Reference no: EM131126288

Managerial Accounting
Exam 1
1. Managerial accounting places considerable weight on:
A) generally accepted accounting principles.
B) the financial history of the entity.
C) ensuring that all transactions are properly recorded.
D) detailed segment reports about departments, products, and customers.

2. The plans of management are often expressed formally in:
A) financial statements.
B) performance reports.
C) budgets.
D) ledgers.
3. The phase of accounting concerned with providing information to managers for use in planning and controlling operations and in decision making is called:
A) throughput time.
B) managerial accounting.
C) financial accounting.
D) controlling.
4. The cost of the cushions that are used to manufacture sofas is best described as a:
A) manufacturing overhead cost.
B) period cost.
C) variable cost.
D) conversion cost.

5. A security guard's wages at a factory would be an example of:
Indirect labor Fixed manufacturing overhead
A) No No
B) Yes Yes
C) Yes No
D) No Yes
6. Materials used in the operation of a factory, such as cleaning supplies, that are not an integral part of the final product should be classified as:
A) direct materials.
B) a period cost.
C) administrative expense.
D) manufacturing overhead.


7. Direct costs:
A) are incurred to benefit a particular accounting period.
B) are incurred due to a specific decision.
C) can be easily traced to a particular cost object.
D) are the variable costs of producing a product.


8. Inventoriable (i.e., product) costs that have become expenses can be found in:
A) period costs.
B) selling expenses.
C) cost of goods sold.
D) administrative expenses.


9. Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level varies?
A) Direct materials.
B) Direct labor.
C) Fixed manufacturing overhead.
D) Responses A and B are both correct.
10. When the level of activity decreases within the relevant range, the fixed cost per unit will:
A) decrease.
B) increase.
C) remain the same.
D) The effect cannot be predicted.

11. All of the cost categories listed below are usually found in a company's accounting records, except for:
A) sunk costs.
B) inventoriable costs.
C) opportunity costs.
D) marketing costs.
12. Abel Company's manufacturing overhead is 20% of its total conversion costs. If direct labor is $38,000 and if direct materials are $47,000, the manufacturing overhead is:
A) $152,000
B) $11,750
C) $21,250
D) $9,500

13. Consider the following costs:
Direct materials $33,000
Depreciation on factory equipment $12,000
Factory janitor's salary $23,000
Direct labor $28,000
Utilities for factory $9,000
Selling expenses $16,000
Production supervisor's salary $34,000
Administrative expenses $21,000

What is the total amount of manufacturing overhead included above?
A) $78,000
B) $139,000
C) $44,000
D) $37,000

14. Manufacturing overhead includes:
A) all direct material, direct labor and administrative costs.
B) all manufacturing costs except direct labor.
C) all manufacturing costs except direct labor and direct materials.
D) all selling and administrative costs.
15. All of the following are examples of product costs except:
A) depreciation on the company's retail outlets.
B) salary of the plant manager.
C) insurance on the factory equipment.
D) rental costs of the factory facility.

16. Conversion costs consist of:
A) direct and indirect labor.
B) direct labor and direct materials.
C) direct labor and manufacturing overhead.
D) prime costs and manufacturing overhead. 

17. Which of the following statements is correct concerning job-order costing?
A) Job-order costing would be appropriate for a textbook publisher.
B) All the costs appearing on a job cost sheet are actual costs.
C) Indirect materials are charged to a specific job.
D) Job-order costing is mainly used in firms with homogeneous products such as oil refineries.

18. Which of the following types of firms typically would use process costing rather than job-order costing?
A) A small appliance repair shop.
B) A manufacturer of commercial passenger aircraft.
C) A specialty equipment manufacturer.
D) A breakfast cereal manufacturer.

19. The job cost sheet:
A) summarizes all costs charged to a particular job.
B) contains only direct costs such as direct materials and direct labor.
C) is discarded after production is completed on a particular job.
D) is useful only in process costing.


20. Elliott Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The company manufactures tools to customer specifications. The following data pertain to Job 1501:

Direct materials used $4,200
Direct labor-hours worked 300
Direct labor rate per hour $8.00
Machine-hours used 200
Predetermined overhead rate per machine-hour $15.00

What is the total manufacturing cost recorded on Job 1501?
A) $8,800
B) $9,600
C) $10,300
D) $11,100

21. Avery Co. uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. For the month of October, Avery's estimated manufacturing overhead cost was $300,000 based on an estimated activity level of 100,000 direct labor-hours. Actual overhead amounted to $325,000 with actual direct labor-hours totaling 110,000 for the month. How much was the overapplied or underapplied overhead?
A) $25,000 overapplied
B) $25,000 underapplied
C) $5,000 overapplied
D) $5,000 underapplied

22. Darrow Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, the company worked 10,000 direct labor-hours and incurred $80,000 of actual manufacturing overhead cost. If overhead was underapplied by $2,000, the predetermined overhead rate for the company for the year must have been:
A) $7.80
B) $8.00
C) $8.20
D) $8.40

23. Linh Corporation applies manufacturing overhead to jobs on the basis of pounds of direct material used. Linh estimated 160,000 pounds of material usage and $200,000 of manufacturing overhead cost for the year. During the year, Linh actually used 150,000 pounds of material and incurred $171,000 of manufacturing overhead cost. What was Linh's underapplied or overapplied overhead for the year?
A) $12,500 underapplied
B) $16,500 overapplied
C) $17,600 underapplied
D) $29,000 overapplied

24. Brusveen Corporation applies manufacturing overhead to jobs on the basis of direct labor-hours. The following information relates to Brusveen for last year:

Estimated Actual
Direct labor-hours 15,000 14,800
Manufacturing overhead cost $300,000 $287,120

What was Brusveen's underapplied or overapplied overhead for last year?
A) $4,000 underapplied
B) $8,880 underapplied
C) $8,880 overapplied
D) $9,000 underapplied

25. Washtenaw Corporation uses a job-order costing system. The following data are for last year:

Estimated direct labor-hours 12,000
Estimated manufacturing overhead costs $39,000
Actual direct labor-hours 11,000
Actual manufacturing overhead costs $37,000

Washtenaw applies overhead using a predetermined rate based on direct labor-hours. What amount of overhead was applied to work in process last year?
A) $39,050
B) $42,600
C) $35,750
D) $36,960

26. The Silver Company uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine-hours in Dept. B. At the beginning of the year, the company made the following estimates:

Direct labor cost $60,000 $40,000
Manufacturing overhead $90,000 $45,000
Direct labor-hours 6,000 9,000
Machine-hours 2,000 15,000

What predetermined overhead rates would be used in Dept A and Dept B, respectively?
A) 67% and $3.00
B) 150% and $5.00
C) 150% and $3.00
D) 67% and $5.00

27. Reamer Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year:

Direct materials $1,000
Direct labor $3,000
Sales commissions $4,000
Salary of production supervisor $2,000
Indirect materials $400
Advertising expense $800
Rent on factory equipment $1,000

Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:
A) $6.80
B) $6.00
C) $3.00
D) $3.40

28. Which of the following statements related to job-order costing and process costing are true?
A) Under both costing methods, manufacturing overhead costs are included in the computation of unit product costs.
B) Under both costing methods, the journal entry to record the completion of production will involve crediting a work in process account.
C) Under both costing methods, the journal entry to record the cost of goods sold will involve crediting the finished goods account.
D) All of the above are true.

29. The completion of goods is recorded as a decrease in the work in process inventory account when using:

Job-order costing Process costing
A) Yes No
B) Yes Yes
C) No Yes
D) No No

30. In process costing, a separate work in process account is kept for each:
A) individual order.
B) equivalent unit.
C) processing department.
D) cost category (i.e., materials, conversion cost).

31. The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method:
A) does not consider the degree of completion of beginning work in process inventory when computing equivalent units of production.
B) considers ending work in process inventory to be fully complete.
C) will always yield a higher cost per equivalent unit.
D) All of the above.

32. Which of the following are needed to compute equivalent units for conversion costs under the weighted-average method of process costing?

Percentage completion of beginning work in process Percentage completion of ending work in process
A) Yes Yes
B) No Yes
C) Yes No
D) No No

33. Health Beverage Company uses a process costing system to collect costs related to the production of its celery flavored cola. The cola is first processed in a Mixing Department at Health and is then transferred out and finished up in the Bottling Department. The finished cases of cola are then transferred to Finished Goods Inventory. The following information relates to Health's two departments for the month of January:

Mixing Bottling
Cases of cola in work in process, January 1 10,000 3,000
Cases of cola completed/transferred out during January 77,000 ?
Cases of cola in work in process, January 31 4,000 8,000

How many cases of cola were completed and transferred to Finished Goods Inventory during January?
A) 66,000
B) 71,000
C) 72,000
D) 74,000

34. The Assembly Department started the month with 83,000 units in its beginning work in process inventory. An additional 334,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 34,000 units in the ending work in process inventory of the Assembly Department.
How many units were transferred to the next processing department during the month?
A) 417,000
B) 285,000
C) 451,000
D) 383,000

35. Barnett Company uses the weighted-average method in its process costing system. The company adds materials at the beginning of the process in Department M. Conversion costs were 75% complete with respect to the 4,000 units in work in process at May 1 and 50% complete with respect to the 6,000 units in work in process at May 31. During May, 12,000 units were completed and transferred to the next department. An analysis of the costs relating to work in process at May 1 and to production activity for May follows:

Materials Conversion
Work in process 5/1 $13,800 $3,740
Costs added during May $42,000 $26,260

The total cost per equivalent unit for May was:
A) $5.02
B) $5.10
C) $5.12
D) $5.25

36. Destry Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 10,000 units in its beginning work in process inventory that were 30% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $19,200. An additional 60,000 units were started into production during the month. There were 19,000 units in the ending work in process inventory of the Welding Department that were 70% complete with respect to conversion costs. A total of $380,060 in conversion costs were incurred in the department during the month.

What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.)
A) $6.400
B) $6.334
C) $6.209
D) $4.811

37. Limber Company uses the weighted-average method in its process costing system. Operating data for the first processing department for the month of June appear below:

Units Percent Complete with Respect to Conversion
Beginning work in process inventory 18,000 80%
Started into production during June 81,000
Ending work in process inventory 17,000 80%

According to the company's records, the conversion cost in beginning work in process inventory was $15,264 at the beginning of June. Additional conversion costs of $68,208 were incurred in the department during the month.
What was the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.)
A) $0.873
B) $0.696
C) $0.842
D) $1.060

38. Hammoudi Company uses the weighted-average method in its process costing system. The first processing department, the Welding Department, started the month with 16,000 units in its beginning work in process inventory that were 90% complete with respect to conversion costs. The conversion cost in this beginning work in process inventory was $61,920. An additional 53,000 units were started into production during the month and 45,000 units were completed in the Welding Department and transferred to the next processing department. There were 24,000 units in the ending work in process inventory of the Welding Department that were 70% complete with respect to conversion costs. A total of $194,340 in conversion costs were incurred in the department during the month.

What would be the cost per equivalent unit for conversion costs for the month? (Round off to three decimal places.)
A) $4.300
B) $4.147
C) $2.524
D) $3.667

39. Paquet Company uses the weighted-average method in its process costing system. The Molding Department is the second department in its production process. The data below summarize the department's operations in January.

Units Percent Complete with Respect to Conversion
Beginning work in process inventory 7,700 40%
Transferred in from the prior
department during January 56,000
Completed and transferred to the next
department during January 58,400
Ending work in process inventory 5,300 90%

The accounting records indicate that the conversion cost that had been assigned to beginning work in process inventory was $16,940 and a total of $347,320 in conversion costs were incurred in the department during January.

What was the cost per equivalent unit for conversion costs for January in the Molding Department? (Round off to three decimal places.)
A) $5.500
B) $5.666
C) $5.766
D) $6.202



40. Lawton Company produces canned tomato soup in a single processing department and has a process costing system in which it uses the weighted-average method. The company sold 250,000 units in the month of January. Data concerning inventories follow:

Units
Inventory at January 1:
Work in process None
Finished goods 75,000
Inventory at January 31:
Work in process (conversion 75% complete) 16,000
Finished goods 60,000

What were the equivalent units for conversion costs for January?
A) 235,000
B) 247,000
C) 251,000
D) 253,000


41. Boswal Company uses the weighted-average method in its process costing system. The Assembly Department started the month with 6,000 units in its beginning work in process inventory that were 80% complete with respect to conversion costs. An additional 52,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. There were 18,000 units in the ending work in process inventory of the Assembly Department that were 20% complete with respect to conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the month?
A) 43,600
B) 40,000
C) 38,800
D) 64,000

42. Jolly Company uses the weighted-average method in its process costing system. Operating data for the Painting Department for the month of April appear below:

Units Percent Complete with Respect to Conversion
Beginning work in process inventory 4,700 90%
Transferred in from the prior department during April 59,700
Ending work in process inventory 7,300 80%

What were the equivalent units for conversion costs in the Painting Department for April?
A) 62,940
B) 62,300
C) 65,540
D) 57,100

43. Parks Company uses the weighted-average method in its process costing system. At the start of the year, the company had 5,000 units in process in Department A that were 60% complete with respect to conversion costs. At the end of the year, 6,500 units were in process, 40% complete with respect to conversion costs. During the year, 30,000 units were completed and transferred on to the next department. The equivalent units for conversion costs would be:
A) 32,600 units
B) 29,600 units
C) 33,000 units
D) 30,000 units

44. Bart Co. adds materials at the beginning of the process in Department M. The company uses the weighted-average method in its process costing system. The following information pertains to Department M's work in process during April:

Units
Work in process, April 1 (conversion 60% complete) 3,000
Started in April 25,000
Completed 20,000
Work in process, April 30 (conversion 75% complete) 8,000

The equivalent units for conversion cost are:
A) 26,000
B) 25,000
C) 24,200
D) 21,800

45. Fatas Corporation uses the weighted-average method in its process costing system. The Assembly Department started the month with 8,000 units in its beginning work in process inventory that were 20% complete with respect to conversion costs. An additional 95,000 units were transferred in from the prior department during the month to begin processing in the Assembly Department. During the month 102,000 units were completed in the Assembly Department and transferred to the next processing department. There were 1,000 units in the ending work in process inventory of the Assembly Department that were 20% complete with respect to conversion costs.
What were the equivalent units for conversion costs in the Assembly Department for the month?
A) 102,200
B) 100,600
C) 102,000
D) 88,000

46. Natiello Corporation uses the weighted-average method in its process costing system. Operating data for the Lubricating Department for the month of October appear below:

Units Percent Complete with Respect to Conversion
Beginning work in process inventory 9,100 20%
Transferred in from the prior department during October 38,500
Completed and transferred to the next department during October 41,000
Ending work in process inventory 6,600 70%

What were the equivalent units for conversion costs in the Lubricating Department for October?
A) 41,000
B) 43,120
C) 36,000
D) 45,620

47. Kew Company uses the weighted-average method in its process costing system. The company had 3,000 units in work in process at April 1 that were 60% complete with respect to conversion cost. During April, 10,000 units were completed. At April 30, 4,000 units remained in work in process and they were 40% complete with respect to conversion cost. Direct materials are added at the beginning of the process. How many units were started during April?
A) 9,000
B) 9,800
C) 10,000
D) 11,000

48. In the computation of costs per equivalent unit, the weighted-average method of process costing considers:
A) costs incurred during the current period only.
B) costs incurred during the current period plus cost of ending work in process inventory.
C) costs incurred during the current period plus cost of beginning work in process inventory.
D) costs incurred during the current period less cost of beginning work in process inventory.

49. Which of the following are needed to compute the cost per equivalent unit for materials under the weighted-average method of process costing?

Material cost assigned to beginning work in process last period Material cost added to production during the current period
A) Yes Yes
B) No Yes
C) Yes No
D) No No

50. All of the following statements are correct when referring to process costing except:
A) Process costing would be appropriate for a jeweler who makes custom jewelry to order.
B) A process costing system has the same basic purposes as a job-order costing system.
C) Units produced are indistinguishable from each other.
D) Costs are accumulated by department.

Bonus
51. Malcolm Company uses a weighted-average process costing system. All materials at Malcolm are added at the beginning of the production process. The equivalent units for materials at Malcolm would be the sum of:
A) units in ending work in process and the units started.
B) units in beginning work in process and the units started.
C) units in ending work in process and the units started and completed.
D) units in beginning work in process and the units started and completed.

52. Jersey Company has a process costing system in which it uses the weighted-average method. The equivalent units for conversion costs for the month were 47,500 units. The beginning work in process inventory consisted of 15,000 units, 60% complete with respect to conversion costs. The ending work in process inventory consisted of 10,000 units, 75% complete with respect to conversion costs. The number of units started during the month was:
A) 25,000 units
B) 34,000 units
C) 35,000 units
D) 40,000 units