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.