charter oak acc102 midterm exam

1. Manufacturing overhead is considered an indirect cost, since overhead costs generally cannot be traced conveniently and directly to specific units of product.

Answer

2. Supervisor salaries, equipment repairs, depreciation of machinery and indirect materials are all examples of manufacturing overhead.

Answer

3. Direct labor and overhead costs that are required to convert raw materials into finished goods are considered to be conversion costs.

Answer

4. A real estate company incurs $500,000 in direct labor, direct material and overhead costs on October 30th. At the end of the year they have not sold any houses yet so these costs should be reported on their income statement.

Answer

5. The payment of a factories electricity bill would be a debit to Manufacturing Overhead.

Answer

6. A credit balance in the manufacturing overhead account at month end indicates that the actual overhead costs were less than the amount applied to jobs.

Answer

7. Job order costing is appropriate for businesses that produce mass quantities of identical units using the same amount of direct labor, direct materials and overhead.

Answer

8. A companies Work in Process account in a job order costing system will be debited for Direct Material, Direct Labor and actual overhead.

Answer

9. An overhead application rate is a device used to assign overhead costs to units of product in proportion to some "activity base" that can be traced directly to the manufactured products.

Answer

10. In activity-based costing, only one cost driver should be used in applying overhead.

Answer

11. Process costing provides information on a total and per-unit bases as well as the per-unit cost of performing each step in the production process.

Answer

12. Completing 3,000 units which were each 75% complete at the beginning of the period represents 2,250 equivalent full units of work during the current period.

Answer

13. An equivalent unit measures the percentage of a completed unit's cost that is present in a partially finished unit.

Answer

14. Direct materials and overhead may be referred to as conversion costs.

Answer

15. If beginning inventory was 6,000 units, 29,000 were started and completed and 5,000 units were in ending inventory, 28,000 units were completed and transfered out.

Answer

16. Target cost equals target price plus profit margin.

Answer

17. If a customer is willing to pay $400 for a new stereo system Radio Shack and Radio Shack requires a 30% return on sales for all of its products then the target cost of the stereo would be $280.

Answer

18. The achievement of the target cost occurs at the first 2 stages of of the target costing process

Answer

=

19. Cycle time is the length of time required for a product to pass completely though inspection.

Answer

20. Rather than aiming to produce inventory, Just-in-Time costing attempts to pull production according to customer demand.

Answer

21. Costs which increase in total amount in direct proportion to an increase in output are called variable costs.

Answer

22. The contribution margin is the difference between total revenue and fixed costs.

Answer

23. Margin of safety is the dollar amount by which actual sales volume exceeds the break-even sales volume.

Answer

24. Operating Income is found by multiplying Margin of Safety by the Contribution Margin Ratio

Answer

25. The volume of output which causes fixed costs to be equal in amount to total revenue is called the break-even point.

Answer

26. Manufacturing costs do not include:

A) Direct labor applicable to production within the period.

B) Selling expenses related to goods manufactured during the period.

C) Direct materials used during the period.

D) Manufacturing overhead charged to work in process during the period.

Answer

27. Direct labor costs in a paint factory would include wages of employees who:

A) Supervise heavy equipment operators.

B) Operate paint-mixing machines.

C) Develop highly secret formulas for new products.

D) Paint the interior of the factory every two years.

Answer

28. Which of the following costs wouldnotbe considered part of the manufacturing overhead of a furniture manufacturer?

A) The cost of compliance with federal factory safety regulations.

B) Depreciation expense on factory equipment.

C) The cost of grease used to lubricate factory equipment.

D) The cost of wood used in furniture construction.

Answer

29. Which of the following should not be classified as a manufacturing cost?

A) Indirect factory labor costs, such as salaries of plant security guards.

B) Direct materials used in the production process.

C) Utility bills related to factory operations.

D) Commissions paid to salespeople.

Answer

30. In a manufacturing company, the cost of goods sold is equal to:

A) The beginning inventory of finished goods, plus net purchases, less the ending inventory of finished goods.

B) The sum of the manufacturing costs charged (debited) to the Work in Process Inventory account during the period.

C) The costs of direct materials, direct labor, and manufacturing overhead incurred in manufacturing the goods sold during the period.

D) The beginning inventory of work in process, plus total manufacturing costs for the period, less the ending inventory of work in process.

Answer

31. A job order cost system would be appropriate in the manufacture of:

A) Paints.

B) Custom-made furniture.

C) Breakfast cereal.

D) Standard-grade plywood.

Answer

32. Manufacturing overhead is:

A) A direct cost that can traced to a specific job.

B) An indirect cost that can be traced to a specific job.

C) A direct cost that cannot be traced to a specific job.

D) An indirect cost that cannot be traced to a specific job.

Answer

33. Benefits of activity-based costing include all of the following except:

A) More accurate measures of product costs.

B) More accurate evaluations of product profitability.

C) A better understanding of what "drives" manufacturing overhead costs.

D) More subjective product pricing decisions.

Answer

34. The cost of salaries paid to employees who work in a factory maintaining the heating system is considered:

A) Direct labor

B) Indirect materials

C) Factory overhead

D) General and administrative costs

Answer

35. Process cost systems

A) Are good when companies produce homogeneous units

B) May have work-in-process accounts for each department.

C) Use equivalent units of production

D) All of the above.

Answer

36. Per-unit costs:

A) Are relevant only when a company is engaged in manufacturing activities.

B) Are determined in job order cost systems but cannot be computed when a process cost system is in use.

C) Are relevant in manufacturing, merchandising, and service industries, regardless of the type of cost accounting system in use.

D) Are determined by relating manufacturing costs to the number of units sold.

Answer

37. Department X of a manufacturing company works on only one product, and all costs are incurred uniformly as the product goes along the assembly line. The 6,000 units in process on December 1 were 60% completed. An additional 60,000 units were placed in production during December. At December 31, the 10,000 units in process were 80% completed. The equivalent full units of production during December amounted to:

A) 60,400.

B) 61,600.

C) 79,600.

D) 76,000.

Answer

38. The computation of equivalent full units is generally not necessary when:

A) Beginning work in process inventories are significantly larger than ending work in process inventories.

B) Beginning and ending work in process inventories differ only slightly.

C) The number of units in ending work in process exceeds the number of units completed and transferred to finished goods during the period.

D) Per-unit costs become distorted as a result of not computing equivalent full units of production.

Answer

Use the following to answer questions 39-40:

Winter Brothers manufactures a single product using a process involving (1) mixing ingredients and (2) a subsequent packaging operation. Winter uses a process cost system to account for the flow of costs through its production process.

39. Refer to the information above. In the production process described, the Work in Process Inventory: Packaging Department is debited for:

A) Costs transferred from the Work in Process Inventory: Mixing Department only.

B) The cost of materials, direct labor, and overhead applicable to the packaging operation only.

C) Costs transferred from the Work in Process Inventory: Mixing Department, as well as materials, direct labor, and overhead applicable to the packaging operation.

D) Costs transferred to the Finished Goods Inventory.

Answer

Use the following to answer questions 39-40:

Winter Brothers manufactures a single product using a process involving (1) mixing ingredients and (2) a subsequent packaging operation. Winter uses a process cost system to account for the flow of costs through its production process.

40. Refer to the information above. In Winter's operation, the Finished Goods Inventory account is debited for:

A) The cost of units transferred directly from the Mixing Department.

B) The cost of units transferred directly from the Packaging Department.

C) The cost of units transferred directly from both the Mixing Department and the Packaging Department.

D) The cost of the units sold.

Answer

41. The primary objective of activity-based management is:

A) To develop more accurate product costs.

B) To reduce and eliminate non-value added activities.

C) To increase product quality.

D) To identify instances of internal failure.

Answer

42. Quality costs include

A) Costs to prevent poor quality from occurring.

B) Costs of appraising and inspecting the product.

C) Costs to correct problems before the customer receives the goods.

D) All of the above.

Answer

43. Just-in-time manufacturing systems are also known as:

A) Supply push systems.

B) Supply pull systems.

C) Demand push systems.

D) Demand pull systems.

Answer

44. Four categories of costs associated with product quality are:

A) External failure, internal failure, prevention, and carrying.

B) External failure, internal failure, prevention, and appraisal.

C) External failure, internal failure, training, and appraisal.

D) Warranty, product liability, prevention, and training.

Answer

45. External failure costs include

A) Inspections of materials.

B) Training.

C) Rework.

D) Warranty costs.

Answer

Use the following to answer questions 46-50:

Noble Corporation manufactures a single product. The selling price is $60 per unit, and variable costs amount to $48 per unit. The fixed costs are $12,000 per month.

46. Refer to the above information. What is the contribution margin ratio of Noble's product?

A) 65%.

B) 80%.

C) 72%.

D) 20%.

Answer

Use the following to answer questions 46-50:

Noble Corporation manufactures a single product. The selling price is $60 per unit, and variable costs amount to $48 per unit. The fixed costs are $12,000 per month.

47. Refer to the above information. What is the monthly sales volume in dollars necessary to break even?

A) $60,000.

B) $16,667.

C) $18,462.

D) $15,000.

Answer

Use the following to answer questions 46-50:

Noble Corporation manufactures a single product. The selling price is $60 per unit, and variable costs amount to $48 per unit. The fixed costs are $12,000 per month.

48. Refer to the above information. How many units must be sold each month to earn a monthly operating income of $5,000?

A) 283.

B) 1,417.

C) 85,000.

D) 354.

Answer

Use the following to answer questions 46-50:

Noble Corporation manufactures a single product. The selling price is $60 per unit, and variable costs amount to $48 per unit. The fixed costs are $12,000 per month.

49. Refer to the above information. What will be the monthly margin of safety (in dollars) if 1,500 units are sold each month?

A) $60,000.

B) $30,000.

C) $ 9,000.

D) $12,000.

Answer

Use the following to answer questions 46-50:

Noble Corporation manufactures a single product. The selling price is $60 per unit, and variable costs amount to $48 per unit. The fixed costs are $12,000 per month.

50. Refer to the above information. What will be Noble's monthly operating income if 1,500 units are sold each month?

A) $78,000.

B) $30,000.

C) $18,000.

D) $ 6,000.

Answer