Deck 1: Introduction to Cost Accounting

Question 1

The following data were taken from Mansfield Merchandisers on January 31: What was the Cost of goods sold in January?

A)$585,000
B)$650,000
C)$620,000
D)$535,000

Answer 1

A

Question 2

The business entity that purchases finished goods for resale is a:

A)Manufacturer.
B)Merchandiser.
C)Service business.
D)For-profit service business.

Answer 2

B
The business entity that purchases finished goods for resale is a merchandiser.

Question 3

Aaron Smith is the supervisor of the Machining Department of Bennett Corporation. He has control over and is responsible for manufacturing costs traced to the department. The Machining Department is an example of a(n):

A)cost center.
B)inventory center.
C)supervised work center.
D)worker's center.

Answer 3

A
The criteria for a cost center are 1) a reasonable basis on which manufacturing costs may be traced and 2) a person who has control over and is accountable for many of the costs charged to that center.

Question 4

Taylor Logan is an accountant with the Tanner Corporation. Taylor's duties include preparing reports that focus on both historical and estimated data needed to conduct ongoing operations and do long-range planning. Taylor is a(n)

A)certified financial planner.
B)management accountant.
C)financial accountant.
D)auditor.

Question 5

Responsibility accounting would most likely hold a manager of a manufacturing unit responsible for:

A)cost of raw materials.
B)quantity of raw materials used.
C)the number of units ordered.
D)amount of taxes incurred.

Question 6

Which of the following items of cost would be least likely to appear on a performance report based on responsibility accounting for the supervisor of an assembly line in a large manufacturing situation?

A)Direct labor
B)Indirect materials
C)Selling expenses
D)Repairs and maintenance

Question 7

Joshua Company prepares monthly performance reports for each department. The budgeted amounts of wages for the Finishing Department for the month of August and for the eight-month period ended August 31 were $12,000 and $100,000, respectively. Actual wages paid through July were $91,500, and wages for the month of August were $11,800. The month and year-to-date variances, respectively, for wages on the August performance report would be:

A)$200 F; $8,500 F
B)$200 F; $3,300 U
C)$200 U; $3,300 U
D)$200 U; $8,500 F

Question 8

Umberg Merchandise Company's cost of goods sold last month was $1,350,000. the Merchandise Inventory at the beginning of the month was $250,000 and there was $325,000 of Merchandise Inventory at the end of the month. Umberg's merchandise purchases were:

A)$1,350,000
B)$1,275,000
C)$1,425,000
D)$1,675,000

Question 9

As a result of recent accounting scandals involving companies such as Enron and World Com, the Sarbanes-Oxley Act of 2002 was written to protect shareholders of public companies by improving

A)management accounting.
B)corporate governance.
C)professional competence.
D)the corporate legal process.

Question 10

Unit cost information is important for making all of the following marketing decisions except:

A)Determining the selling price of a product.
B)Bidding on contracts.
C)Determining the amount of advertising needed to promote the product.
D)Determining the amount of profit that each product earns.

Question 11

Control is the process of monitoring the company's operations to determine whether the company's objectives are being achieved. Effective control is achieved through all of the following except:

A)periodically measuring and comparing company results.
B)assigning responsibility for costs to employees responsible for those costs.
C)constantly monitoring employees to ensure they do exactly as they are told.
D)taking necessary corrective action when variances warrant doing so.

Question 12

The business entity that converts purchased raw materials into finished goods by using labor, technology, and facilities is a:

A)Manufacturer.
B)Merchandiser.
C)Service business.
D)Not-for-profit service agency.

Question 13

Which of the following is not a key element of the Sarbanes Oxley Act to improve corporate governance?

A)The establishment of the Public Company Accounting Oversight Board
B)Requiring a company's annual report to contain an internal control report that includes management's opinion on the effectiveness of internal control
C)Severe criminal penalties for retaliation against "whistleblowers"
D)Requiring that the company's performance reports are prepared in accordance with generally accepted accounting principles

Question 14

ISO 9000 is a set of international standards for:

A)determining the selling price of a product.
B)cost control.
C)quality management.
D)planning,

Question 15

Which of the following items of cost would be least likely to appear on a performance report based on responsibility accounting for the supervisor of an assembly line in a large manufacturing situation?

A)Direct labor
B)Supervisor's salary
C)Materials
D)Repairs and maintenance

Question 16

Examples of service businesses include:

A)Airlines, architects, and hair stylists.
B)Department stores, poster shops, and wholesalers.
C)Aircraft producers, home builders, and machine tool makers.
D)None of these are correct.

Question 17

The process of establishing objectives or goals for the firm and determining the means by which they will be met is:

A)controlling.
B)analyzing profitability.
C)planning.
D)assigning responsibility.

Question 18

Cost accounting differs from financial accounting in that financial accounting:

A)Is mostly concerned with external financial reporting.
B)Is mostly concerned with individual departments of the company.
C)Provides the additional information required for special reports to management.
D)Puts more emphasis on future operations.

Question 19

The type of merchandiser who purchases goods from the producer and sells to stores who sell to the consumer is a:

A)Manufacturer.
B)Retailer.
C)Wholesaler.
D)Service business.

Question 20

Which of the following statements best describes a characteristic of a performance report prepared for use by a production line department head?

A)The costs in the report should include only those controllable by the department head.
B)The report should be stated in dollars rather than in physical units so the department head knows the financial magnitude of any variances.
C)The report should include information on all costs chargeable to the department, regardless of their origin or control.
D)It is more important that the report be precise than timely.

Question 21

A(n) __________ requires estimating inventory balances during the year for interim financial statements and shutting down operations to count all inventory items at the end of the year.

A)periodic inventory system
B)inventory control account
C)perpetual inventory system
D)inventory cost method

Question 22

Factory overhead includes:

A)Indirect labor but not indirect materials.
B)Indirect materials but not indirect labor.
C)All manufacturing costs, except indirect materials and indirect labor.
D)All manufacturing costs, except direct materials and direct labor.

Question 23

In the financial statements, Materials should be categorized as:

A)Revenue.
B)Expenses.
C)Assets.
D)Liabilities.

Question 24

The Macke Company's payroll summary showed the following in November: What is the amount that would be included in factory overhead in November?

A)$20,000
B)$35,000
C)$95,000
D)$120,000

Question 25

The following data are from Burton Corporation, a manufacturer, for the month of September: Compute the prime costs.

A)$344,000
B)$135,000
C)$335,000
D)$256,000

Question 26

For a manufacturer, the cost of all materials purchases and on hand to be used in the manufacturing process is:

A)Merchandise Inventory.
B)Finished Goods.
C)Work in Process.
D)Materials.

Question 27

The balance in Kayser Manufacturing Company's Finished Goods account at November 30 was $825,000. Its November cost of goods manufactured was $2,350,000 and its cost of goods sold in November was $2,455,000. What was the balance in Kayser's Finished Goods at November 1?

A)$435,000
B)$640,000
C)$710,000
D)$930,000

Question 28

For a manufacturer, manufacturing costs incurred to date for goods in various stages of production, but not yet completed is:

A)Merchandise Inventory.
B)Finished Goods.
C)Work in Process.
D)Materials.

Question 29

For a manufacturer, the total cost of manufactured goods completed but still on hand is:

A)Merchandise Inventory.
B)Finished Goods.
C)Work in Process.
D)Materials.

Question 30

Which of the following is most likely to be considered an indirect material in the manufacture of a sofa?

A)Lumber
B)Glue
C)Fabric
D)Foam rubber

Question 31

Ashley Corp. had finished goods inventory of $50,000 and $60,000 at April 1 and April 30, respectively, and cost of goods manufactured of $175,000 in April. Cost of goods sold in April was:

A)$165,000
B)$175,000
C)$185,000
D)$225,000

Question 32

A typical factory overhead cost is:

A)Freight out.
B)Stationery and printing.
C)Depreciation on machinery and equipment.
D)Postage.

Question 33

Payroll is debited and Wages Payable is credited to:

A)Pay the payroll taxes.
B)Record the payroll.
C)Pay the payroll.
D)Distribute the payroll.

Question 34

The Macke Company's payroll summary showed the following in November: What is the amount that would be included in direct labor in November?

A)$25,000
B)$60,000
C)$95,000
D)$120,000

Question 35

Factory overhead would include:

A)Wages of office clerk.
B)Sales manager's salary.
C)Supervisor's salary.
D)Tax accountant's salary.

Question 36

Witt Company, like most manufacturers, maintains a continuous record of purchases, materials issued into production and balances of all goods in stock, so that inventory valuation data is available at any time. This is an example of a(n)

A)perpetual inventory system.
B)inventory control account.
C)periodic inventory system.
D)inventory cost method.

Question 37

The term "prime cost" refers to:

A)The sum of direct labor costs and all factory overhead costs.
B)The sum of direct material costs and direct labor costs.
C)All costs associated with manufacturing other than direct labor costs and direct material costs.
D)Manufacturing costs incurred to produce units of output.

Question 38

Inventory accounts for a manufacturer include all of the following except:

A)Merchandise Inventory.
B)Finished Goods.
C)Work in Process.
D)Materials.

Question 39

The term "conversion costs" refers to:

A)The sum of direct labor costs and all factory overhead costs.
B)The sum of direct material costs and direct labor costs.
C)All costs associated with manufacturing other than direct labor costs.
D)Direct labor costs incurred to produce units of output.

Question 40

The following data are from Burton Corporation, a manufacturer, for the month of September: Compute the conversion costs.

A)$335,000
B)$209,000
C)$281,000
D)$256,000

Question 41

In job order costing, the basic document for accumulating the cost of each job is the:

A)Job cost sheet.
B)Requisition sheet.
C)Purchase order.
D)Invoice.

Question 42

According to the Institute of Management Accountants (IMA) Statement of Ethical Professional Practice, under the Integrity Standard, each member has the responsibility to:

A)Communicate information fairly and objectively.
B)Keep information confidential.
C)Mitigate actual conflicts of interest.
D)Maintain an appropriate level of professional competence.

Question 43

Under a job order system of cost accounting, Cost of Goods Sold is debited and Finished Goods is credited for a:

A)Transfer of materials to the factory.
B)Shipment of completed goods to the customer.
C)Transfer of completed production to the finished goods storeroom.
D)Purchase of goods on account.

Question 44

According to the Institute of Management Accountants (IMA) Statement of Ethical Professional Practice, performing professional duties in accordance with relevant laws, regulations and technical standards is a component of which standard?

A)Competence
B)Confidentiality
C)Integrity
D)Credibility

Question 45

An industry that would most likely use process costing procedures is:

A)Beverage.
B)Home Construction.
C)Printing.
D)Shipbuilding.

Question 46

Selected data concerning the past fiscal year's operations (000's omitted) of the Stanley Manufacturing Company are presented below: The cost of goods sold during the year was:

A)$730.
B)$775.
C)$675.
D)$765.

Question 47

When should process costing techniques be used in assigning costs to products?

A)In situations where standard costing techniques should not be used
B)If products manufactured are substantially identical
C)When production is only partially completed during the accounting period
D)If products are manufactured on the basis of each order received

Question 48

A standard cost system is one:

A)that provides a separate record of cost for each special-order product.
B)that uses predetermined costs to furnish a measurement that helps management make decisions regarding the efficiency of operations.
C)that accumulates costs for each department or process in the factory.
D)where costs are accumulated on a job cost sheet.

Question 49

Which of the following is not a cost that is accumulated in Work in Process?

A)Direct materials
B)Administrative expense
C)Direct labor
D)Factory overhead

Question 50

Which of the following production operations would be most likely to employ a job order system of cost accounting?

A)Candy manufacturing
B)Crude oil refining
C)Printing text books
D)Flour Milling

Question 51

The Institute of Management Accountants (IMA) Statement of Professional Practice includes all of the following standards except:

A)Confidentiality.
B)Commitment.
C)Integrity.
D)Competence.

Question 52

Mountain Company produced 20,000 blankets in June to be sold during the holiday season. The manufacturing costs were: The cost per blanket is:

A)$6.25.
B)$9.00.
C)$12.00.
D)$14.75.

Question 53

Mountain Company produced 20,000 blankets in June to be sold during the holiday season. The manufacturing costs were: Management has decided that the mark-on percentage necessary to cover the product's share of selling and administrative expenses and to earn a satisfactory profit is 30%. The selling price per blanket should be:

A)$12.00.
B)$15.60.
C)$23.60.
D)$31.20.

Question 54

Under a job order system of cost accounting, the dollar amount of the entry to transfer inventory from Work in Process to Finished Goods is the sum of the costs charged to all jobs:

A)In process during the period.
B)Completed and sold during the period.
C)Completed during the period.
D)Started in process during the period.

Question 55

The statement of costs of goods manufactured shows:

A)Office supplies used in accounting office.
B)Deprecation of factory building.
C)Salary of sales manager.
D)Rent paid on finished goods warehouse.

Question 56

Under a job order cost system of accounting, the entry to distribute payroll to the appropriate accounts would be:

A)Debit-PayrollCredit-Wages Payable
B)Debit-Work in ProcessDebit-Factory OverheadDebit-Selling and Administrative ExpenseCredit-Payroll
C)Debit-Work in ProcessDebit-Finished GoodsDebit-Cost of Goods SoldCredit-Payroll
D)Debit-Work in ProcessDebit-Factory OverheadDebit-Selling and Administrative ExpenseCredit-Wages Payable

Question 57

At a certain level of operations, per unit costs and selling price are as follows: manufacturing costs, $50; selling and administrative expenses, $10; selling price, $80. Given this information, the mark-on percentage to manufacturing cost used to determine selling price must have been:

A)40 percent.
B)60 percent.
C)33 percent.
D)25 percent.

Question 58

Selected data concerning the past fiscal year's operations (000's omitted) of the Stanley Manufacturing Company are presented below: Assuming Stanley does not use indirect materials, the cost of materials purchased during the year amounted to:

A)$455.
B)$450.
C)$365.
D)$360.

Question 59

A law firm wanting to track the costs of serving different clients may use a:

A)process cost system.
B)job order cost system.
C)cost control system.
D)standard cost system.

Question 60

Selected data concerning the past fiscal year's operations (000's omitted) of the Stanley Manufacturing Company are presented below: The cost of goods manufactured during the year was:

A)$735.
B)$710.
C)$665.
D)$705.

Question 61

The following inventory data relate to the Reta Company: Revenues and costs for the period: Compute the following for the year:
a.Direct materials purchased
b.Direct labor costs incurred
c.Cost of goods sold
d.Gross profit

Question 62

The following inventory data relate to the Reta Company: Revenues and costs for the period: Prepare journal entries for the following, making any necessary computations:
a.Purchase of materials on account
b.Issuance of materials into production
c.Transfer the cost of completed work to Finished Goods
d.Record the sale of the goods on account and the related cost of goods sold.

Question 63

The following data was taken from the general ledger and other records of Martinez Manufacturing Co. at July 31, the end of the first month of operations in the current fiscal year:
a.Prepare a statement of cost of goods manufactured.
b.Determine the cost of goods sold for the month.

Question 64

The following data were taken from Middletown Merchandisers on July 31, for the first month of its fiscal year: Compute the inventory at July 1.

Question 65

The Shawshank Manufacturing Co. uses a job order cost system of accounting. The following information was taken from the books of the company after all posting had been completed at the end of January:
a.Prepare the journal entries to allocate the costs of materials, labor, and factory overhead to each job and to transfer the costs of jobs completed to Finished Goods.
b.Compute the total production cost of each job.
c.Compute the unit cost of each job.
d.Compute the selling price per unit for each job, assuming a mark-on percentage of 40 percent.

Question 66

The following data was taken from the general ledger and other records of Marwick Manufacturing Co. at January31, the end of the first month of operations in the current fiscal year:
a.Prepare a statement of cost of goods manufactured.
b.Determine the cost of goods sold for the month.

Question 67

Tom Jones, a management accountant, was faced with an ethical conflict at the office. According to the Institute of Management Accountants' Statement of Professional Practice, the first action Tom should pursue is to:

A)follow his organization's established policies on the resolution of such conflict.
B)contact the local newspaper.
C)contact the company's audit committee.
D)consult an attorney.

Question 68

Custom Cabinets Inc. manufactures goods on a job order basis. During the month of November, three jobs were started. (There was no work in process at the beginning of the month.) Jobs 401 and 402 were completed and sold for $14,500 and $19,000, respectively, during the month; Job 403 was still in process at the end of November.
The following data are taken from the job cost sheets for each job. Factory overhead charges include a total of $900 of indirect materials and $600 of indirect labor. One work in process control account is used. Prepare a journal entry to record each of the following:
a.Materials used
b.Factory wages and salaries earned
c.Factory Overhead transferred to Work in Process
d.Jobs completed
e.
Jobs sold

Question 69

The following data were taken from the general ledger and other data of Spargus Manufacturing on May 31: Compute the cost of goods sold for Spargus Manufacturing, selecting the appropriate items from the list provided.

Question 70

The following data were taken from the general ledger of Data Corp., a retailer of computers and accessories: Compute the cost of goods sold for the month of August.

Question 71

Prepare a performance report showing both month and year-to-date data for Post Manufacturing's Machining Department for February, 2011 using the following data:

Question 72

Following is a list of costs incurred by the Sitka Products Co. during the month of June: Prepare the journal entries necessary to record the issuance of materials, the distribution of labor cost, the recording of factory overhead, and the entry transferring Factory Overhead to Work in Process.