Question 1

Which of the following documents initiates the purchasing of materials?
A)Job order cost sheet
B)Receiving report
C)Purchase request
D)Purchase order

Accepted Answer

Purchase request initiates the purchasing of materials.

Question 2

Which of the following is a source document for purchase of materials?
A)Vendor's invoice
B)Purchase request
C)Receiving report
D)All of these

Accepted Answer

A vendor's invoice is a document generated by the vendor indicating the amount owed for materials purchased. A purchase request is a document used to request authorization to purchase materials. A receiving report is a document used to record the receipt of materials and compare them to the original purchase order. All three of these documents are necessary for the purchase of materials, making D the correct answer.

Question 3

Which of the following is not a product cost?
A)Indirect materials costs
B)Packaging costs
C)Direct labor costs
D)Overhead costs

Accepted Answer

While packaging costs may be associated with the production of a product, they are typically categorized as a period cost rather than a product cost. Product costs include direct materials, direct labor, and overhead costs.

Question 4

Which of the following types of product costs appear in the financial statements?
A)Predetermined overhead costs
B)Estimated costs
C)Standard costs
D)Actual costs

Accepted Answer

Actual costs are the only type of product costs that appear in the financial statements. Predetermined overhead costs, estimated costs, and standard costs are used in costing systems to calculate the cost of products, but they are not reported in the financial statements. Only the actual costs incurred in producing and selling the products are recorded in the financial statements.

Question 5

Which of the following accounts decreases when cost of goods manufactured is recorded?
A)Work in Process Inventory
B)Finished Goods Inventory
C)Overhead
D)Cost of Goods Sold

Accepted Answer

When cost of goods manufactured is recorded, it signifies that goods have been completed and are moving out of the Work in Process Inventory to the Finished Goods Inventory. Therefore, Work in Process Inventory decreases.

Question 6

In a manufacturing environment,direct labor costs initially flow
A)into the Materials Inventory account.
B)into the Cost of Goods Sold account.
C)into the Work in Process Inventory account.
D)into the Finished Goods Inventory account.

Accepted Answer

Direct labor costs are the wages paid to the workers who are directly involved in producing a product or service. As these workers complete their tasks, their time and costs are recorded in the Work in Process Inventory account, since they are directly contributing to the production of goods or services that are not yet complete. Once the products are finished, the costs are then transferred to the Finished Goods Inventory account, and ultimately to the Cost of Goods Sold account when the products are sold. The Materials Inventory account is used to record the costs of materials purchased and used in production. So, option A is incorrect, and options B and D are also incorrect, as direct labor costs do not flow directly into these accounts.

Question 7

To calculate the total cost of goods manufactured from total manufacturing costs
A)subtract all period costs from total manufacturing costs.
B)add beginning and subtract ending finished goods inventory to total manufacturing costs.
C)you must know how many goods were sold during the period.
D)add beginning and subtract ending work in process inventory to total manufacturing costs.

Accepted Answer

To calculate the total cost of goods manufactured, we need to add the beginning work in process inventory to the total manufacturing costs and then subtract the ending work in process inventory. This is because the total cost of goods manufactured includes all the costs of the goods that were completed (i.e., moved from work in process inventory to finished goods inventory) during the period.

Question 8

Cost of goods manufactured is equal to
A)Direct Materials + Direct Labor + Overhead.
B)Beginning Work in Process Inventory + Total Manufacturing Costs - Ending Work in Process Inventory.
C)Beginning Work in Process Inventory + Period Costs - Ending Work in Process Inventory.
D)Beginning Work in Process Inventory + Product Costs.

Accepted Answer

Cost of goods manufactured is the total cost incurred in the production of finished goods, including direct materials, direct labor, and manufacturing overhead. To calculate the cost of goods manufactured, we start with the beginning work in process inventory, add total manufacturing costs incurred in the period (direct materials, direct labor, and manufacturing overhead), and subtract the ending work in process inventory. Therefore, Choice B is correct.

Question 9

Overhead costs are
A)not allocated to the Work in Process Inventory account.
B)not charged directly to the Finished Goods Inventory account.
C)expensed in the period in which they are incurred.
D)not considered product costs.

Accepted Answer

Overhead costs are not charged directly to the Finished Goods Inventory account, but instead are allocated to products through the use of predetermined rates and then charged to the Work in Process Inventory account. Overhead costs are considered product costs as they are necessary for the production of goods. However, they are expensed in the period in which they are incurred, rather than being added to inventory accounts.

Question 10

Which of the following accounts includes the cost of completed but unsold units of a manufacturing firm?
A)Cost of Goods Sold
B)Finished Goods Inventory
C)Work in Process Inventory
D)Materials Inventory

Accepted Answer

Finished Goods Inventory includes the cost of completed but unsold units of a manufacturing firm. Cost of Goods Sold accounts for the cost of goods that have been sold to customers. Work in Process Inventory accounts for the cost of partially completed units that are still in the manufacturing process. Materials Inventory accounts for the cost of raw materials and supplies that have not yet been used in production.

Question 11

All manufacturing costs that are assigned to completed (but unsold)products should be classified as
A)materials inventory costs.
B)cost of goods sold.
C)work in process inventory costs.
D)finished goods inventory costs.

Accepted Answer

Completed products that have not yet been sold are classified as finished goods inventory, and all manufacturing costs that are assigned to these products should be classified as finished goods inventory costs.

Question 12

Which of the following accounts contain only one type of product cost?
A)Work in Process Inventory
B)Materials Inventory
C)Finished Goods Inventory
D)Cost of Goods Sold

Accepted Answer

Materials Inventory only includes the cost of materials used in production and does not include labor or overhead costs. Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold all include a combination of materials, labor, and overhead costs.

Question 13

Which of the following should not be included in the computation of cost of goods manufactured?
A)Factory power costs
B)Indirect materials costs
C)Selling costs
D)Direct materials costs

Accepted Answer

Cost of goods manufactured only includes the cost of producing the goods, such as direct materials, direct labor, and factory overhead. Selling costs are not part of the cost of production, but rather a separate expense incurred to sell the goods.

Question 14

From Jolier's year-end income statement,you observe that the finished goods inventory has doubled during the year.This would indicate that during the year Jolier
A)sold more goods than were produced.
B)produced more goods than last year.
C)produced more goods than were sold.
D)sold more goods than last year.

Accepted Answer

When finished goods inventory doubles, it means that more goods were produced than sold. As a result, the company has more inventory left over at the end of the year than at the beginning, indicating that there was excess production.

Question 15

Which of the following equations is correct?
A)Total Manufacturing Costs = Direct Materials + Direct Labor + Selling Costs
B)Total Manufacturing Costs = Direct Materials + Direct Labor + Overhead
C)Total Manufacturing Costs = Direct Labor + Overhead + Selling Costs + Administrative Costs
D)Total Manufacturing Costs = Product Costs + Period Costs

Accepted Answer

Total Manufacturing Costs consist of Direct Materials, Direct Labor, and Overhead. Selling Costs and Administrative Costs are not part of manufacturing costs. Product Costs include Direct Materials, Direct Labor, and Manufacturing Overhead while Period Costs include Selling Costs and Administrative Costs.

Question 16

Total manufacturing costs incurred during a period are transferred to the
A)Cost of Goods Sold account.
B)Work in Process Inventory account.
C)Finished Goods Inventory account.
D)Overhead account.

Accepted Answer

The manufacturing costs incurred during a period are first recorded in the Work in Process Inventory account as the goods are being produced. Once the production is completed, the costs are then transferred from the Work in Process Inventory account to the Finished Goods Inventory account. From there, the costs move to the Cost of Goods Sold account when the finished goods are sold. The overhead account is used to record indirect expenses related to manufacturing, such as rent, utilities, and insurance.

Question 17

The income statement for a manufacturing company usually contains a detailed computation of the
A)total manufacturing cost.
B)cost of goods sold.
C)total cost of materials used.
D)total overhead.

Accepted Answer

The income statement for a manufacturing company usually contains a detailed computation of the cost of goods sold, which includes the total manufacturing cost, total cost of materials used, and total overhead. However, the cost of goods sold is the most important component of the income statement for a manufacturing company, as it represents the direct costs associated with producing and selling the company's products.

Question 18

In a manufacturing environment,costs of materials initially flow
A)into the Work in Process Inventory account.
B)into the Materials Inventory account.
C)into the Cost of Goods Sold account.
D)into the Finished Goods Inventory account.

Accepted Answer

Costs of materials are initially recorded in the Materials Inventory account, which tracks the cost of all raw materials on hand. As materials are used in production, the cost is then transferred to the Work in Process Inventory account. Once the products are completed, the costs are transferred to the Finished Goods Inventory account, and then finally to the Cost of Goods Sold account when the products are sold.

Question 19

The presentation of merchandise inventory on the balance sheet of a merchandising company most nearly resembles the presentation of __________ inventory on the balance sheet of a manufacturing company.
A)materials
B)finished goods
C)manufacturing supplies
D)work in process

Accepted Answer

The presentation of merchandise inventory on the balance sheet of a merchandising company is most similar to the presentation of finished goods inventory on the balance sheet of a manufacturing company. Both represent the inventory that is ready for sale to customers. Materials, manufacturing supplies, and work in process inventory all represent inventory that is still in the production process and not yet ready for sale.

Question 20

Consider the following information: direct materials used totaled $124,700;direct labor amounted to $412,000;overhead was computed to be $789,600;Work in Process Inventory on March 1,2014,was $482,500;and Work in Process Inventory on March 31,2014,was $597,100.What was the cost of goods manufactured?
A)$1,211,700
B)$729,200
C)$1,440,900
D)$422,100

Accepted Answer

Cost of goods manufactured = Direct materials used + Direct labor + Overhead + Beginning work in process inventory - Ending work in process inventory= $124,700 + $412,000 + $789,600 + $482,500 - $597,100= $1,211,700

Quiz 17: Managerial Accounting and Cost Concepts

Which of the following documents initiates the purchasing of materials?

Which of the following is a source document for purchase of materials?

Which of the following is not a product cost?

Which of the following types of product costs appear in the financial statements?

Which of the following accounts decreases when cost of goods manufactured is recorded?

In a manufacturing environment,direct labor costs initially flow

To calculate the total cost of goods manufactured from total manufacturing costs

Cost of goods manufactured is equal to

Overhead costs are

Which of the following accounts includes the cost of completed but unsold units of a manufacturing firm?

All manufacturing costs that are assigned to completed (but unsold) products should be classified as

Which of the following accounts contain only one type of product cost?

Which of the following should not be included in the computation of cost of goods manufactured?

From Jolier's year-end income statement,you observe that the finished goods inventory has doubled during the year.This would indicate that during the year Jolier

Which of the following equations is correct?

Total manufacturing costs incurred during a period are transferred to the

The income statement for a manufacturing company usually contains a detailed computation of the

In a manufacturing environment,costs of materials initially flow

The presentation of merchandise inventory on the balance sheet of a merchandising company most nearly resembles the presentation of __________ inventory on the balance sheet of a manufacturing company.