Deck 10: Accounting Systems for Manufacturing Businesses

Question 1

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

Answer 1

False

Question 2

Product cost consists of factory overhead.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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 8

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

Question 9

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

Question 10

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 11

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

Question 12

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

Question 13

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

Question 14

Sales commission is an example of factory overhead cost.

Question 15

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

Question 16

Indirect labor is included in factory overhead.

Question 17

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

Question 18

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

Question 19

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 20

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

Question 21

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

Question 22

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 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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

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

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

Direct labor cost is an example of a product cost.

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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 41

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 42

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 43

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 44

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 45

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 46

Which of the following statements is true of financial accounting?

A) Under financial accounting, reports are prepared using generally accepted accounting principles.
B) Financial accounting focuses on providing information primarily for internal use.
C) Financial accounting includes more subjective data like possibility of competitors' reactions to a company's new sales prices.
D) Information reported by financial accounting is not shared with those outside the company.

Question 47

Which of the following costs are included in the cost of manufacturing a product?

A) Direct materials cost, factory overhead cost, and administrative cost
B) Direct labor cost and factory overhead cost
C) Direct labor cost, direct materials cost, and factory overhead cost
D) Direct materials cost and direct labor cost

Question 48

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

Question 49

Which of the following is not a product cost?

A) direct materials.
B) sales and administrative expenses.
C) direct labor.
D) factory overhead.

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

The cost of materials entering directly into the manufacturing process is classified as:

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

Question 52

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

Question 53

Which of the following would not be classified as direct materials for an auto manufacturer?

A) Steel
B) Upholstery fabric
C) Cost of the engine of the car.
D) Material used for door panels

Question 54

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 55

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 56

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

Question 57

Which of the following items would not be classified as a part of factory overhead?

A) Machine operators' wages
B) Amortization of manufacturing patents
C) Production supervisors' salaries
D) Factory supplies used

Question 58

Compute factory overhead cost from the following costs: $\begin{array}{|l|l|}\hline 20,000 & \text { Depreciation on factory buildings } \\\hline 25,000 & \text { Depreciation on office equipment } \\\hline 70,000 & \text { Direct materials used } \\\hline 3,000 & \text { Indirect labor } \\\hline & \\\hline\end{array}$

A) $23,000
B) $43,000
C) $70,000
D) $113,000

Question 59

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 60

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 61

Which of the following costs is not included in the finished goods inventory?

A) Hourly wages of an assembly worker
B) Depreciation on factory plant and equipment
C) Company president's salary
D) Electronic components of a computer

Question 62

The recording of the jobs shipped and customers billed would increase:

A) Accounts Payable.
B) Cash.
C) Finished Goods.
D) Cost of Goods Sold.

Question 63

The recording of the jobs completed would increase:

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

Question 64

Which of the following products would most likely be manufactured using a job order costing system?

A) Number 2 pencils
B) Computer monitors
C) Wedding invitations
D) Paper

Question 65

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 66

The basis for recording direct and indirect labor costs incurred is a summary of the period's:

A) job order cost sheets.
B) time tickets.
C) employees' earnings records.
D) clock cards.

Question 67

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 68

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 69

The recording of the jobs completed would decrease:

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

Question 70

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 71

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 72

At the end of the fiscal year, if the balance in Factory Overhead is small, it would normally be:

A) transferred to Work-in-Process.
B) transferred to Cost of Goods Sold.
C) transferred to Finished Goods.
D) allocated between Work-in-Process and Finished Goods.

Question 73

Which of the following is not true about why a service firm will use the job order costing system?

A) To help control cost.
B) To determine client billing.
C) To determine department costs within the firm.
D) To determine profit.

Question 74

Job order costing and process costing are:

A) pricing systems.
B) cost accounting systems.
C) cost flow systems.
D) inventory tracking systems.

Question 75

The recording of the factory labor costs incurred for general factory use would include a debit to:

A) Factory Overhead.
B) Wages Payable.
C) Wages Expense.
D) Cost of Goods Sold.

Question 76

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 77

Each account in the subsidiary ledger for work in process is called a:

A) finished goods sheet.
B) stock record.
C) materials requisition.
D) job cost sheet.

Question 78

In a job order cost accounting system, when goods that have been ordered are received, the receiving department personnel inspects the goods and completes the:

A) purchase order.
B) sales invoice.
C) receiving report.
D) purchase requisition.

Question 79

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 80

Applying of factory overhead costs to jobs would decrease:

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