Deck 10: Accounting for Manufacturing Operations

Question 1

For a construction contractor, the wages of carpenters would be classified as direct labor cost.

Answer 1

True

Question 2

The costs of materials and labor that do not enter directly into the finished product are classified as cost of goods sold.

Answer 2

False

Question 3

Product cost consists of factory overhead.

Answer 3

True

Question 4

Period costs are costs that are incurred for the production requirements of a certain period.

Question 5

Direct materials costs are included in the conversion costs of a product.

Question 6

A manufacturing business converts materials into finished products through the use of machinery and labor.

Question 7

Sales commission is an example of factory overhead cost.

Question 8

The current year's advertising costs are normally considered as product costs.

Question 9

If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as factory overhead cost.

Question 10

If the cost of materials is not a significant portion of the total product cost, the materials may be classified as a part of factory overhead cost.

Question 11

Inventories of finished products are reported as current assets on a manufacturer's balance sheet.

Question 12

The cost of materials entering directly into the manufacturing process is classified as factory overhead cost.

Question 13

Reporting under managerial accounting is not restricted by specific rules such as generally accepted accounting principles (GAAP).

Question 14

Conversion cost is the combination of direct labor cost and factory overhead cost.

Question 15

Non-manufacturing costs are generally classified into two categories: selling and administrative.

Question 16

Managerial accounting reports information primarily for stakeholders that are external to the company.

Question 17

A manufacturing business reports three types of inventory on its balance sheet: direct materials, products in the process of being manufactured, and finished products.

Question 18

For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.

Question 19

As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on the balance sheet as inventory.

Question 20

The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead cost.

Question 21

The underapplied factory overhead amount may be transferred to cost of goods sold at the end of the fiscal year.

Question 22

If the actual overhead incurred is less than the applied factory overhead, it is called overapplied factory overhead.

Question 23

Direct labor cost is an example of a product cost.

Question 24

Depreciation expense on factory equipment is part of factory overhead cost.

Question 25

Manufacturers implement the philosophy of just-in-time processing to produce products with high quality, low cost, and instant availability.

Question 26

In job order cost accounting system, perpetual inventory records are maintained in controlling accounts and subsidiary ledgers for materials, work in process, and finished goods.

Question 27

Materials inventory consists of the costs of direct and indirect materials that have not yet entered the manufacturing process.

Question 28

The direct labor and overhead costs of providing services to clients are accumulated in a Work-in-Process account.

Question 29

The summary of the time tickets at the end of each month is the basis for recording the direct and indirect labor costs incurred in production.

Question 30

Factory overhead is applied to production using a predetermined overhead rate.

Question 31

Using the job order cost system, service business are able to bill clients on a weekly or monthly basis, even when the job has not been completed.

Question 32

In response to materials requisition, materials are transferred from the storeroom to the factory.

Question 33

In a job order cost system, materials and supply costs for a service business are normally included as part of overhead cost.

Question 34

Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within expected ranges.

Question 35

If factory overhead applied is less than the actual costs, the overhead is said to be underapplied.

Question 36

A job order cost system provides for a separate record of the costs for each particular quantity of product that is manufactured.

Question 37

Indirect labor is included in factory overhead.

Question 38

After the goods are completed, their costs are transferred from Work in Process to Finished Goods.

Question 39

A job order cost system accumulates costs for each of the departments or processes within the factory.

Question 40

A company may use a job order cost system for some of its products and a process cost system for other products.

Question 41

Which of the following statements is true of managerial accounting?

A) Reporting under managerial accounting is constrained by rules such as generally accepted accounting principles.
B) Managerial accounting is required to be reported annually, also may be reported monthly or quarterly.
C) Managerial accounting provides information to the external stakeholders of the company.
D) Managerial accounting is primarily concerned with generating information for use by managers.

Question 42

Which of the following is an example of direct materials cost for an automobile manufacturer?

A) Cost of oil lubricants for factory machinery
B) Cost of wages of assembly worker
C) Varnish for coating
D) Cost of interior upholstery

Question 43

Which of the following is most likely to be a product cost?

A) Salary of the vice president of sales
B) Advertising for a particular product
C) Drill bits for a drill press used in the plant assembly area
D) Salary of the company receptionist

Question 44

Compute factory overhead cost from the following costs: $$\begin{array} { | l | r | } \hline \text { Depreciation on factory buil dings } & \$ 45,950 \\\hline \text { Depreciation on office equipment } & 32,980 \\\hline \text { Direct materials used } & 96,840 \\\hline \text { Indirect labor } & 6,580 \\\hline\end{array}$$

A) $73,000
B) $52,530
C) $96,840
D) $78,930

Question 45

Activity-based costing is a method of accumulating and allocating costs by department.

Question 46

Which of the following would be classified as direct materials for an auto manufacturer?

A) Factory light bulbs
B) Material used for door panels
C) Drill bits
D) Steel

Question 47

If the cost of direct materials is not a significant portion of the total product cost, it may be classified as:

A) direct labor costs.
B) selling and administrative costs.
C) miscellaneous costs.
D) factory overhead costs.

Question 48

Which of the following is true of a direct materials cost?

A) A direct materials cost is included in factory overhead.
B) It is sometimes called factory burden.
C) It is not a significant portion of the total product cost.
D) It is the cost of any material that is an integral part of the finished product.

Question 49

Depreciation on factory equipment is an example of a_____.

A) period cost
B) product cost
C) selling cost
D) prime cost

Question 50

Which of the following is an example of direct labor cost for an airplane manufacturer?

A) Cost of wages of janitors
B) Cost of wages of assembly worker
C) Salary of plant supervisor
D) Salary of the chairman

Question 51

Which of the following items would be classified as a part of prime cost?

A) Direct labor cost
B) Factory overhead cost
C) Selling cost
D) Administrative cost

Question 52

The cost of wages paid to employees directly involved in the manufacturing process of converting materials into finished product is classified as:

A) factory overhead cost.
B) direct labor cost.
C) wages expense.
D) direct materials cost.

Question 53

Which of the following is a period cost?

A) Power
B) Depreciation on factory equipment
C) Sales commissions
D) Wages of an assembly worker

Question 54

Finished goods inventory includes _____.

A) telephone charges
B) advertising expenses
C) factory overhead
D) director's fees

Question 55

Which of the following is a product cost?

A) Administrative cost
B) Direct labor cost
C) Selling cost
D) Opportunity cost

Question 56

Which of the following is considered a part of factory overhead cost?

A) Sales commissions
B) Depreciation of factory buildings
C) Depreciation of office equipment
D) Direct materials used

Question 57

Costs are often classified by their relationship to a segment of operations, called a _____.

A) prime cost
B) controlling account
C) cost object
D) cost sheet

Question 58

Which of the following statements is a difference between financial accounting and managerial accounting?

A) Under financial accounting, reports are prepared using GAAP, whereas under managerial accounting, information that is useful to management for its decision making is not recorded using GAAP.
B) Financial accounting focuses on providing information for internal use, whereas managerial accounting focuses on providing information for external use.
C) Under financial accounting, reports are prepared as and when management needs them, whereas under managerial accounting, reports are prepared on a monthly basis.
D) Financial accounting has a subjective approach, whereas managerial accounting has an objective approach.

Question 59

Which of the following is an example of a factory overhead cost?

A) Repair and maintenance cost on the administrative building
B) Factory heating and lighting cost
C) Insurance premiums on salespersons' automobiles
D) President's salary

Question 60

Service companies can effectively use activity-based costing to compute product (service) costs.

Question 61

A _____ is prepared when materials that have been ordered are received and inspected.

A) supplier's invoice
B) materials ledger
C) receiving report
D) materials requisition

Question 62

Which of the following businesses is most likely to use a job order costing system?

A) A paper mill
B) A swimming pool installer
C) A company that manufactures chlorine for swimming pools
D) An oil refinery

Question 63

Which of the following costs appear on a balance sheet?

A) Selling expenses
B) Product Costs
C) Period Costs
D) Opportunity costs

Question 64

Dividing estimated total factory overhead costs by estimated activity base will give the _____.

A) underabsorbed factory overhead rate
B) predetermined factory overhead rate
C) ​overabsorbed factory overhead rate
D) ​actual factory overhead rate

Question 65

Which of the following best explains a job order cost system?

A) It provides product costs for each manufacturing department or process.
B) It is often used by companies that manufacture custom products for customers or batches of similar products.
C) It is often used by companies that manufacture units of a product that are indistinguishable from each other.
D) It is used by companies that manufacture units of a product using a continuous production process.

Question 66

The document authorizing the issuance of materials from the storeroom for use in manufacturing is called:

A) materials requisition.
B) purchase requisition.
C) receiving report.
D) purchase order.

Question 67

In a job order cost accounting system, the effect of the flow of direct materials into production will be:

A) increase in Work-in-Process and decrease in Materials Inventory.
B) increase in Materials Inventory and decrease in Work-in-Process.
C) increase in Factory Overhead and decrease in Materials Inventory.
D) increase in Work-in-Process and decrease in Supplies.

Question 68

Which of the following would be a period costs for a textbooks printing company?

A) Wages of a press operator
B) Utility costs of the factory
C) Advertising expenses
D) Paper costs

Question 69

For which of the following businesses would the job order cost system be most appropriate?

A) Custom cabinet manufacturer
B) Automobile manufacturer
C) Lumber mill
D) Meat processor

Question 70

Recording direct labor costs in a job order cost accounting system:

A) increases Factory Overhead and decreases Work-in-Process.
B) increases Finished Goods and increases Wages Payable.
C) increases Work-in-Process and increases Wages Payable.
D) increases Factory Overhead and increases Wages Payable.

Question 71

A(n) _____ provides product costs for each quantity of a product that is manufactured.

A) process costing
B) job order costing
C) activity based costing
D) DuPont costing

Question 72

Which of the following businesses is most likely to use process cost accounting system?

A) Custom cabinet manufacturer
B) Dress designer
C) Lumber mill
D) Printing firm

Question 73

Increase in the Work-in-Process account occur when:

A) materials are received into the storeroom.
B) factory overhead costs are incurred.
C) direct labor is recorded from the time sheets.
D) materials are ordered.

Question 74

A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the materials from the Materials account to:

A) Work-in-Process and Cost of Goods Sold.
B) Work-in-Process and Factory Overhead.
C) Finished Goods and Cost of Goods Sold.
D) Work-in-Process and Finished Goods.

Question 75

Which of the following are the two main types of cost accounting systems for manufacturing operations?

A) Process cost and general accounting systems
B) Job order cost and process cost systems
C) Job order cost and general accounting systems
D) Process cost and replacement cost systems

Question 76

Direct materials, work-in-process, and finished goods inventory are most likely to be reported on the balance sheet of a(n):

A) financial consultant.
B) apparel boutique.
C) automobile company.
D) insurance company.

Question 77

Which of the following is true of job order cost systems?

A) Examples of companies that use job order cost systems would be oil refineries, paper producers, chemical processors, and food processors.
B) Job order cost systems are not widely used.
C) Job order cost systems are often used by companies that manufacture custom products for customers or batches of similar products.
D) Job order cost systems provide product costs for each manufacturing department or process.

Question 78

Which of the following is most likely a period cost?

A) Depreciation on factory lunchroom furniture
B) Salary of telephone receptionist in the sales office
C) Salary of a security guard for the factory parking lot
D) Computer chips used by a computer manufacturer

Question 79

The amount of time spent by each employee and the labor costs incurred for each individual job or for factory overhead are recorded on the:

A) employees' earnings records.
B) in-and-out board.
C) time tickets.
D) receiving order

Question 80

Which of the following manufacturing costs is an indirect cost of producing a product?

A) Oil lubricants used for factory machinery
B) Commissions for sales personnel
C) Hourly wages of an assembly worker
D) Memory chips for a microcomputer manufacturer