Exam 1 Flashcards
1
Q
Which of the following statements is false?
- Manufacturing costs include direct materials, direct labor, and manufacturing overhead.
- Indirect labor is included in manufacturing overhead.
- Raw materials include direct materials and exclude indirect materials.
- Direct labor can be easily traced to individual units of product
A
- Raw materials include direct materials and exclude indirect materials.
2
Q
Which of the following statements is false?
- Selling costs can be either direct or indirect costs.
- Selling costs can be either variable or fixed costs.
- Selling costs are included in a contribution format income statement.
- Selling costs are included in manufacturing overhead.
A
- Selling costs are included in manufacturing overhead.
3
Q
Cost: The wages of pediatric nurses
Cost Object: The pediatric department
Direct or Indirect?
A
Direct Cost
4
Q
Cost: Prescription drugs
Cost Object: A particular patient
Direct or Indirect?
A
Direct Cost
5
Q
Cost: Heating the hospital
Cost Object: The pediatric department
Direct or Indirect?
A
Indirect Cost
6
Q
Cost: The salary of the head of pediatrics
Cost Object: The pediatric department
Direct or Indirect?
A
Direct Cost
7
Q
Cost: The salary of the head of pediatrics
Cost Object: A particular pediatric patient
Direct or Indirect?
A
Indirect Cost
8
Q
Cost: Hospital chaplain’s salary
Cost Object: A particular patient
Direct or Indirect?
A
Indirect Cost
9
Q
Cost: Lab tests by outside contractor
Cost Object: A particular patient
Direct or Indirect?
A
Direct Cost
10
Q
Cost: Lab tests by outside contractor
Cost Object: A particular department
Direct or Indirect?
A
Direct Cost
11
Q
Item: The cost of a hard drive installed in a computer.
Cost: ?
DM, DL, S MO, Selling, or Administrative?
A
Direct materials cost
12
Q
Item: The cost of advertising in the Puget Sound Computer User newspaper.
Cost: ?
DM, DL, S MO, Selling, or Administrative?
A
Selling cost
13
Q
Item: The wages of employees who assemble computers from components.
Cost: ?
DM, DL, S MO, Selling, or Administrative?
A
Direct labor cost
14
Q
Item: Sales commissions paid to the company’s salespeople.
Cost: ?
DM, DL, S MO, Selling, or Administrative?
A
Selling cost
15
Q
Item: The salary of the assembly shop’s supervisor.
Cost: ?
DM, DL, S MO, Selling, or Administrative?
A
Manufacturing overhead cost
16
Q
Item: The salary of the company’s accountant.
Cost: ?
DM, DL, S MO, Selling, or Administrative?
A
Administrative cost
17
Q
Item: Depreciation on equipment used to test assembled computers before release to customers.
Cost:
DM, DL, S MO, Selling, or Administrative?
A
Manufacturing overhead cost
18
Q
Costs: Soap and paper towels used by factory workers at the end of a shift.
Product Cost or Period Cost: ?
A
Product Cost
19
Q
Costs: Depreciation on salespersons’ cars.
Product Cost or Period Cost: ?
A
Period Cost
20
Q
Costs: Rent on equipment used in the factory.
Product Cost or Period Cost: ?
A
Product Cost
21
Q
Costs: Lubricants used for machine maintenance.
Product Cost or Period Cost: ?
A
Product Cost
22
Q
Costs: Salaries of personnel who work in the finished goods warehouse.
Product Cost or Period Cost: ?
A
Period Cost
23
Q
Costs: Factory supervisors’ salaries.
Product Cost or Period Cost: ?
A
Product Cost
24
Q
Costs: Heat, water, and power consumed in the factory.
Product Cost or Period Cost: ?
A
Product Cost
25
Costs: Materials used for boxing products for shipment overseas. (Units are not normally boxed.)
Product Cost or Period Cost: ?
Period Cost
26
Costs: Advertising costs.
Product Cost or Period Cost: ?
Period Cost
27
Costs: Workers’ compensation insurance for factory employees.
Product Cost or Period Cost: ?
Product Cost
28
Costs: Depreciation on chairs and tables in the factory lunchroom.
Product Cost or Period Cost: ?
Product Cost
29
Costs: The wages of the receptionist in the administrative offices.
Product Cost or Period Cost: ?
Period Cost
30
Costs: Cost of leasing the corporate jet used by the company’s executives.
Product Cost or Period Cost: ?
Period Cost
31
Costs: The cost of renting rooms at a Florida resort for the annual sales conference.
Product Cost or Period Cost: ?
Period Cost
32
Costs: The cost of packaging the company’s product.
Product Cost or Period Cost: ?
Product Cost
33
Dominik Corporation purchased a machine 5 years ago for $527,000 when it launched product M08Y. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 310 machine costing $545,000 or by a new model 240 machine costing $450,000. Management has decided to buy the model 240 machine. It has less capacity than the model 310 machine, but its capacity is sufficient to continue making product M08Y. Management also considered, but rejected, the alternative of dropping product M08Y and not replacing the old machine. If that were done, the $450,000 invested in the new machine could instead have been invested in a project that would have returned a total of $532,000.
In making the decision to buy the model 240 machine rather than the model 310 machine, the differential cost was:
- $95,000Correct
- $5,000
- $77,000
- $18,000
$95,000
34
Paolucci Corporation's relevant range of activity is 7,800 units to 16,000 units. When it produces and sells 11,900 units, its average costs per unit are as follows:
Average Cost per Unit
Direct materials $7.00
Direct labor $3.90
Variable manufacturing overhead $1.90
Fixed manufacturing overhead $3.20
Fixed selling expense $1.20
Fixed administrative expense $0.90
Sales commissions $1.15
Variable administrative expense $0.80
If 10,900 units are sold, the variable cost per unit sold is closest to:
- $20.05
- $12.80
- $16.00
- $14.75
$14.75
35
Kneeland Corporation has provided the following information:
Cost per Unit Cost per Period
Direct materials $6.80
Direct labor $4.15
Variable manufacturing overhead $1.65
Fixed manufacturing overhead 121500
Sales commissions $1.00
Variable administrative expense $0.50
Fixed selling and administrative $40,500
expense
If 10,000 units are produced, the total amount of manufacturing overhead cost is closest to:
- $186,000
- $138,000
- $162,000
- $150,000
- $138,000
36
Which of the following statements are true?
1. If a job is not completed at year end, then no manufacturing overhead cost would be applied to that job when a predetermined overhead rate is used.
2. Actual overhead costs are not assigned to jobs in a job costing system.
3. The amount of overhead applied to a particular job equals the actual amount of overhead caused by the job.
- Only statement 1 is true.
- Only statement 2 is true.
- Statements 2 and 3 are true.
- All of the statements are true.
- Only statement 2 is true.
37
Which of the following statements are true?
1. The costs attached to products that have not been sold are included in ending inventory on the balance sheet.
2. In absorption costing, nonmanufacturing costs are assigned to units of product.
3. Most countries require some form of absorption costing for external reports.
- Only statement 1 is true.
- Only statement 2 is true.
- Statements 1 and 3 are true.
- All of the statements are true.
- Statements 1 and 3 are true.
38
In a job-order costing system that is based on machine-hours, which of the following formulas is correct?
- Predetermined overhead rate = Actual manufacturing overhead ÷ Actual machine-hours
- Predetermined overhead rate = Actual manufacturing overhead ÷ Estimated machine-hours
- Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours
- Predetermined overhead rate = Estimated manufacturing overhead ÷ Actual machine-hours
- Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours
39
Assigning manufacturing overhead to a specific job is complicated by all of the below except:
- Manufacturing overhead is an indirect cost that is either impossible or difficult to trace to a particular job.
- Manufacturing overhead is incurred only to support some jobs.
- Manufacturing overhead consists of both variable and fixed costs.
- The average cost of actual fixed manufacturing overhead expenses will vary depending on how many units are produced in a period.
- Manufacturing overhead is incurred only to support some jobs.
40
Which of the following statements is not correct concerning multiple overhead rate systems?
- A multiple overhead rate system is more complex than a system based on a single plantwide overhead rate.
- A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate.
- A company may choose to create a separate overhead rate for each of its production departments.
- In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.
- In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.
41
Longobardi Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 33,500 labor-hours. The estimated variable manufacturing overhead was $6.37 per labor-hour and the estimated total fixed manufacturing overhead was $850,900. The actual labor-hours for the year turned out to be 30,100 labor-hours. The predetermined overhead rate for the recently completed year was closest to:
- $31.77 per labor-hour
- $25.40 per labor-hour
- $6.37 per labor-hour
- $35.36 per labor-hour
- $31.77 per labor-hour
42
Bernson Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $492,000 and 30,000 machine-hours for the period. The company incurred actual total fixed manufacturing overhead of $517,000 and 28,300 total machine-hours during the period. The amount of manufacturing overhead that would have been applied to all jobs during the period is closest to:
Note: Round your intermediate calculations to 2 decimal places.
- $464,120
- $492,000
- $487,703
- $25,000
- $464,120
43
Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:
Total machine-hours 33,000
Total fixed manufacturing overhead cost $ 660,000
Variable manufacturing overhead per machine-hour $ 6.00
Recently, Job T687 was completed with the following characteristics:
Number of units in the job 10
Total machine-hours 40
Direct materials $ 715
Direct labor cost $ 1,430
If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to:
Note: Round your intermediate calculations to 2 decimal places.
- $127.40
- $1,014.00
- $445.90
- $300.30
- $445.90
44
In a job-order costing system, indirect labor cost is usually recorded as a debit to:
- Manufacturing Overhead.
- Finished Goods.
- Work in Process.
- Cost of Goods Sold.
- Manufacturing Overhead.
45
In a job-order costing system, manufacturing overhead applied is recorded as a debit to:
- Raw Materials inventory.
- Finished Goods inventory.
- Work in Process inventory.
- Cost of Goods Sold.
- Work in Process inventory.
46
The journal entry to record applying overhead during the production process is:
Debit Credit
-
Manufacturing Overhead XXX
Work in Process XXX
- Debit Credit
Finished Goods XXX
Manufacturing Overhead XXX
- Debit Credit
Manufacturing Overhead XXX
Finished Goods XXX
- Debit Credit
Work in Process XXX
Manufacturing Overhead XXX
- Debit Credit
Work in Process XXX
Manufacturing Overhead XXX
47
Refer to the T-account below:
Manufacturing Overhead
Debit Credit
(2) 9,000 (12) 167,000
(3) 15,000
(4) 80,000
(5) 30,000
(6) 25,000
159,000 167,000
Balance 8,000
- Underapplied overhead.
- Manufacturing overhead that will be carried over to the next period.
- Overapplied overhead.
- A bookkeeping error.
- Overapplied overhead.
48
Under a job-order costing system, the dollar amount transferred from Work in Process to Finished Goods is the sum of the costs charged to all jobs:
- started in process during the period.
- in process during the period.
- completed and sold during the period.
- completed during the period.
- completed during the period.
49
In the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the “Total raw materials available” is computed by adding together the “Beginning raw materials inventory” and:
- Ending raw materials inventory
- Raw materials used in production
- Purchases of raw materials
- Indirect materials included in manufacturing overhead
- Purchases of raw materials
50
When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true?
- Work in Process will decrease.
- Cost of Goods Sold will increase.
- Net income will decrease.
- Gross margin will increase.
- Gross margin will increase.
51
Molzahn Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year:
Estimated total manufacturing overhead at the beginning of the year $481,250
Estimated direct labor-hours at the beginning of the year 35,000 dl hrs
Results of operations:
Actual direct labor-hours 40,000 dl hrs
Manufacturing overhead:
Indirect labor cost $179,000
Other manufacturing overhead costs incurred $465,000
Manufacturing overhead is overapplied or underapplied by:
- $165,000 Overapplied
- $94,000 Underapplied
- $165,000 Underapplied
- $94,000 Overapplied
- $94,000 Underapplied
52
TAMUCC Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 30,700 labor-hours. The estimated variable manufacturing overhead was $5.09 per labor-hour and the estimated total fixed manufacturing overhead was $724,827. The actual labor-hours for the year turned out to be 27,300 labor-hours.
The predetermined overhead rate for the recently completed year was closest to:
$28.70 per labor-hour
53
ABC Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:
Total machine-hours 30,500
Total fixed manufacturing overhead cost
$610,000
Variable manufacturing overhead per machine-hour $6.00
Recently, Job T687 was completed with the following characteristics:
Number of units in the job 10
Total machine-hours 30
Direct materials $690
Direct labor cost $1,370
If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to:
$397.60
54
CC Corporation is using a predetermined overhead rate that was based on estimated total fixed manufacturing overhead of $504,000 and 30,000 machine-hours for the period.
The company incurred actual total fixed manufacturing overhead of $517,000 and 29,300 total machine-hours during the period.
The amount of manufacturing overhead that would have been applied to all jobs during the period is closest to:
$492,240
55
,Gator Corporation is a manufacturer that uses job-order costing. The company closes out any overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has supplied the following data for the just completed year:
Results of operations:
Actual dl hrs. 40,000
Manufacturing overhead:
Indirect labor cost $179,000
Other moh costs incurred $465,000
Manufacturing overhead is overapplied or underapplied by:
94,000
56
Reports financial info to external parties, stockholders, investors, and regulators
What is Financial accounting?
57
Providing info to managers within an organization, so they can formulate plans, control operations, and make decisions
What is Managerial accounting?
58
- Assign cost to cost object.
- Accounting for cost in manufacturing companies
- Preparing financial statements
- Predicting cost behavior in response to changes in activity
- Making decisions
What is Purpose of classification?
59
Anything for which cost data is desired
Examples:
- Product: car/computer/coffee
- Job: 100 flyers
- Organization unit: business school
- Service: CPA tax return
What is a cost object?
60
Can be easily and conveniently traced to unit of product
- Example: factory manager salary for manufacturing department
What is direct cost?
61
Can’t be easily inconveniently traced to unit a product
- Example: factory managers salary for a particular product
What is indirect cost?
62
Indirect costs incurred to support a number of cost objects
- These costs can’t be traced to any individual cost objects
What are common costs?
63
Raw materials that become an integral part of the product, and can be conveniently traced directly to it
- Aren’t just natural resources, any materials
- Example: a radio installed in a car
What are direct materials?
64
Labor costs that can easily be traced to individual units of product
- Also, called touch labor
- Example: wages paid to car assembly workers
What is direct labor?
65
Includes all manufacturing costs, except direct materials, and direct labor, costs can’t be readily traced to finish products
- Includes in direct materials that can’t be easily traced
- Example: glue used to assemble a chair
- Includes indirect labor that can’t be easily traced
- Example: janitors, security guards
What is manufacturing overhead?
66
- Manufacturing related.
- Not direct materials
- Not direct labor
What are the 3 conditions to be manufacturing?
67
Only those indirect costs associated with __________ _______ _______________are included in manufacturing overhead
operating the factory
68
Costs necessary to secure the order and deliver the product.
- Can be either direct or indirect costs
What are selling costs?
69
all executive, organizational, clerical costs
- can be either direct or indirect costs
What are administrative costs?
70
Include all the costs that are involved in acquiring or making a product
What are product costs?
71
Include any materials that go into the final product
What are raw materials?
72
Units of product that are only partially complete and require further work before ready to sell
What is work in progress?
73
Completed units that haven’t been sold
What are finished goods?
74
From raw materials to work in progress
When direct materials are used in production costs, go ____________
75
To convert direct materials into finished goods
Direct labor in menu texturing overhead costs are added to work in progress _____________
76
From work in progress to finished goods
Once units of production are completed, their costs are transferred ___________________________
77
From finished goods to cost of goods sold
When manufacturer sells, costs are transferred ________________
78
Include direct materials, strict labor manufacturing overhead
What are product costs?
79
Include all selling costs and administrative costs.
What are period costs?
80
Refers to how a cost will react to changes in the level of activity
- example: clothing, factory, if sales goes up, what happens to direct material costs?
- Most common classifications are variable costs, fixed costs, and mixed costs
What is cost behavior?
81
A cost that remains constant, and total, regardless of changes in the level of activity
- committed: long-term, multiyear horizon, can’t be significantly reduced in the short term
- Example: investment in facilities and equipment
- Discretionary: usually arise from annual decisions, may be altered in the short term by current managerial decisions
- Example: advertising, manager development program
What are fixed costs?
82
A cost that varies in total, indirect proportion to charges in the level of activity
- Example: $20 for a pizza and one dollar per beverage
Total beverage: total variable cost
Cost per beverage: variable cost per unit
What is a variable cost?
83
A measure of what causes the entrance of variable cost
- as the level of activity base increases, the total variable cost increases proportionally
- Example: units, produced, machine hours, miles driven, labor hours
What is activity base/cost driver?
84
Contains both variable and fixed elements
Total mix cost line: Y = a+bX
Y = total manufacturing cost
b = variable cost per unit of activity
a = total fixed cost
X = level of activity
What are mixed costs?
85
Difference in cost between any two alternatives
- Difference in revenue between two alternatives is called differential revenue
- Both are always relevant to decisions
- Either fixed or variable
What are differential costs?
86
Have already been incurred and can’t be changed now or in future, and hast to meet both terms
- These irrelevant costs should be ignored
What are sunk costs?
87
A common type of absorption costing system
- Oh manufacturing costs, including fixed and variable, are assigned to units of product
- All non-manufacturing costs are treated as. Costs and are assigned to units of product.
What is job order costing?
88
Many different products are produced each period
- Products are manufactured to order
- Each order requires chasing/allocating costs to each job in maintaining records for each job
- Example:
Boeing (aircraft manufacturing)
University tees (manufacture to order)
Walt Disney (movie production)
Job order costing system is used when?
89
Charge direct materials and direct labor costs to each job as work is performed
Manufacturing overhead (indirect materials, and indirect labor) are allocated to odd jobs rather than directly trace to each job
What is cost flow?
90
Direct labor hours, direct, labor funds, or machine hours, is used to assign manufacturing overhead to individual jobs
What is an allocation base?
91
Used to apply overhead to jobs is determined before period begins.
- Ideally, the allocation base is a cost driver that causes overhead
What is predetermined overhead rate?
92
applies less than actual overhead
- Increases cost of goods sold, decreases net operating income
What is under-applied overhead?
93
Applies more than actual overhead
- Decrease of cost of goods sold, increases net operating income
What is overapplied overhead?
94
No distinction between work done in the prior and current periods
- The equivalent of units of production, different from equivalent units
What is weighted average?
