer $ 2,769. $ 3,000. $ 3,724. $ 6,000. $18,000. Question 9 Baker Corporation has two operating departments, Machining and Assembly, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period: Office Expenses Total Salaries…………….........$ 30,000 Depreciation…………….. 20,000 Advertising………………. 40,000 Item Machining Number of Employees…. 1,000 Net Sales………………… $ 325,000 Cost of Goods Sold…….. $ 75,000 Allocation Basis Number of Employees Cost of Goods Sold Net Sales Assembly 1,500 $ 475,000 $ 125,000 Total 2,500 $ 800,000 $ 200,000 The amount of the total office expenses that should be allocated to Assembly for the current period is: Answer $ 35,750. $ 45,000. $ 54,250. $ 90,000. $600,000. Question 10 Able Company has two operating (production) departments: Assembly and Fabricating. Assembly has 150 employees and occupies 44,000 square feet; Fabricating has 100 employees and occupies 36,000 square feet. Indirect factory expenses for the current period are as follows: Administration……….$ 80,000 Maintenance…………..100,000 Administration is allocated based on workers in each department; maintenance is allocated based on square footage. The total amount of indirect factory expenses that should be allocated to the Assembly Department for the current period is: Answer $ 48,000. $ 55,000. $103,000. $104,000. $110,000. CHAPTER 22 Question 1 Salaries of sales personnel who are paid on a commission-only basis are which type of cost? Answer Fixed. Variable. Mixed. Step-wise. None of the above. Question 2 Company A's fixed costs were $35,380, its variable costs were $86,020, and its sales were $127,500 for 34,000 units. What is the company's break-even point in units? Answer 34,000. 31,000. 29,000. 27,000. None of the above. Question 3 Janet sells a product for $18.99. The variable costs are $14.38. Janet's break-even units are 59,000. What is the amount of fixed costs? Answer $59,000. $271,990. $848,420. $1,120,410. None of the above. Question 4 The current sales price is $31 per unit and the current variable cost is $23 per unit. Fixed costs are $48,800. In order to meet the competition, the sales price is decreased by $1, and the firm is able to decrease variable costs by $0.85. If all other costs remain unchanged, what will happen to the break-even point in units? Answer It will increase by 117 units (rounded to nearest unit). It will decrease by 871 units (rounded to nearest unit). It will increase by 871 units (rounded to nearest unit). It will decrease by 117 units (rounded to nearest unit). It will not change. Question 5 Company A's fixed costs were $135,000, its variable costs were $72,000, and its sales were $288,000. What is the company's break-even point in sales? Answer $135,000. $180,000. $253,125. $288,000. None of the above. Question 6 With a tax rate of 30%, fixed costs of $46,100, and a contribution ratio of 55%, how much revenue is required to achieve a desired after-tax net income of $49,070? Answer $211,273. $127,455. $ 83,818. $173,036. None of the above. Question 7 The sales mix for Emory's Hardware is as follows: Product A: 12 units @ $5.25 sales price; $4.85 variable cost per unit. Product B: 10 units @ $7.50 sales price; $6.95 variable cost per unit. Product C: 6 units @ $12.25 sales price; $10.35 variable cost per unit. Emory's fixed costs are $75,950. What are the composite break-even units? Answer 1,500. 2,000. 2,500. 3,500. 4,000. Question 8 A cost that remains the same in total even when volume of activity varies is a: Answer Fixed cost. Curvilinear cost. Variable cost. Step-wise variable cost. Standard cost. Question 9 A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The contribution margin per unit is: Answer $ 5.00. $ 7.00. $ 8.17. $12.00. $17.00. Question 10 The contribution margin per unit expressed as a percentage of the product's selling price is the: Answer Volume variance. Margin of safety. Contribution margin ratio. Break-even point. Rate of return on sales. CHAPTER 23 Question 1 The budgeting process serves which of the following purpose(s)? Answer It helps motivate employees and helps to effectively communicate with them. It communicates expectations. It helps coordinate activities toward common goals. It helps in evaluating results and management performance. All of the above. Question 2 Which of the following is true with respect to master budgets? Answer A master budget is a formal written and comprehensive plan for a company's future. It contains individual budgets that are linked with each other to form a coordinated plan. A master budget should include a series of operating budgets, as well as a capital expenditures budget, and financial budgets. The analysis for a master budget begins with projecting annual sales volume and prices. All of the above. None of the above. Question 3 Which of the following is true regarding the capital expenditures budget? Answer It lists dollar amounts to be both received from plan asset disposals and spent to purchase additional plant assets to carry out the budgeted business activities. It is generally the first budget prepared. It is not generally affected by long range plans. It usually involves short-term time commitments and is usually small in terms of dollar values when compared to other budgets. All of the above. Question 4 Which of the following statements is not true? Answer Sales budgets are prepared before the cash budgets. Budgeted balance sheets are dependent upon budgeted income statements. Budgeted income statements include depreciation expenses. Merchandise budgets show budgeted units and dollar amounts. Cash budgets include depreciation expenses. Question 5 When preparing the cash budget, all the following should be considered except: Answer Cash receipts from customers. Cash payments for merchandise. Depreciation expense. Cash payments for income taxes. Cash payments for capital expenditures. Question 6 A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is called a(n): Answer Capital expenditures budget. Operating budget. Rolling budget. Cash budget. Income statement. Question 7 Which of the following accounts would appear on a budgeted balance sheet? Answer Income tax expense. Accounts receivable. Sales commissions. Depreciation expense. All of these. Question 8 Which of the following budgets must be completed before a cash budget can be prepared? Answer Capital expenditures budget. Sales budget. Merchandise purchases budget. General and administrative expense budget. All of these. Question 9 Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June. Northern Company has an agreement with its bank to maintain a cash balance of at least $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must: Answer Borrow $ 4,500. Borrow $ 2,500. Borrow $10,000. Repay $ 7,500. Repay $ 2,500. Question 10 The Palos Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from its current and past sales? Answer $29,160. $46,760. $61,160. $66,200. $78,800.