Test bank for principles of cost accounting 15th edition

Test Bank for Principles of Cost Accounting 15th Edition

The Macke Company’s payroll summary showed the following in November:
Sales department salaries $10,000 Supervisor salaries 20,000 Assembly
workers’ wages 25,000 Machine operators’ wages 35,000 Maintenance
workers’ wages 15,000 Accounting department salaries 5,000 What is the
amount that would be included in direct labor in November?

1. a. $25,000
2. b. $60,000
3. c. $95,000


4. d. $120,000
The Macke Company’s payroll summary showed the following in November:
Sales department salaries $10,000 Supervisor salaries 20,000 Assembly
workers’ wages 25,000 Machine operators’ wages 35,000 Maintenance
workers’ wages 15,000 Accounting department salaries 5,000 What is the
amount that would be included in factory overhead in November?

1. a. $20,000
2. b. $35,000
3. c. $95,000
4. d. $120,000
Factory overhead includes:

1. a. Indirect labor but not indirect materials.
2. b. Indirect materials but not indirect labor.
3. c. All manufacturing costs, except indirect materials and indirect labor.
4. d. All manufacturing costs, except direct materials and direct labor.
A typical factory overhead cost is:

1. a. Freight out.
2. b. Stationery and printing.
3. c. Depreciation on machinery and equipment.
4. d. Postage.


Factory overhead would include:

1. a. Wages of office clerk.
2. b. Sales manager’s salary.
3. c. Supervisor’s salary.
4. d. Tax accountant’s salary.
The term "prime cost" refers to:

1. a. The sum of direct labor costs and all factory overhead costs.
2. b. The sum of direct material costs and direct labor costs.
3. c. All costs associated with manufacturing other than direct labor costs and
direct material costs.
4. d. Manufacturing costs incurred to produce units of output.
The following data are from Burton Corporation, a manufacturer, for the
month of September: Direct materials used $135,000 Supervisors’ salaries
6,000 Machine operators’ wages 200,000 Sales office rent and utilities 22,000
Machine depreciation 35,000 Secretary to the Chief Executive Officer salary
3,000 Factory insurance 15,000 Compute the prime costs.

1. a. $344,000
2. b. $135,000
3. c. $335,000
4. d. $256,000

The term "conversion costs" refers to:

1. a. The sum of direct labor costs and all factory overhead costs.


2. b. The sum of direct material costs and direct labor costs.
3. c. All costs associated with manufacturing other than direct labor costs.
4. d. Direct labor costs incurred to produce units of output.
The following data are from Burton Corporation, a manufacturer, for the
month of September: Direct materials used $135,000 Supervisors’ salaries
6,000 Machine operators’ wages 200,000 Sales office rent and utilities 22,000
Machine depreciation 35,000 Secretary to the Chief Executive Officer salary
3,000 Factory insurance 15,000 Compute the conversion costs.

1. a. $335,000
2. b. $209,000
3. c. $281,000
4. d. $256,000
Payroll is debited and Wages Payable is credited to:

1. a. Pay the payroll taxes.
2. b. Record the payroll.
3. c. Pay the payroll.
4. d. Distribute the payroll.
Which of the following is not a cost that is accumulated in Work in
Process?

1. a. Direct materials
2. b. Administrative expense
3. c. Direct labor

4. d. Factory overhead


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:

1. a. 40 percent.
2. b. 60 percent.
3. c. 33 percent.
4. d. 25 percent.
Mountain Company produced 20,000 blankets in June to be sold during the
holiday season. The manufacturing costs were: Direct materials $125,000
Direct labor 55,000 Factory overhead 60,000 Selling expense 25,000
Administrative expense 30,000 The cost per blanket is:

1. a. $6.25.
2. b. $9.00.
3. c. $12.00.
4. d. $14.75.
Mountain Company produced 20,000 blankets in June to be sold during the
holiday season. The manufacturing costs were: Direct materials $125,000
Direct labor 55,000 Factory overhead 60,000 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:

1. a. $12.00.
2. b. $15.60.

3. c. $23.60.
4. d. $31.20.


The statement of costs of goods manufactured shows:

1. a. Office supplies used in accounting office.
2. b. Deprecation of factory building.
3. c. Salary of sales manager.
4. d. Rent paid on finished goods warehouse.
Selected data concerning the past fiscal year's operations (000's omitted) of
the Stanley Manufacturing Company are presented below: INVENTORIES
Beginning Ending Materials $ 90 $ 85 Work in process 50 65 Finished goods
100 90 Other data: Direct materials used $365 Total manufacturing costs
charged to production during the year (includes direct materials, direct labor,
and factory overhead) 680 Cost of goods available for sale 765 Selling and
general expenses 250 Assuming Stanley does not use indirect materials, the
cost of materials purchased during the year amounted to:

1. a. $455.
2. b. $450.
3. c. $365.
4. d. $360.
Selected data concerning the past fiscal year's operations (000's omitted) of
the Stanley Manufacturing Company are presented below: INVENTORIES
Beginning Ending Materials $ 90 $ 85 Work in process 50 65 Finished goods
100 90 Other data: Direct materials used $365 Total manufacturing costs
charged to production during the year (includes direct materials, direct labor,
and factory overhead) 680 Cost of goods available for sale 765 Selling and
general expenses 250 The cost of goods manufactured during the year

was:

1. a. $735.
2. b. $710.
3. c. $665.


4. d. $705.
Selected data concerning the past fiscal year's operations (000's omitted) of
the Stanley Manufacturing Company are presented below: INVENTORIES
Beginning Ending Materials $ 90 $ 85 Work in process 50 65 Finished goods
100 90 Other data: Direct materials used $365 Total manufacturing costs
charged to production during the year (includes direct materials, direct labor,
and factory overhead) 680 Cost of goods available for sale 765 Selling and
general expenses 250 The cost of goods sold during the year was:

1. a. $730.
2. b. $775.
3. c. $675.
4. d. $765.
Which of the following production operations would be most likely to employ
a job order system of cost accounting?

1. a. Candy manufacturing
2. b. Crude oil refining
3. c. Printing text books
4. d. Flour Milling
A law firm wanting to track the costs of serving different clients may use
a:

1. a. process cost system.
2. b. job order cost system.
3. c. cost control system.
4. d. standard cost system.


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

1. a. In situations where standard costing techniques should not be used
2. b. If products manufactured are substantially identical
3. c. When production is only partially completed during the accounting period
4. d. If products are manufactured on the basis of each order received
An industry that would most likely use process costing procedures is:

1. a. Beverage.
2. b. Home Construction.
3. c. Printing.
4. d. Shipbuilding.
A standard cost system is one:

1. a. that provides a separate record of cost for each special-order product.
2. b. that uses predetermined costs to furnish a measurement that helps
management make decisions regarding the efficiency of operations.
3. c. that accumulates costs for each department or process in the factory.
4. d. where costs are accumulated on a job cost sheet.
In job order costing, the basic document for accumulating the cost of each job
is the:

1. a. Job cost sheet.

2. b. Requisition sheet.


3. c. Purchase order.
4. d. Invoice.
Under a job order cost system of accounting, the entry to distribute payroll to
the appropriate accounts would be:

1. a. Debit-Payroll
2. Credit-Wages Payable
3. b. Debit-Work in Process
4. Debit-Factory Overhead
5. Debit-Selling and Administrative Expense
6. Credit-Payroll
7. c. Debit-Work in Process
8. Debit-Finished Goods
9. Debit-Cost of Goods Sold
10. Credit-Payroll
11. d. Debit-Work in Process
12. Debit-Factory Overhead
13. Debit-Selling and Administrative Expense
14. Credit-Wages Payable
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:

1. a. In process during the period.
2. b. Completed and sold during the period.

3. c. Completed during the period.
4. d. Started in process during the period.
Under a job order system of cost accounting, Cost of Goods Sold is debited
and Finished Goods is credited for a:

1. a. Transfer of materials to the factory.
2. b. Shipment of completed goods to the customer.
3. c. Transfer of completed production to the finished goods storeroom.
4. d. Purchase of goods on account.
The Institute of Management Accountants (IMA) Statement of Professional
Practice includes all of the following standards except:

1. a. Confidentiality.
2. b. Commitment.
3. c. Integrity.
4. d. Competence.
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?

1. a. Competence
2. b. Confidentiality
3. c. Integrity
4. d. Credibility


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

1. a. Communicate information fairly and objectively.
2. b. Keep information confidential.
3. c. Mitigate actual conflicts of interest.
4. d. Maintain an appropriate level of professional competence.
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:

1. a. follow his organization’s established policies on the resolution of such
conflict.
2. b. contact the local newspaper.
3. c. contact the company’s audit committee.
4. d. consult an attorney.
The business entity that converts purchased raw materials into finished
goods by using labor, technology, and facilities is a:

1. a. Manufacturer.
2. b. Merchandiser.
3. c. Service business.
4. d. Not-for-profit service agency.


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

1. a. Manufacturer.
2. b. Merchandiser.
3. c. Service business.
4. d. For-profit service business.
The type of merchandiser who purchases goods from the producer and sells

to stores who sell to the consumer is a:

1. a. Manufacturer.
2. b. Retailer.
3. c. Wholesaler.
4. d. Service business.
Examples of service businesses include:

1. a. Airlines, architects, and hair stylists.
2. b. Department stores, poster shops, and wholesalers.
3. c. Aircraft producers, home builders, and machine tool makers.
4. d. None of these are correct.
ISO 9000 is a set of international standards for:

1. a. determining the selling price of a product.
2. b. cost control.
3. c. quality management.


4. d. planning,
Unit cost information is important for making all of the following marketing
decisions except:

1. a. Determining the selling price of a product.
2. b. Bidding on contracts.
3. c. Determining the amount of advertising needed to promote the product.
4. d. Determining the amount of profit that each product earns.
The process of establishing objectives or goals for the firm and determining
the means by which they will be met is:

1. a. controlling.
2. b. analyzing profitability.
3. c. planning.
4. d. assigning responsibility.
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:

1. a. periodically measuring and comparing company results.
2. b. assigning responsibility for costs to employees responsible for those costs.
3. c. constantly monitoring employees to ensure they do exactly as they are
told.
4. d. taking necessary corrective action when variances warrant doing so.


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):

1. a. cost center.
2. b. inventory center.
3. c. supervised work center.
4. d. worker’s center.
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?

1. a. Direct labor
2. b. Indirect materials

3. c. Selling expenses
4. d. Repairs and maintenance
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?

1. a. Direct labor
2. b. Supervisor's salary
3. c. Materials
4. d. Repairs and maintenance


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

1. a. cost of raw materials.
2. b. quantity of raw materials used.
3. c. the number of units ordered.
4. d. amount of taxes incurred.
Which of the following statements best describes a characteristic of a
performance report prepared for use by a production line department
head?

1. a. The costs in the report should include only those controllable by the
department head.
2. b. The report should be stated in dollars rather than in physical units so the
department head knows the financial magnitude of any variances.
3. c. The report should include information on all costs chargeable to the
department, regardless of their origin or control.
4. d. It is more important that the report be precise than timely.

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:

1. a. $200 F; $8,500 F
2. b. $200 F; $3,300 U
3. c. $200 U; $3,300 U
4. d. $200 U; $8,500 F


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

1. a. management accounting.
2. b. corporate governance.
3. c. professional competence.
4. d. the corporate legal process.
Which of the following is not a key element of the Sarbanes Oxley Act to
improve corporate governance?

1. a. The establishment of the Public Company Accounting Oversight Board
2. b. Requiring a company’s annual report to contain an internal control report
that includes management’s opinion on the effectiveness of internal control
3. c. Severe criminal penalties for retaliation against “whistleblowers”
4. d. Requiring that the company’s performance reports are prepared in

accordance with generally accepted accounting principles
Cost accounting differs from financial accounting in that financial
accounting:

1. a. Is mostly concerned with external financial reporting.
2. b. Is mostly concerned with individual departments of the company.
3. c. Provides the additional information required for special reports to
management.
4. d. Puts more emphasis on future operations.


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)

1. a. certified financial planner.
2. b. management accountant.
3. c. financial accountant.
4. d. auditor.
The following data were taken from Mansfield Merchandisers on January 31:
Merchandise inventory, January 1 $ 90,000 Sales salaries 35,000 Merchandise
inventory, January 31 65,000 Purchases 560,000 What was the Cost of goods
sold in January?

1. a. $585,000
2. b. $650,000
3. c. $620,000
4. d. $535,000
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:

1. a. $1,350,000
2. b. $1,275,000
3. c. $1,425,000
4. d. $1,675,000


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:

1. a. $165,000
2. b. $175,000
3. c. $185,000
4. d. $225,000
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?

1. a. $435,000
2. b. $640,000
3. c. $710,000
4. d. $930,000
Inventory accounts for a manufacturer include all of the following except:

1. a. Merchandise Inventory.

2. b. Finished Goods.
3. c. Work in Process.
4. d. Materials.


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

1. a. Merchandise Inventory.
2. b. Finished Goods.
3. c. Work in Process.
4. d. Materials.
For a manufacturer, manufacturing costs incurred to date for goods in various
stages of production, but not yet completed is:

1. a. Merchandise Inventory.
2. b. Finished Goods.
3. c. Work in Process.
4. d. Materials.
For a manufacturer, the cost of all materials purchases and on hand to be
used in the manufacturing process is:

1. a. Merchandise Inventory.
2. b. Finished Goods.
3. c. Work in Process.
4. d. Materials.
In the financial statements, Materials should be categorized as:

1. a. Revenue.
2. b. Expenses.

3. c. Assets.
4. d. Liabilities.
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.

1. a. periodic inventory system
2. b. inventory control account
3. c. perpetual inventory system
4. d. inventory cost method
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)

1. a. perpetual inventory system.
2. b. inventory control account.
3. c. periodic inventory system.
4. d. inventory cost method.
Which of the following is most likely to be considered an indirect material in
the manufacture of a sofa?

1. a. Lumber
2. b. Glue
3. c. Fabric
4. d. Foam rubber