Question 1

Under- or overapplied manufacturing overhead at year-end is most commonly charged or credited to Work-in-Process Inventory.

Accepted Answer

Under- or overapplied manufacturing overhead at year-end is most commonly adjusted in the Cost of Goods Sold account, although some companies might choose to allocate it among Work-in-Process Inventory, Finished Goods Inventory, and Cost of Goods Sold based on their accounting policies.

Question 2

Manufacturing overhead:
A) includes direct materials, indirect materials, indirect labor, and factory depreciation.
B) is easily traced to jobs.
C) includes all selling costs.
D) should not be assigned to individual jobs because it bears no obvious relationship to them.
E) is a pool of indirect production costs that must somehow be attached to each unit manufactured.

Accepted Answer

Manufacturing overhead is a pool of indirect production costs that cannot be easily traced to specific jobs or units. It includes expenses such as factory rent, utilities, supplies, maintenance, and indirect labor. To determine the cost of each unit produced, manufacturing overhead must be allocated or apportioned to each unit based on a predetermined overhead rate.

Question 3

Which of the following manufacturers would most likely use job-order costing?
A) Chemical manufacturers.
B) Microchip processors.
C) Custom-furniture manufacturers.
D) Gasoline refiners.
E) Fertilizer manufacturers.

Accepted Answer

Custom-furniture manufacturers are likely to use job-order costing as each piece of furniture is custom-made and unique, and therefore requires individual cost tracking.

Question 4

A manufacturing firm produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order. To accumulate the cost of each order, the company would use a:
A) job-cost record.
B) cost allocation matrix.
C) production log.
D) overhead sheet.
E) manufacturing cost record.

Accepted Answer

A job-cost record is used to accumulate the cost of each order in a manufacturing firm that produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order. This record allows the company to track direct materials, direct labor, and manufacturing overhead costs for each job/order.

Question 5

Which of the following statements regarding work in process is not correct?
A) Work in process is partially completed inventory.
B) Work in process consists of direct labor, direct material, and manufacturing overhead.
C) Work-in-Process Inventory is debited to record direct material used and direct labor incurred.
D) Work-in-Process Inventory appears on the year-end balance sheet.
E) Work-in-Process Inventory is credited when goods are sold.

Accepted Answer

Work-in-Process Inventory is debited to record direct material used and direct labor incurred, but it is not credited when goods are sold. When goods are completed, Work-in-Process Inventory is credited and Finished Goods Inventory is debited. When goods are sold, Finished Goods Inventory is credited and Cost of Goods Sold is debited.

Question 6

The term "normal costing" refers to the use of job-costing systems.

Accepted Answer

The answer of The term "normal costing" refers to the...

Question 7

Manufacturing overhead is a pool of indirect production costs that must somehow be attached to each unit manufactured.

Accepted Answer

Manufacturing overhead includes indirect costs such as rent, utilities, and depreciation that cannot be directly traced to a specific unit of production, so they must be allocated to each unit in some manner.

Question 8

A custom-home builder would likely utilize:
A) job-order costing.
B) process costing.
C) mass customization.
D) process budgeting.
E) joint costing.

Accepted Answer

Custom-home building involves the creation of unique, one-of-a-kind homes tailored to the specific requests of each individual client. This makes it a prime example of a job-order costing situation, where costs are tracked and allocated to individual jobs, such as each custom home construction project.

Question 9

Pruitt Company has developed an integrated system that coordinates the flow of all goods, services, and information into and out of the organization, working with raw material vendors as well as customers to improve service and reduce costs. The firm is said to be using:
A) participative management.
B) top-down management.
C) strategic cost management.
D) supply chain management.
E) management by objectives (MBO).

Accepted Answer

The described system is an example of supply chain management, which involves coordinating the flow of goods, services, and information across an organization's entire supply chain, including vendors and customers.

Question 10

Which of the following statements about manufacturing cost flows is false?
A) Direct materials, direct labor, and manufacturing overhead are entered in the Work-in-Process Inventory account.
B) The Finished-Goods Inventory account will contain entries that reflect the cost of goods sold during the period.
C) The cost of units sold during the period will typically appear on the income statement.
D) When a company sells goods that cost $54,000 for $60,000, the firm will enter $6,000 in an account entitled Profit on Sale.
E) Units are normally transferred from Work-in-Process Inventory to Finished-Goods Inventory.

Accepted Answer

When a company sells goods that cost $54,000 for $60,000, the firm will not enter $6,000 in an account entitled Profit on Sale. Instead, the cost of goods sold will be recorded for $54,000 and the revenue from the sale will be recorded for $60,000. The difference between the two, which is $6,000, will be recorded as gross profit on the income statement.

Question 11

Product costing in a manufacturing firm is the process of:
A) accumulating the company's period costs.
B) allocating costs among the firm's departments.
C) placing a value on the company's fixed assets.
D) assigning costs to the firm's inventory.
E) assigning costs to the company's managers.

Accepted Answer

Product costing in a manufacturing firm involves assigning costs to the firm's inventory, which includes the direct materials, direct labor, and manufacturing overhead costs associated with producing the company's products. This is done to determine the cost of goods sold and the value of the firm's ending inventory. Options A, B, C, and E do not accurately describe the process of product costing in a manufacturing firm.

Question 12

Electricity costs that were incurred by a company's production processes should be debited to Utilities Expense.

Accepted Answer

Electricity costs incurred by a company's production processes should be debited to Manufacturing Overhead, not Utilities Expense, as they are part of the costs of producing the products.

Question 13

The assignment of direct labor cost to individual jobs is based on:
A) an estimate of the total time spent on the job.
B) actual total payroll cost divided equally among all jobs in process.
C) estimated total payroll cost divided equally among all jobs in process.
D) the actual time spent on each job multiplied by the wage rate.
E) the estimated time spent on each job multiplied by the wage rate.

Accepted Answer

Direct labor cost is the cost associated with the employees who are directly involved in production, such as assembly line workers or machinists. The allocation of this cost to individual jobs is based on the actual time spent by each worker on each job multiplied by their wage rate. This method ensures that the cost of each job reflects the actual labor involved in producing it.

Question 14

Which of the following statements about material requisitions is false?
A) Material requisitions are often computerized.
B) Material requisitions are a common example of source documents.
C) Material requisitions contain information that is useful to the cost accounting department.
D) Material requisitions authorize the transfer of materials from the production floor to the raw materials warehouse.
E) Material requisitions are routinely linked to a bill of materials that lists all of the materials needed to complete a job.

Accepted Answer

Material requisitions do not authorize the transfer of materials from the production floor to the raw materials warehouse, they authorize the transfer of materials from the warehouse to the production floor.

Question 15

When using normal costing, the total production cost of a job is composed of:
A) direct material and direct labor.
B) direct material, direct labor, manufacturing overhead, and outlays for selling costs.
C) direct material, direct labor, manufacturing overhead, and outlays for both selling and administrative costs.
D) direct material, direct labor, and applied manufacturing overhead.
E) direct material, direct labor, and actual manufacturing overhead.

Accepted Answer

Normal costing includes direct material, direct labor, and applied manufacturing overhead. This is because manufacturing overhead is a fixed cost that is necessary for production, but cannot be directly traced to a specific product, so it is allocated based on a predetermined overhead rate. Outlays for selling and administrative costs are not included in the total production cost of a job. Actual manufacturing overhead may be used in some costing systems, but not in normal costing.

Question 16

Which of the following statements is true?
A) Service firms have little need for determining the cost of their services.
B) The concept of product costing is relevant only for manufacturing firms.
C) The cost of year-end inventory appears on the balance sheet as an expense.
D) Service companies use cost information for planning and control purposes.
E) Mining and petroleum companies have no inventoriable costs.

Accepted Answer

Service companies use cost information for planning and control purposes. Although service firms may not have physical products to manufacture, they still incur costs such as labor, rent, and utilities. These costs must be analyzed and managed in order to operate effectively. Therefore, service companies have a need for determining the cost of their services just like manufacturing firms. The cost of year-end inventory does not appear on the balance sheet as an expense, and mining and petroleum companies do have inventoriable costs.

Question 17

As production takes place, all manufacturing costs are added to the:
A) Work-in-Process Inventory account.
B) Manufacturing-Overhead Inventory account.
C) Cost-of-Goods-Sold account.
D) Finished-Goods Inventory account.
E) Production Labor account.

Accepted Answer

During production, all manufacturing costs (direct materials, direct labor, and manufacturing overhead) are added to the Work-in-Process (WIP) Inventory account. This account tracks the costs associated with products that are in the process of being manufactured but are not yet complete.

Question 18

Which of the following types of companies would most likely use process costing?
A) Aircraft manufacturers.
B) Textile manufacturers.
C) Textbook publishers.
D) Custom-machining firms.
E) Shipbuilders.

Accepted Answer

Textile manufacturing involves a continuous process where large quantities of homogeneous products (such as fabric) are produced. Process costing is a suitable method for calculating the cost of production in such industries.

Question 19

The final step in recognizing the completion of production requires a company to debit Finished-Goods Inventory and credit Work-in-Process Inventory.

Accepted Answer

This is because once production is completed, the cost of goods produced is transferred from Work-in-Process Inventory to Finished-Goods Inventory. Therefore, Finished-Goods Inventory is debited and Work-in-Process Inventory is credited.

Question 20

A typical job-cost record would provide information about all of the following items related to an order except:
A) the cost of direct materials used.
B) administrative costs.
C) direct labor costs incurred.
D) applied manufacturing overhead.
E) direct labor hours worked.

Accepted Answer

A job-cost record is used to track the costs associated with a specific job or order. The record typically includes information such as the cost of direct materials used, direct labor costs incurred, applied manufacturing overhead and direct labor hours worked. However, administrative costs are not directly related to the production of the order and hence, would not be included in a job-cost record.

Quiz 3: Product Costing and Cost Accumulation in a Batch Production Environment

Under- or overapplied manufacturing overhead at year-end is most commonly charged or credited to Work-in-Process Inventory.

Manufacturing overhead:

Which of the following manufacturers would most likely use job-order costing?

A manufacturing firm produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order. To accumulate the cost of each order, the company would use a:

Which of the following statements regarding work in process is not correct?

The term "normal costing" refers to the use of job-costing systems.

Manufacturing overhead is a pool of indirect production costs that must somehow be attached to each unit manufactured.

A custom-home builder would likely utilize:

Pruitt Company has developed an integrated system that coordinates the flow of all goods, services, and information into and out of the organization, working with raw material vendors as well as customers to improve service and reduce costs. The firm is said to be using:

Which of the following statements about manufacturing cost flows is false?

Product costing in a manufacturing firm is the process of:

Electricity costs that were incurred by a company's production processes should be debited to Utilities Expense.

The assignment of direct labor cost to individual jobs is based on:

Which of the following statements about material requisitions is false?

When using normal costing, the total production cost of a job is composed of:

Which of the following statements is true?

As production takes place, all manufacturing costs are added to the:

Which of the following types of companies would most likely use process costing?

The final step in recognizing the completion of production requires a company to debit Finished-Goods Inventory and credit Work-in-Process Inventory.

A typical job-cost record would provide information about all of the following items related to an order except: