Managerial Accounting Creating Value in a Dynamic Business Environment 11Th Edition By Hilton – Test Bank
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Sample Test
Chapter 3
Product Costing and Cost Accumulation in a Batch Production
Environment
Answer Key
True / False Questions
1. Product
or service cost is a very objective number that anyone could agree on.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 03-01
Feedback True: This
statement is false.
Feedback False: Correct! In reality, product cost is a slippery
concept.
2. Product
costs provide crucial data for a variety of managerial purposes.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-01
Feedback True: Correct! It
is true that product costs provide crucial data for a variety of managerial
purposes.
Feedback False: This statement is true.
3. The
final step in recognizing the completion of production requires a company to
debit Finished-Goods Inventory and credit Work-in-Process Inventory.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-02
Learning Objective: 03-05
Feedback True:
Correct! Control systems influence behavior.
Feedback False: Control systems influence behavior.
4. As
soon as products are completed, their product costs are transferred from Raw Materials
Inventory to Finished-Goods Inventory.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 03-02
Feedback True: This
statement is false.
Feedback False: Correct! As soon as products are completed,
their costs are transferred from Work-in-Process Inventory to Finished-Goods
Inventory.
5. Manufacturing
overhead is a pool of indirect production costs that must somehow be attached
to each unit manufactured.
TRUE
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03
Feedback True:
Correct! Control systems influence behavior.
Feedback False: Control systems influence behavior.
6. In a
public accounting firm, for example, costs are assigned to an audit engagement
in much the same way they are assigned to a single batch of tables by a
furniture manufacturer.
TRUE
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03
Feedback True:
Correct! Audits for accounting firms have costs assigned in the same
manner that costs for tables are assigned within furniture manufacturers.
Feedback False: This statement is true.
7. In
traditional product-costing systems, the measure of productive activity is
usually some volume-based cost driver, like direct-labor hours.
TRUE
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-04
Feedback True:
Correct! Volume-based cost drivers are productive activity measures in
traditional product-costing systems.
Feedback False: This statement is true.
8. A
predetermined overhead rate is calculated by dividing actual overhead cost by
the actual amount of a cost driver used in the process.
FALSE
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-04
Feedback True: This
statement is false.
Feedback False: Correct! The calculation for a predetermined
overhead rate is calculated by dividing budgeted overhead cost by the budgeted
amount of cost driver or activity base.
9. Electricity
costs that were incurred by a company’s production processes should be debited
to Utilities Expense.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05
Feedback True: This statement is false.
Feedback False: Correct! Electricity costs incurred by a
company’s production processes are associated with Manufacturing Overhead
rather than Utilities Expense.
10. A
production order for a job authorizes the release of material to production.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05
Feedback True: This statement is false.
Feedback False: Correct! It is important to consider the
system.
11. Under-
or overapplied manufacturing overhead at year-end is most commonly charged or
credited to Work-in-Process Inventory.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05
Feedback True: It is important to consider the system.
Feedback False: Correct! Under or overapplied manufacturing
overhead is not commonly charged to Work-in Process Inventory.
12. The
term “normal costing” refers to the use of job-costing systems.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical
Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-06
Feedback True: This statement is false.
Feedback False: Correct! Normal costing does not refer to
the use of job-costing systems.
13. Actual
costing avoids the profitability of cyclicality.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical
Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-06
Feedback True: This statement is false.
Feedback False: Correct! The use of actual costing is affected
by cyclicality of profits.
14. Two-stage
cost allocation uses a first stage to assign all product costs to production
departments and then a second stage to apply different cost drivers to improve
efficiency.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical
Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-07
Feedback True: This statement is false.
Feedback False: Correct! In the first stage, all
manufacturing-overhead costs are assigned to the production departments, such
as machining and assembly. In the second stage, the overhead costs that have
been assigned to each production department are applied to the production jobs
that pass through the department.
15. The
two-stage cost allocation actually has three types of allocation involved.
TRUE
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-07
Feedback True:
Correct! The two-stage cost allocation actually has three types of
allocation involved.
Feedback False: This statement is true.
16. Job-order
costing methods are used in a variety of service industry firms and nonprofit
organizations.
TRUE
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-08
Feedback True:
Correct! Job-order costing is applicable to service firms and nonprofit
organization.
Feedback False: This statement is true.
17. Nonmanufacturing
firms typically refer to their service production processes as jobs.
FALSE
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-08
Feedback True: This
statement is false.
Feedback False: Correct! Rather than referring to production
“jobs,” nonmanufacturing organizations use terminology that reflects their
operations, like hospitals refer to cases and consultants refer to engagements.
Multiple Choice Questions
18. Product
costing in a manufacturing firm is the process of:
A. accumulating the company’s period costs.
B. allocating costs among the firm’s departments.
C. placing a value on the company’s fixed assets.
D. assigning
costs to the firm’s inventory.
E. assigning costs to the company’s managers.
AACSB: Reflective Thinking
AICPA BB: Critical
Thinking
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-01
Feedback A: This statement is incorrect.
Feedback B: This statement is incorrect.
Feedback C: This statement is incorrect.
Feedback D: Correct! Product costing in a manufacturing
firm is the process of assigning costs to the firm’s inventory.
Feedback E: This statement is incorrect.
19. Which
of the following statements is true?
A.Service firms have little need for determining the cost of their services.
B. The concept of product costing is relevant only for manufacturing
firms.
C. The cost of year-end inventory appears on the balance sheet as an
expense.
D. Service
companies use cost information for planning and control purposes.
E. Mining and petroleum companies have no inventoriable costs.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-01
Feedback A: This statement is incorrect.
Feedback B: This statement is incorrect.
Feedback C: This statement is incorrect.
Feedback D: Correct! Service companies use cost information
for planning and control purposes.
Feedback E: This statement is incorrect.
20. Which
of the following statements is true?
21. Product
costing is not used in financial accounting.
B.There is only one way to assign indirect costs.
C. All product cost numbers can be easily derived due to their objective
nature.
D. Product costing is limited to manufacturing firms.
E. Relative
profitability depends upon the way we assign costs and define outputs as
successful or unsuccessful.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-01
Feedback A: Product costing is also used in managerial
accounting.
Feedback B: Just like direct costs, there are several ways
to assign indirect costs.
Feedback C: Product costing is not really objective in
nature.
Feedback D: Nonmanufacturing firms also use product
costing.
Feedback E: Correct! Relative profitability depends upon
the way we assign costs and define outputs as successful or unsuccessful.
21. If a
company sells goods that cost $80,000 for $92,000, the firm will:
A.reduce
Finished-Goods Inventory by $80,000.
B. reduce Finished-Goods Inventory by $92,000.
C. report sales revenue on the balance sheet of $92,000.
D. reduce Cost of Goods Sold by $80,000.
E. follow more than one of the other procedures.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-02
Learning Objective: 03-05
Feedback A: Correct! The firm will reduce Finished-Goods
Inventory by $80,000.
Feedback B: This is incorrect.
Feedback C: This is incorrect.
Feedback D: This is incorrect.
Feedback E: This is incorrect.
22. As
production takes place, all manufacturing costs are added to the:
A.Work-in-Process
Inventory account.
B.Manufacturing-Overhead Inventory account.
C. Cost-of-Goods-Sold account.
D. Finished-Goods Inventory account.
E. Production Labor account.
AACSB: Reflective Thinking
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-02
Learning Objective: 03-05
Feedback A: Correct! All manufacturing costs are added to
the Work-in-Process Inventory account as production takes place.
Feedback B: This account is incorrect.
Feedback C: This account is incorrect.
Feedback D: This account is incorrect.
Feedback E: This account is incorrect.
23. Which
of the following statements regarding work in process is not correct?
A.Work in process is partially completed inventory.
B.Work in process consists of direct labor, direct material, and manufacturing
overhead.
C. Work-in-Process Inventory is debited to record direct material used and
direct labor incurred.
D. Work-in-Process Inventory appears on the year-end balance sheet.
E. Work-in-Process
Inventory is credited when goods are sold.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-02
Learning Objective: 03-05
Feedback A: This statement is true.
Feedback B: This statement is true.
Feedback C: This statement is true.
Feedback D: This statement is true.
Feedback E: Correct! Work-in-process Inventory is not
credited when goods are sold.
24. Which
of the following statements about manufacturing cost flows is false?
A.Direct materials, direct labor, and manufacturing overhead are entered in the
Work-in-Process Inventory account.
B.The Finished-Goods Inventory account will contain entries that reflect the
cost of goods sold during the period.
C. The cost of units sold during the period will typically appear on the
income statement.
D. When
a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000
in an account entitled Profit on Sale.
E. Units are normally transferred from Work-in-Process Inventory to
Finished-Goods Inventory.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Reporting
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-02
Learning Objective: 03-05
Feedback A: This statement is true.
Feedback B: This statement is true.
Feedback C: This statement is true.
Feedback D: Correct! A firm will not enter $6,000 in an
account entitled Profit on Sale.
Feedback E: This statement is true.
25. The
final step in recognizing the completion of production requires a company to:
A.debit
Finished-Goods Inventory and credit Work-in-Process Inventory.
B.debit Work-in-Process Inventory and credit Finished-Goods Inventory.
C. add direct labor to Work-in-Process Inventory.
D. add direct materials, direct labor, and manufacturing overhead to
Work-in-Process Inventory.
E. add direct materials to Finished-Goods Inventory.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Decision Making
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-02
Learning Objective: 03-05
Feedback A: Correct! The final step in recognizing the
completion of production requires a company to debit Finished Goods Inventory
and credit Work-in-Process.
Feedback B: This is not the final step.
Feedback C: This is not the final step.
Feedback D: This is not the final step.
Feedback E: This is not the final step.
26. Morgan
Manufacturing recently sold goods that cost $35,000 for $45,000 cash. The
journal entries to record this transaction would include:
A.a credit to Work-in-Process Inventory for $35,000.
B.a debit to Sales Revenue for $45,000.
C. a credit to Profit on Sale for $10,000.
D. a debit to Finished-Goods Inventory for $35,000.
E. a
credit to Sales Revenue for $45,000.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Bloom’s: Apply
Difficulty: 2 Medium
Learning Objective: 03-02
Learning Objective: 03-05
Feedback A: This is not included in the journal entries.
Feedback B: This is not included in the journal entries.
Feedback C: This is not included in the journal entries.
Feedback D: This is not included in the journal entries.
Feedback E: Correct! The journal entries include a credit
to Sales Revenue for $45,000.
27. Which
of the following manufacturers would most likely use job-order costing?
A.Chemical manufacturers.
B. Microchip processors.
C. Custom-furniture
manufacturers.
D. Gasoline refiners.
E. Fertilizer manufacturers.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03
Feedback A: This is most likely a process costing system.
Feedback B: This is most likely a process costing system.
Feedback C: Correct! The custom-furniture manufacturer
would most likely used job-order costing.
Feedback D: This is most likely a process costing system.
Feedback E: This is most likely a process costing system.
28. A
custom-home builder would likely utilize:
A.job-order
costing.
B. process costing.
C. mass customization.
D. process budgeting.
E. joint costing.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03
Feedback A: Correct! Custom-home builders would most likely
utilize job-order costing.
Feedback B: This would probably not be used by a
custom-home builder.
Feedback C: This would probably not be used by a
custom-home builder.
Feedback D: This would probably not be used by a
custom-home builder.
Feedback E: This would probably not be used by a
custom-home builder.
29. Which
of the following types of companies would most likely use process costing?
A.Aircraft manufacturers.
B. Textile
manufacturers.
C. Textbook publishers.
D. Custom-machining firms.
E. Shipbuilders.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03
Feedback A: Process costing would probably not be used.
Feedback B: Textile manufacturers would most likely use
process costing.
Feedback C: Process costing would probably not be used.
Feedback D: Process costing would probably not be used.
Feedback E: Process costing would probably not be used.
30. A
manufacturing firm produces goods in accordance with customer specifications,
commencing production upon receipt of a purchase order. To accumulate the cost
of each order, the company would use a:
A.job-cost
record.
B. cost allocation matrix.
C. production log.
D. overhead sheet.
E. manufacturing cost record.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03
Feedback A: Correct! To accumulate the cost of each order,
the company would use a job-cost record.
Feedback B: This would not be used for accumulating costs.
Feedback C: This would not be used for accumulating costs.
Feedback D: This would not be used for accumulating costs.
Feedback E: This would not be used for accumulating costs.
31. A
typical job-cost record would provide information about all of the following
items related to an order except:
A.the cost of direct materials used.
B. administrative
costs.
C. direct labor costs incurred.
D. applied manufacturing overhead.
E. direct labor hours worked.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Reporting
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03
Feedback A: This would be found in a typical job-cost record.
Feedback B: Correct! Administrative costs would not be
provided in a typical job-cost record.
Feedback C: This would be found in a typical job-cost record.
Feedback D: This would be found in a typical job-cost
record.
Feedback E: This would be found in a typical job-cost
record.
32. Which
of the following statements about material requisitions is false?
A.Material requisitions are often computerized.
B. Material requisitions are a common example of source documents.
C. Material requisitions contain information that is useful to the cost
accounting department.
D. Material
requisitions authorize the transfer of materials from the production floor to
the raw materials warehouse.
E. Material requisitions are routinely linked to a bill of materials that
lists all of the materials needed to complete a job.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Reporting
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03
Feedback A: This statement is true.
Feedback B: This statement is true.
Feedback C: This statement is true.
Feedback D: Correct! Material requisitions do not authorize
the transfer of material from the production floor to the raw materials
warehouse.
Feedback E: This statement is true.
33. Gonzales
Company has developed an integrated system that coordinates the flow of all goods,
services, and information into and out of the organization, working with raw
material vendors as well as customers to improve service and reduce costs. The
firm is said to be using:
A.participative management.
B.top-down management.
C. strategic cost management.
D. supply
chain management.
E. management by objectives (MBO).
AACSB: Reflective Thinking
AICPA BB: Resource
Management
AICPA FN: Decision Making
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-03
Feedback A: This is not participative management.
Feedback B: This is not top-down management
Feedback C: This is not strategic cost management.
Feedback D: Correct! The firm is using supply chain
management.
Feedback E: This is not management by objectives.
34. The
assignment of direct labor cost to individual jobs is based on:
A.an estimate of the total time spent on the job.
B.actual total payroll cost divided equally among all jobs in process.
C. estimated total payroll cost divided equally among all jobs in process.
D. the
actual time spent on each job multiplied by the wage rate.
E. the estimated time spent on each job multiplied by the wage rate.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-03
Feedback A: This is incorrect for the assignment of direct labor
costs to individual jobs.
Feedback B: This is incorrect for the assignment of direct labor
costs to individual jobs.
Feedback C: This is incorrect for the assignment of direct labor
costs to individual jobs.
Feedback D: Correct! The assignment is based on the
actual time spent on each job multiplied by the wage rate.
Feedback E: This is incorrect for the assignment of direct
labor costs to individual jobs.
35. When
using normal costing, the total production cost of a job is composed of:
A.direct material and direct labor, only.
B. direct material, direct labor, manufacturing overhead, and outlays for
selling costs.
C. direct material, direct labor, manufacturing overhead, and outlays for
both selling and administrative costs.
D. direct
material, direct labor, and applied manufacturing overhead.
E. direct material, direct labor, and actual manufacturing overhead.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-03
Feedback A: This is incorrect.
Feedback B: This is incorrect.
Feedback C: This is incorrect.
Feedback D: Correct! The total production cost of a job is
composed of direct material, direct labor, and applied manufacturing overhead.
Feedback E: This is incorrect.
36. Manufacturing
overhead:
A.includes direct materials, indirect materials, indirect labor, and factory
depreciation.
B.is easily traced to jobs.
C. includes all selling costs.
D. should not be assigned to individual jobs because it bears no obvious
relationship to them.
E. is
a pool of indirect production costs that must somehow be attached to each unit
manufactured.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-03
Feedback A: This statement is incorrect regarding manufacturing
overhead.
Feedback B: This statement is incorrect regarding manufacturing
overhead.
Feedback C: This statement is incorrect regarding manufacturing
overhead.
Feedback D: This statement is incorrect regarding
manufacturing overhead.
Feedback E: Correct! Manufacturing overhead is a pool of
indirect production costs.
37. The
process of assigning overhead costs to the jobs that are worked on is commonly
called:
A.service department cost allocation.
B.overhead cost distribution.
C. overhead
application.
D. transfer costing.
E. overhead cost apportionment.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA: FN Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-04
Learning Objective: 03-05
Feedback A: This is incorrect.
Feedback B: This is incorrect.
Feedback C: Correct! The process of assigning overhead to
jobs is called overhead application.
Feedback D: This is incorrect.
Feedback E: This is incorrect.
38. Which
of the following is the correct method to calculate a predetermined overhead
rate?
A.Budgeted total manufacturing cost ¸ budgeted amount of cost driver.
B.Budgeted
overhead cost ¸ budgeted amount of cost driver.
C. Budgeted amount of cost driver ¸ budgeted overhead cost.
D. Actual overhead cost ¸ budgeted amount of cost driver.
E. Actual overhead cost ¸ actual amount of cost driver.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA: FN Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-04
Learning Objective: 03-05
Feedback A: This is an incorrect method.
Feedback B: Correct! This is the correct method for
calculating a predetermined overhead rate.
Feedback C: This is an incorrect method.
Feedback D: This is an incorrect method.
Feedback E: This is an incorrect method.
39. Norwood
Corporation uses a predetermined overhead rate of $20 per machine hour. In
deriving this figure, the company’s accountant used:
A.a
denominator of budgeted machine hours for the current accounting period.
B.a denominator of actual machine hours for the current accounting period.
C. a denominator of actual machine hours for the previous accounting
period.
D. a numerator of budgeted machine hours for the current accounting
period.
E. a numerator of actual machine hours for the current accounting period.
AACSB: Reflective Thinking
AICPA BB: Industry
AICPA: FN Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-04
Learning Objective: 03-05
Feedback A: Correct! The company’s accountant used a
denominator of budgeted machine hours for the current accounting period.
Feedback B: This is not correct.
Feedback C: This is not correct.
Feedback D: This is not correct.
Feedback E: This is not correct.
40. Metalica
Company applies overhead based on machine hours. At the beginning of 20×1, the
company estimated that manufacturing overhead would be $500,000, and machine
hours would total 20,000. By 20×1 year-end, actual overhead totaled $525,000,
and actual machine hours were 25,000. On the basis of this information, the
20×1 predetermined overhead rate was:
A.$0.04 per machine hour.
B.$0.05 per machine hour.
C. $20 per machine hour.
D. $21 per machine hour.
E. $25
per machine hour.
AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-04
Learning Objective: 03-05
Feedback A: This amount is incorrect.
Feedback B: This amount is incorrect.
Feedback C: This amount is incorrect.
Feedback D: This amount is incorrect.
Feedback E: Correct! Estimated
overhead ÷ Estimated machine hours = $500,000 ÷ 20,000 =
$25 per machine hour.
41. Osgood
Company, which applies overhead at the rate of 190% of direct material cost,
began work on job no. 101 during June. The job was completed in July and sold
during August, having accumulated direct material and labor charges of $27,000
and $15,000, respectively. On the basis of this information, the total overhead
applied to job no. 101 amounted to:
A.$0.
B.$28,500.
C. $51,300.
D. $70,500.
E. $79,800.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-04
Learning Objective: 03-05
Feedback A: This amount is incorrect.
Feedback B: This amount is incorrect.
Feedback C: Correct! Overhead applied = Direct materials x
overhead application rate = $27,000 x 190% = $51,300.
Feedback D: This amount is incorrect.
Feedback E: This amount is incorrect.
42. Blakely
charges manufacturing overhead to products by using a predetermined application
rate, computed on the basis of machine hours. The following data pertain to the
current year:
Budgeted manufacturing overhead: $480,000
Actual manufacturing overhead: $440,000
Budgeted machine hours: 20,000
Actual machine hours: 16,000
Overhead applied to production totaled:
A.$352,000.
B.$384,000.
C. $550,000.
D. $600,000.
E. some other amount.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-04
Learning Objective: 03-05
Feedback A: This amount is incorrect.
Feedback B: Correct! Overhead applied = (Budgeted
overhead ÷ Budgeted machine hours) x Actual machine hours =
($480,000 ÷20,000) x 16,000 = $384,000
Feedback C: This amount is incorrect.
Feedback D: This amount is incorrect.
Feedback E: This is incorrect, because there is a correct
amount listed.
43. Farrina
Manufacturing uses a predetermined overhead application rate of $8 per direct
labor hour. A review of the company’s accounting records for the year just
ended discovered the following:
Underapplied manufacturing overhead: $7,200
Actual manufacturing overhead: $392,000
Budgeted labor hours: 50,000
Simone’s actual labor hours worked totaled:
A.48,100.
B.49,100.
C. 49,900.
D. 50,900.
E. cannot be determined based on the information presented.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-04
Learning Objective: 03-05
Feedback A: Correct! Actual labor hours = (Actual overhead –
Underapplied overhead) ÷ Predetermined overhead application rate per
direct labor hour = ($392,000 – $7,200) ÷ $8 = 48,100 hours.
Feedback B: This amount is incorrect.
Feedback C: This amount is incorrect.
Feedback D: This amount is incorrect.
Feedback E: This amount is incorrect.
44. Boxer
Industries worked on four jobs during its first year of operation: nos. 401,
402, 403, and 404. A review of job no. 403’s cost record revealed direct
material charges of $40,000 and total manufacturing costs of $50,000. If Boxer
applies overhead at 150% of direct labor cost, the overhead applied to job no.
403 must have been:
A.$0.
B.$6,000.
C. $4,000.
D. $3,333.
E. $5,000.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-04
Learning Objective: 03-05
Feedback A: This amount is incorrect.
Feedback B: Total manufacturing costs for Job 403 – total direct
material costs for Job 403 = Total Direct labor and overhead costs for Job 403;
Total Direct labor and overhead costs for Job 403 ÷ (100% for direct
labor + 150% of direct labor for overhead) = Direct labor cost for Job 403;
Direct labor cost for Job 403 x 150% overhead rate = Overhead costs for Job
403; $50,000 – $40,000 = $10,000; $10,000 ÷ 2.5 = $4,000 direct
labor; $4,000 x 150% = $6,000 overhead.
Feedback C: This amount is incorrect.
Feedback D: This amount is incorrect.
Feedback E: This amount is incorrect.
45. Which
of the following statements about materials is false?
A.Acquisitions
of materials are normally charged to the Purchases account.
B. The use of direct materials gives rise to a debit to Work-in-Process
Inventory.
C. The use of indirect materials gives rise to a debit to Manufacturing
Overhead.
D. The use of indirect materials gives rise to a credit to Manufacturing
Supplies Inventory.
E. Direct materials are accounted for in a different manner than indirect
materials.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 03-05
Feedback A: Correct! Acquisition of materials are not
normally charged to Purchases.
Feedback B: This statement is true.
Feedback C: This statement is true.
Feedback D: This statement is true.
Feedback E: This statement is true.
46. Templeton
Corporation recently used $75,000 of direct materials and $9,000 of indirect
materials in production activities. The journal entries reflecting these
transactions would include:
A.a
debit to Manufacturing Overhead for $9,000.
B. a debit to Manufacturing Overhead for $84,000.
C. a debit to Raw-Material Inventory for $75,000.
D. a debit to Work-in-Process Inventory for $84,000.
E. a credit to Manufacturing Overhead for $9,000.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05
Feedback A: Correct! The journal entries would include a debit
to Manufacturing Overhead for $9,000.
Feedback B: This entry is incorrect.
Feedback C: This entry is incorrect.
Feedback D: This entry is incorrect.
Feedback E: This entry is incorrect.
47. A
review of a company’s Work-in-Process Inventory account found a debit for
materials of $67,000. If all procedures were performed in the correct manner,
this means that the firm:
A.also recorded a credit to Raw-Material Inventory.
B. also recorded a credit to Manufacturing Supplies Inventory.
C. was accounting for the usage of direct materials.
D. was accounting for the usage of indirect materials.
E. also
recorded a credit to Raw-Material Inventory and was accounting for the usage of
direct materials.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05
Feedback A: This entry is incorrect.
Feedback B: This entry is incorrect.
Feedback C: This entry is incorrect.
Feedback D: This entry is incorrect.
Feedback E: Correct! There would be a credit to
Raw-Material Inventory and the firm was accounting for the usage of direct materials.
48. Travers
Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor.
The proper journal entry to record these events would include a debit to Work
in Process for:
A.$0 because Work in Process should be credited.
B. $0 because Work in Process is not affected.
C. $11,000.
D. $106,000.
E. $117,000.
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05
Feedback A: This amount is incorrect.
Feedback B: This amount is incorrect.
Feedback C: This amount is incorrect.
Feedback D: Correct! The journal entry would include a
debit to Work in Process for $106,000.
Feedback E: This amount is incorrect.
49. The
following information relates to October:
Production supervisor’s salary: $3,500
Factory maintenance wages: 250 hours at $10 per hour
The journal entry to record the preceding information is:
|
A. |
Manufacturing overhead |
6,000 |
|
|
|
Wages Payable |
|
6,000 |
|
B. |
Wages Payable |
6,000 |
|
|
|
Manufacturing
overhead |
|
6,000 |
|
C. |
Work-in-Process Inventory |
6,000 |
|
|
|
Wages Payable |
|
6,000 |
|
D. |
Wages Payable |
6,000 |
|
|
|
Work-in-Process Inventory |
|
6,000 |
|
E. |
Manufacturing overhead |
2,500 |
|
|
|
Work-in-Process Inventory |
3,500 |
|
|
|
Wages
Payable |
|
6,000 |
AACSB: Analytic
AICPA BB: Critical
Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05
Feedback A: Correct! The journal entry would debit
Manufacturing overhead for $6,000 and credit Wages Payable for $6,000.
Feedback B: This entry is incorrect.
Feedback C: This entry is incorrect.
Feedback D: This entry is incorrect.
Feedback E: This entry is incorrect.
50. Electricity
costs that were incurred by a company’s production processes should be debited
to:
A.Utilities Expense.
B. Accounts Payable.
C. Cash.
D. Manufacturing
Overhead.
E. Work-in-Process Inventory.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 03-05
Feedback A: This account is incorrect.
Feedback B: This account is incorrect.
Feedback C: This account is incorrect.
Feedback D: Correct! Manufacturing Overhead is the debit
for electricity costs.
Feedback E: This account is incorrect.
51. The
journal entry needed to record $5,000 of advertising for Oxner Manufacturing
would include:
A.a
debit to Advertising Expense.
B. a credit to Advertising Expense.
C. a debit to Manufacturing Overhead.
D. a credit to Manufacturing Overhead.
E. a debit to Projects-in-Process.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 03-05
Feedback A: Correct! The journal entry would include a debit to
Advertising Expense.
Feedback B: This entry is incorrect.
Feedback C: This entry is incorrect.
Feedback D: This entry is incorrect.
Feedback E: This entry is incorrect.
52. Hsu
Company incurred $90,000 of depreciation for the year. Eighty percent relates
to the firm’s production facilities, and 20% relates to sales and
administrative offices. If all items are handled in the proper manner, a review
of the company’s accounting records should reveal a:
A.debit to Depreciation Expense for $90,000.
B. debit to Manufacturing Overhead for $90,000.
C. debit
to Manufacturing Overhead for $72,000.
D. debit to Work-in-Process Inventory for $18,000.
E. credit to Cash for $90,000.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 03-05
Feedback A: This entry is incorrect.
Feedback B: This entry is incorrect.
Feedback C: Correct! Depreciation for production = $90,000
x 80% = $72,000; the journal entry should include a debit to Manufacturing
Overhead for $72,000.
Feedback D: This entry is incorrect.
Feedback E: This entry is incorrect.
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