MGT 11B More Practice on Multiple Choice Questions (CHAPTER 14;15;16 and 17)

MGT 11B
More Practice on Multiple Choice Questions

Chapter 14
1.      (SO 1)
Managerial accounting:
a.    is governed by generally accepted accounting principles.
b.    places emphasis on special-purpose information.
c.    pertains to the entity as a whole and is highly aggregated.
d.    is limited to cost data.     

2.      (SO 2)
The management of an organization performs several broad functions. They are:
a.    planning, directing, and selling.
b.    planning, directing, and controlling.
c.    planning, manufacturing, and controlling.
d.    directing, manufacturing, and controlling.     

3.      (SO 2)
After passage of the Sarbanes-Oxley Act of 2002:
a.    reports prepared by managerial accountants must by audited by CPAs.
b.    CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results.
c.    the audit committee, rather than top management, is responsible for the company's financial statements.
d.    reports prepared by managerial accountants must comply with generally accepted accounting principles (GAAP).     

4.      (SO 3)
Direct materials are a:
a.    
Product Cost    Manufacturing Overhead    Period Cost
Yes    Yes    No

b.    
Product Cost    Manufacturing Overhead    Period Cost
Yes    No    No

c.    
Product Cost    Manufacturing Overhead    Period Cost
Yes    Yes    Yes

d.    
Product Cost    Manufacturing Overhead    Period Cost
No    No    No

e.         

5.      (SO 3)
Which of the following costs would a computer manufacturer include in manufacturing overhead?
a.    The cost of the disk drives.
b.    The wages earned by computer assemblers.
c.    The cost of the memory chips.
d.    Depreciation on testing equipment.     

6.      (SO 3)
Which of the following is not an element of manufacturing overhead?
a.    Sales manager's salary.
b.    Plant manager's salary.
c.    Factory repairman's wages.
d.    Product inspector's salary.     

7.      (SO 4)
Indirect labor is a:
a.    nonmanufacturing cost.
b.    raw material cost.
c.    product cost.
d.    period cost.     

8.      (SO 4)
Which of the following costs are classified as a period cost?
a.    Wages paid to a factory custodian.
b.    Wages paid to a production department supervisor.
c.    Wages paid to a cost accounting department supervisor.
d.    Wages paid to an assembly worker.     

9.      (SO 5)
For the year, Redder Company has cost of goods manu-factured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is:
a.    $450,000.
b.    $500,000.
c.    $550,000.
d.    $600,000.     

10.      (SO 5)
Cost of goods available for sale is a step in the calculation of cost of goods sold of:
a.    a merchandising company but not a manufacturing company.
b.    a manufacturing company but not a merchandising company.
c.    a merchandising company and a manufacturing company.
d.    neither a manufacturing company nor a merchandising company.     

11.      (SO 6)
A cost of goods manufactured schedule shows beginning and ending inventories for:
a.    raw materials and work in process only.
b.    work in process only.
c.    raw materials only.
d.    raw materials, work in process, and finished goods.     

12.      (SO 6)
The formula to determine the cost of goods manufactured is:
a.    Beginning raw materials inventory + Total manufacturing costs − Ending work in process inventory.
b.    Beginning work in process inventory + Total manufacturing costs − Ending finished goods inventory.
c.    Beginning finished good inventory + Total manufacturing costs − Ending finished goods inventory.
d.    Beginning work in process inventory + Total manufacturing costs − Ending work in process inventory.     

13.      (SO 7)
A manufacturer may report three inventories on its balance sheet: (1) raw materials, (2) work in process, and (3) finished goods. Indicate in what sequence these inventories generally appear on a balance sheet.
a.    (1), (2), (3)
b.    (2), (3), (1)
c.    (3), (1), (2)
d.    (3), (2), (1)     

14.      (SO 8)
Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion?
a.    Just-in-time inventory.
b.    Total-quality management.
c.    Balanced scorecard.
d.    Activity-based costing.     

15.      (SO 8)
Examples of recent trends in the economic environment of U.S. businesses are:
a.    increasing deregulation, decreasing global competition, and a shift toward providing services rather than goods.
b.    increasing deregulation, increasing global competition, and a shift toward providing goods rather than services.
c.    decreasing deregulation, decreasing global competition, and a shift toward providing services rather than goods.
d.    increasing deregulation, increasing global competition, and a shift toward providing services rather than goods.

 
Chapter 15
1.      (SO 1)
Cost accounting involves the measuring, recording, and reporting of:
a.    product costs.
b.    future costs.
c.    manufacturing processes.
d.    managerial accounting decisions.     

2.      (SO 1)
A company is more likely to use a job order costing system if:
a.    it manufactures a large volume of similar products.
b.    its production is continuous.
c.    it manufactures products with unique characteristics.
d.    it uses a periodic inventory system.     

3.      (SO 2)
In accumulating raw materials costs, companies debit the cost of raw materials purchased in a perpetual system to:
a.    Raw Materials Purchases.
b.    Raw Materials Inventory.
c.    Purchases.
d.    Work in Process.     

4.      (SO 2)
When incurred, factory labor costs are debited to:
a.    Work in Process.
b.    Factory Wages Expense.
c.    Factory Labor.
d.    Factory Wages Payable.     

5.      (SO 2)
The flow of costs in job order costing:
a.    begins with work in process inventory and ends with finished goods inventory.
b.    begins as soon as a sale occurs.
c.    parallels the physical flow of materials as they are converted into finished goods.
d.    is necessary to prepare the cost of goods manufactured schedule.     

6.      (SO 3)
Raw materials are assigned to a job when:
a.    the job is sold.
b.    the materials are purchased.
c.    the materials are received from the vendor.
d.    the materials are issued by the materials storeroom.     

7.      (SO 3)
The source documents for assigning costs to job cost sheets are:
a.    invoices, time tickets, and the predetermined overhead rate.
b.    materials requisition slips, time tickets, and the actual overhead costs.
c.    materials requisition slips, payroll register, and the predetermined overhead rate.
d.    materials requisition slips, time tickets, and the predetermined overhead rate.     

8.      (SO 3)
In recording the issuance of raw materials in a job order cost system, it would be incorrect to:
a.    debit Work in Process Inventory.
b.    debit Finished Goods Inventory.
c.    debit Manufacturing Overhead.
d.    credit Raw Materials Inventory.     

9.      (SO 3)
The entry when direct factory labor is assigned to jobs is a debit to:
a.    Work in Process Inventory and a credit to Factory Labor.
b.    Manufacturing Overhead and a credit to Factory Labor.
c.    Factory Labor and a credit to Manufacturing Overhead.
d.    Factory Labor and a credit to Work in Process Inventory.     

10.      (SO 4)
The formula for computing the predetermined manufacturing overhead rate is estimated annual overhead costs divided by an expected annual operating activity, expressed as:
a.    direct labor cost.
b.    direct labor hours.
c.    machine hours.
d.    Any of the above.     

11.      (SO 4)
In Crawford Company, the predetermined overhead rate is 80% of direct labor cost. During the month, Crawford incurs $210,000 of factory labor costs, of which $180,000 is direct labor and $30,000 is indirect labor. Actual overhead incurred was $200,000. The amount of overhead debited to Work in Process Inventory should be:
a.    $200,000.
b.    $168,000.
c.    $144,000.
d.    $160,000.     

12.      (SO 5)
Mynex Company completes Job No. 26 at a cost of $4,500 and later sells it for $7,000 cash. A correct entry is:
a.    Debit Finished Goods Inventory $7,000 and credit Work in Process Inventory $7,000.
b.    Debit Cost of Goods Sold $7,000 and credit Finished Goods Inventory $7,000.
c.    Debit Finished Goods Inventory $4,500 and credit Work in Process Inventory $4,500.
d.    Debit Accounts Receivable $7,000 and credit Sales $7,000.     

13.      (SO 5)
At the end of an accounting period, a company using a job order costing system prepares the cost of goods manufactured:
a.    from the job cost sheet.
b.    from the Work in Process Inventory account.
c.    by adding direct materials used, direct labor incurred, and manufacturing overhead incurred.
d.    from the Cost of Goods Sold account.     

14.      (SO 6)
At end of the year, a company has a $1,200 debit balance in Manufacturing Overhead. The company:
a.    makes an adjusting entry by debiting Manufacturing Overhead Applied for $1,200 and crediting Manufacturing Overhead for $1,200.
b.    makes an adjusting entry by debiting Manufacturing Overhead Expense for $1,200 and crediting Manufacturing Overhead for $1,200.
c.    makes an adjusting entry by debiting Cost of Goods Sold for $1,200 and crediting Manufacturing Overhead for $1,200.
d.    makes no adjusting entry because differences between actual overhead and the amount applied are a normal part of job order costing and will average out over the next year.     

15.      (SO 6)
Manufacturing overhead is underapplied if:
a.    actual overhead is less than applied.
b.    actual overhead is greater than applied.
c.    the predetermined rate equals the actual rate.
d.    actual overhead equals applied overhead.

 
Chapter 16
1.      (SO 1)
Which of the following items is not characteristic of a process cost system?
a.    Once production begins, it continues until the finished product emerges.
b.    The products produced are heterogeneous in nature.
c.    The focus is on continually producing homogeneous products.
d.    When the finished product emerges, all units have precisely the same amount of materials, labor, and overhead.     

2.      (SO 2)
Indicate which of the following statements is not correct.
a.    Both a job order and a process cost system track the same three manufacturing cost elements—direct materials, direct labor, and manufacturing overhead.
b.    A job order cost system uses only one work in process account, whereas a process cost system uses multiple work in process accounts.
c.    Manufacturing costs are accumulated the same way in a job order and in a process cost system.
d.    Manufacturing costs are assigned the same way in a job order and in a process cost system.     

3.      (SO 3)
In a process cost system, the flow of costs is:
a.    work in process, cost of goods sold, finished goods.
b.    finished goods, work in process, cost of goods sold.
c.    finished goods, cost of goods sold, work in process.
d.    work in process, finished goods, cost of goods sold.     

4.      (SO 4)
In making journal entries to assign raw materials costs, a company using process costing:
a.    debits Finished Goods Inventory.
b.    often debits two or more work in process accounts.
c.    generally credits two or more work in process accounts.
d.    credits Finished Goods Inventory.     

5.      (SO 4)
In a process cost system, manufacturing overhead:
a.    is assigned to finished goods at the end of each accounting period.
b.    is assigned to a work in process account for each job as the job is completed.
c.    is assigned to a work in process account for each production department on the basis of a predetermined overhead rate.
d.    is assigned to a work in process account for each production department as overhead costs are incurred.     

6.      (SO 5)
Conversion costs are the sum of:
a.    fixed and variable overhead costs.
b.    labor costs and overhead costs.
c.    direct material costs and overhead costs.
d.    direct labor and indirect labor costs.     

7.      (SO 5)
The Mixing Department's output during the period consists of 20,000 units completed and transferred out, and 5,000 units in ending work in process 60% complete as to materials and conversion costs. Beginning inventory is 1,000 units, 40% complete as to materials and conversion costs. The equivalent units of production are:
a.    22,600.
b.    23,000.
c.    24,000.
d.    25,000.     

8.      (SO 6)
In RYZ Company, there are zero units in beginning work in process, 7,000 units started into production, and 500 units in ending work in process 20% completed. The physical units to be accounted for are:
a.    7,000.
b.    7,360.
c.    7,500.
d.    7,340.     

9.      (SO 6)
Mora Company has 2,000 units in beginning work in process, 20% complete as to conversion costs, 23,000 units transferred out to finished goods, and 3,000 units in ending work in process 33% complete as to conversion costs.
The beginning and ending inventory is fully complete as to materials costs. Equivalent units for materials and conversion costs are, respectively:
a.    22,000, 24,000.
b.    24,000, 26,000.
c.    26,000, 24,000.
d.    26,000, 26,000.     

10.      (SO 6)
Fortner Company has no beginning work in process; 9,000 units are transferred out and 3,000 units in ending work in process are one-third finished as to conversion costs and fully complete as to materials cost. If total materials cost is $60,000, the unit materials cost is:
a.    $5.00.
b.    $5.45 rounded.
c.    $6.00.
d.    No correct answer is given.     

11.      (SO 6)
Largo Company has unit costs of $10 for materials and $30 for conversion costs. If there are 2,500 units in ending work in process, 40% complete as to conversion costs, and fully complete as to materials cost, the total cost assignable to the ending work in process inventory is:
a.    $45,000.
b.    $55,000.
c.    $75,000.
d.    $100,000.     

12.      (SO 7)
A production cost report:
a.    is an external report.
b.    shows both the production quantity and cost data related to a department.
c.    shows equivalent units of production but not physical units.
d.    contains six sections.     

13.      (SO 7)
In a production cost report, units to be accounted for are calculated as:
a.    Units started into production + Units in ending work in process.
b.    Units started into production − Units in beginning work in process.
c.    Units transferred out + Units in beginning work in process.
d.    Units started into production + Units in beginning work in process.     

*14.      (SO 8)
Hollins Company uses the FIFO method to compute equivalent units. It has 2,000 units in beginning work in process, 20% complete as to conversion costs, 25,000 units started and completed, and 3,000 units in ending work in process, 30% complete as to conversion costs. All units are 100% complete as to materials. Equivalent units for materials and conversion costs are, respectively:
a.    28,000 and 26,600.
b.    28,000 and 27,500.
c.    27,000 and 26,200.
d.    27,000 and 29,600.     

*15.      (SO 8)
KLM Company uses the FIFO method to compute equivalent units. It has no beginning work in process; 9,000 units are started and completed and 3,000 units in ending work in process are one-third completed. All material is added at the beginning of the process. If total materials cost is $60,000, the unit materials cost is:
a.    $5.00.
b.    $6.00.
c.    $6.67 (rounded).
d.    No correct answer given.     

*16.      (SO 3)
Toney Company uses the FIFO method to compute equivalent units. It has unit costs of $10 for materials and $30 for conversion costs. If there are 2,500 units in ending work in process, 100% complete as to materials and 40% complete as to conversion costs, the total cost assignable to the ending work in process inventory is:
a.    $45,000.
b.    $55,000.
c.    $75,000.
d.    $100,000.

 
Chapter 17
1.      (SO 1)
Activity-based costing (ABC):
a.    can be used only in a process cost system.
b.    focuses on units of production.
c.    focuses on activities performed to produce a product.
d.    uses only a single basis of allocation.     

2.      (SO 1)
Activity-based costing:
a.    is the initial phase of converting to a just-in-time operating environment.
b.    can be used only in a job order costing system.
c.    is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers.
d.    uses direct labor as its primary cost driver.     

3.      (SO 1, 4)
Any activity that causes resources to be consumed is called a:
a.    just-in-time activity.
b.    facility-level activity.
c.    cost driver.
d.    non–value-added activity.     

4.      (SO 2)
The first step in the development of an activity-based costing system is:
a.    identify and classify activities and allocate overhead to cost pools.
b.    assign overhead costs to products.
c.    identify cost drivers.
d.    compute overhead rates.     

5.      (SO 4)
Which of the following would be the best cost driver for the assembling cost pool?
a.    Number of product lines.
b.    Number of parts.
c.    Number of orders.
d.    Amount of square footage.     

6.      (SO 4)
The overhead rate for Machine Setups is $100 per setup. Products A and B have 80 and 60 setups, respectively. The overhead assigned to each product is:
a.    Product A $8,000, Product B $8,000.
b.    Product A $8,000, Product B $6,000.
c.    Product A $6,000, Product B $6,000.
d.    Product A $6,000, Product B $8,000.     

7.      (SO 4)
Donna Crawford Co. has identified an activity cost pool to which it has allocated estimated overhead of $1,920,000. It has determined the expected use of cost drivers for that activity to be 160,000 inspections. Widgets require 40,000 inspections, Gadgets 30,000 inspections, and Targets 90,000 inspections. The overhead assigned to each product is:
a.    Widgets $40,000, Gadgets $30,000, Targets $90,000.
b.    Widgets $640,000, Gadgets $640,000, Targets $640,000.
c.    Widgets $360,000, Gadgets $480,000, Targets $1,080,000.
d.    Widgets $480,000, Gadgets $360,000, Targets $1,080,000.     

8.      (SO 5)
A frequently cited limitation of activity-based costing is:
a.    ABC results in more cost pools being used to assign overhead costs to products.
b.    Certain overhead costs remain to be allocated by means of some arbitrary volume-based cost driver such as labor or machine hours.
c.    ABC leads to poorer management decisions.
d.    ABC results in less control over overhead costs.     

9.      (SO 5)
A company should consider using ABC if:
a.    overhead costs constitute a small portion of total product costs.
b.    it has only a few product lines that require similar degrees of support services.
c.    direct labor constitutes a significant part of the total product cost and a high correlation exists between direct labor and changes in overhead costs.
d.    its product lines differ greatly in volume and manufacturing complexity.     

10.      (SO 6)
An activity that adds costs to the product but does not increase its market value is a:
a.    value-added activity.
b.    cost driver.
c.    cost–benefit activity.
d.    non–value-added activity.     

11.      (SO 6)
The following activity is value-added:
a.    Storage of raw materials.
b.    Moving parts from machine to machine.
c.    Shaping a piece of metal on a lathe.
d.    All of the above.     

12.      (SO 7)
A relevant facility-level cost driver for heating costs is:
a.    machine hours.
b.    direct material.
c.    floor space.
d.    direct labor cost.     

*13.      (SO 9)
Under just-in-time processing:
a.    raw materials are received just in time for use in production.
b.    subassembly parts are completed just in time for use in assembling finished goods.
c.    finished goods are completed just in time to be sold.
d.    All of the above.     

*14.      (SO 9)
The primary objective of just-in-time processing is to:
a.    accumulate overhead in activity cost pools.
b.    eliminate or reduce all manufacturing inventories.
c.    identify relevant activity cost drivers.
d.    identify value-added activities.