Cost Accounting Theories Test Bank 2019 PDF

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COST ACCOUNTING (THEORIES)MULTIPLE CHOICE QUESTIONSJOB ORDER COSTING Which of the following costing methods of valuation are acceptable in a job order costing system? Actual Standard Actual Predetermined Material Material Labor Overhead Cost Cost Cost Cost a. yes yes no yes b. yes no yes no c. no ye...

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COST ACCOUNTING (THEORIES) MULTIPLE CHOICE QUESTIONS JOB ORDER COSTING 1. Which of the following costing methods of valuation are acceptable in a job order costing system? Actual Material Cost yes yes no yes

a. b. c. d. ANSWER: 2.

Standard Material Cost yes no yes yes

Actual Labor Cost no yes yes yes

Predetermined Overhead Cost yes no yes yes

d

Which of the following costing systems allows management to quickly recognize materials, labs, and overhead variances and take measures to correct them?

a. b. c. d.

Actual Cost System yes yes no no

ANSWER:

Normal Cost System yes no yes no

d

3. In a normal cost system, debits to Work in Process Inventory would not be made for a. b. c. d.

actual overhead. applied overhead. actual direct material. actual direct labor.

ANSWER:

a

4. Which of the following are drawbacks to applying actual overhead to production? a. b. c. d.

A delay occurs in assigning costs to jobs or products. Fluctuations in quantities produced during a period could cause varying per-unit charges for fixed overhead. Seasonality of overhead costs may cause distortions in job or product costs. All of the above.

ANSWER:

d

5. Job order costing and process costing have which of the following characteristics? a. b. c. d.

Job Order Costing homogeneous products and large quantities homogeneous products and small quantities heterogeneous products and large quantities heterogeneous products and small quantities

ANSWER: 6.

Process Costing heterogeneous products and small quantities heterogeneous products and large quantities homogeneous products and small quantities homogeneous products and large quantities

d

A credit to Work in Process Inventory represents a. b. c. d.

work still in process. raw material put into production. the application of overhead to production. the transfer of completed items to Finished Goods Inventory.

ANSWER:

d

7. Additional accounts that comprise the balance of a single general account is a a. b. c. d.

worksheet. journal. subsidiary ledger. book of original entry.

ANSWER: 8.

In a job order costing system, the dollar amount of the entry that debits Finished Goods Inventory and credits Work in Process Inventory is the sum of the costs charged to all jobs a. b. c. d.

started in process during the period. in process during the period. completed and sold during the period. completed during the period.

ANSWER: 9.

c

d

Total manufacturing costs for the year plus beginning Work in Process Inventory cost equals a. b. c. d.

cost of goods manufactured in the year. ending Work in Process Inventory. total manufacturing costs to account for. cost of goods available for sale.

ANSWER: 10.

Which of the following would be least likely to be supported by subsidiary accounts or ledgers in a company that employs a job order costing system? a. Work in Process Inventory b. Raw Material Inventory c. Accounts Payable d. Supplies Inventory ANSWER:

11.

d

A journal entry includes a debit to Work in Process Inventory and a credit to Raw Material Inventory. The explanation for this would be that a. indirect material was placed into production. b. raw material was purchased on account. c. direct material was placed into production. d. direct labor was utilized for production. ANSWER:

12.

c

c

The source document that records the amount of raw material that has been requested by production is the a. job order cost sheet. b. bill of lading. c. interoffice memo. d. material requisition. ANSWER:

d

13. A material requisition form information except a. job number. b. quantity required. c. unit cost. d. purchase order number. ANSWER: 14.

should

show

all

of

the

following

d

Which of the following statements about job order cost sheets is true? a. All job order cost sheets serve as the general ledger control account for Work in Process Inventory. b. Job order cost sheets can serve as subsidiary ledger information for both Work in Process Inventory and Finished Goods Inventory. c. If material requisition forms are used, job order cost sheets do not need to be maintained. d. Job order cost sheets show costs for direct material and direct labor, but not for manufacturing overhead since it is an applied amount. ANSWER:

b

15.

Clyde Jenkins is an auditor for the General Accounting Office. Clyde is investigating invoices sent by Proper Paper Products charging the Army $30 per roll for toilet paper. Proper Paper uses a job order costing system. Where should Clyde look to find total production costs related to the toilet paper? a. material requisition form b. bill of materials c. sales invoice d. job order cost sheet ANSWER:

16.

The primary accounting document in a job order costing system is a(n) a. bill of materials. b. job order cost sheet. c. employee time sheet. d. materials requisition. ANSWER:

17.

a

Which of the following journal entries records the accrual of the cost of indirect labor used in production? a. debit Work in Process Inventory, credit Wages Payable b. debit Work in Process Inventory, credit Manufacturing Overhead c. debit Manufacturing Overhead, credit Work in Process Inventory d. debit Manufacturing Overhead, credit Wages Payable ANSWER:

20.

c

The __________ provides management with an historical summation of total costs for a given product. a. job order cost sheet b. employee time sheet c. material requisition form d. bill of lading ANSWER:

19.

b

The cost sheets for incomplete jobs at the end of the period comprise the subsidiary ledger for a. Finished Goods Inventory. b. Raw Material Inventory. c. Work in Process Inventory. d. Supplies Inventory. ANSWER:

18.

d

d

In job order costing, payroll taxes paid by the employer for factory employees are commonly accounted for as a. direct labor cost. b. manufacturing overhead cost. c. indirect labor cost. d. administrative cost.

ANSWER: 21.

The logical explanation for an entry that includes a debit to Manufacturing Overhead control and a credit to Prepaid Insurance is a. the insurance company sent the company a refund of its policy premium. b. overhead for insurance was applied to production. c. insurance for production equipment expired. d. insurance was paid on production equipment. ANSWER:

22.

d

Manufacturing overhead application a. rates are applied within a range of 35 to 60 percent of direct labor. b. is performed at the beginning of the period. c. rates fluctuate during the period with changes in production quantities. d. rates are calculated by dividing budgeted overhead by a budgeted quantity of some cost driver. ANSWER:

26.

c

In a job order costing system, the use of indirect material would usually be reflected in the general ledger as an increase in a. stores control. b. work in process control. c. manufacturing overhead applied. d. manufacturing overhead control. ANSWER:

25.

b

Production overhead does not include the costs of a. factory depreciation and supplies. b. factory employees’ cafeteria departments. c. production line workers. d. the maintenance department for the factory. ANSWER:

24.

c

The journal entry to apply overhead to production includes a credit to Manufacturing Overhead control and a debit to a. Finished Goods Inventory. b. Work in Process Inventory. c. Cost of Goods Sold. d. Raw Material Inventory. ANSWER:

23.

b

d

A credit to the Manufacturing Overhead control account represents the a. actual cost of overhead incurred. b. actual cost of overhead paid this period. c. amount of overhead applied to production.

d.

amount of indirect material and labor used during the period.

ANSWER: 27.

The journal entry to record the incurrence and payment of overhead costs for factory insurance requires a debit to a. Cash and a credit to Manufacturing Overhead. b. Manufacturing Overhead and a credit to Accounts Payable. c. Manufacturing Overhead and a credit to Cash. d. Work in Process Inventory and a credit to Cash. ANSWER:

28.

c

In a job order costing system, the subsidiary ledger for Finished Goods Inventory is comprised of a. all job order cost sheets. b. job order cost sheets for all uncompleted jobs. c. job order cost sheets for all completed jobs not yet sold. d. job order cost sheets for all ordered, uncompleted, and completed jobs. ANSWER:

31.

b

Overhead is applied to jobs in a job order costing system a. at the end of a period. b. as jobs are completed. c. at the end of a period or as jobs are completed, whichever is earlier. d. at the end of a period or as jobs are completed, whichever is later. ANSWER:

30.

c

The source document that records the amount of time an employee worked on a job and his/her pay rate is the a. job order cost sheet. b. employee time sheet. c. interoffice memo. d. labor requisition form. ANSWER:

29.

c

c

Underapplied overhead resulting from unanticipated and immaterial price increases for overhead items should be written off by a. decreasing Cost of Goods Sold. b. increasing Cost of Goods Sold. c. decreasing Cost of Goods Sold, Work in Process Inventory, and Finished Goods Inventory. d. increasing Cost of Goods Sold, Work in Process Inventory, and Finished Goods Inventory. ANSWER:

b

32.

Overapplied overhead would result if a. the plant were operated at less than normal capacity. b. overhead costs incurred were less than costs charged to production. c. overhead costs incurred were unreasonably small in relation to units produced. d. overhead costs incurred were greater than costs charged to production. ANSWER:

33.

Debits to Cost of Goods Sold typically represent the a. transfer of completed items to Finished Goods Inventory. b. costs of items sold. c. selling price of items sold. d. the cost of goods manufactured. ANSWER:

34.

a

Which of the following organizations would most likely not use a job order costing system? a. Avondale Shipbuilders b. Pickle and Weymann, Attorneys-at-Law c. Atlantic City Saltwater Taffy d. Century City Construction Company ANSWER:

37.

b

Which of the following organizations would be most likely to use a job order costing system? a. the loan department of a bank b. the check clearing department of a bank c. a manufacturer of processed cheese food d. a manufacturer of video cassette tapes ANSWER:

36.

b

In a perpetual inventory system, a transaction that requires two journal entries (or one compound entry) is needed when a. raw materials are purchased on account. b. goods are sold for either cash or on account. c. goods are finished and transferred out of Work in Process Inventory. d. overhead is applied to Work in Process Inventory. ANSWER:

35.

b

c

In a job order costing system, a. b. c. d.

standards cannot be used. an average cost per unit within a job cannot be computed. costs are accumulated by departments and averaged among all jobs. overhead is typically assigned to jobs on the basis of some cost driver.

ANSWER:

d

38. When job order costing is accumulation is the a. department. b. supervisor. c. item. d. job. ANSWER: 39.

What each a. b. c. d.

cost

d

a

b

Product costing is not concerned with cost a. assignment. b. origination. c. identification. d. measurement. ANSWER:

42.

focal point of

Which of the following could not be used in job order costing? a. standards b. an average cost per unit for all jobs c. normal costing d. overhead allocation based on the job’s direct labor hours ANSWER:

41.

primary

is the best cost accumulation procedure to use when many batches, differing as to product specifications, are produced? job order process actual standard

ANSWER: 40.

used, the

b

Which of the following statements is false? a. While the use of standard costing is acceptable for job order costing systems, actual cost records should still be maintained. b. It is normally more time-consuming for a company to use standard costs in a job order costing system. c. Standards can be used in a job order costing system, if the company usually produces items that are similar in nature. d. Standard costs may be used for material, labor, or both material and labor in a job order costing environment. ANSWER:

b

PROCESS COSTING 1.

Which cost accumulation procedure is most applicable in continuous mass-production manufacturing environments? a. b. c. d.

standard actual process job order

ANSWER: 2.

Process costing is used in companies that a. b. c. d.

engage in road and bridge construction. produce sailboats made to customer specifications. produce bricks for sale to the public. construct houses according to customer plans.

ANSWER: 3.

gasoline potato chips blank videotapes stained glass windows

ANSWER:

produces heterogeneous products. produces items by special request of customers. produces homogeneous products. accumulates costs by job.

ANSWER:

c

Which is the best cost accumulation procedure to use for continuous mass production of like units? a. b. c. d.

actual standard job order process

ANSWER: 6.

d

A process costing system is used by a company that a. b. c. d.

5.

c

A producer of ________ would not use a process costing system. a. b. c. d.

4.

c

d

Equivalent units of production are equal to the a. b.

units completed by a production department in the period. number of units worked on during the period by a production department.

c. d.

number of whole units that could have been completed if all work of the period had been used to produce whole units. identifiable units existing at the end of the period in a production department.

ANSWER: 7.

In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing which of the following by EUP? a. b. c. d.

only current period current period cost current period cost current period cost

ANSWER: 8.

b

is more difficult to apply. only considers the last units worked on. ignores work performed in subsequent periods. commingles costs of two periods.

ANSWER:

d

The first step in determining the cost per EUP per cost component under the weighted average method is to a. b. c. d.

add the beginning Work in Process Inventory cost to the current period’s production cost. divide the current period’s production cost by the equivalent units. subtract the beginning Work in Process Inventory cost from the current period’s production cost. divide the current period’s production cost into the EUP.

ANSWER: 10.

cost plus the cost of beginning inventory less the cost of beginning inventory plus the cost of ending inventory

The weighted average method is thought by some accountants to be inferior to the FIFO method because it a. b. c. d.

9.

c

a

The difference between EUP calculated using FIFO and EUP calculated using weighted average is the equivalent units a. b. c. d.

started and residing in residing in uncompleted

ANSWER:

b

completed during the period. beginning Work in Process Inventory. ending Work in Process Inventory. in Work in Process Inventory.

11.

EUP calculations for standard process costing are the same as a. the EUP calculations for weighted average process costing. b. the EUP calculations for FIFO process costing. c. LIFO inventory costing for merchandise. d. the EUP calculations for LIFO process costing. ANSWER:

12.

In a FIFO process costing system, which of the following are assumed to be completed first in the current period? a. units started this period b. units started last period c. units transferred out d. units still in process ANSWER:

13.

b

The FIFO method of process costing will produce the same cost of goods transferred out amount as the weighted average method when a. the goods produced are homogeneous. b. there is no beginning Work in Process Inventory. c. there is no ending Work in Process Inventory. d. beginning and ending Work in Process Inventories are each 50 percent complete. ANSWER:

15.

b

To compute equivalent units of production using the FIFO method of process costing, work for the current period must be stated in units a. completed during the period and units in ending inventory. b. completed from beginning inventory, units started and completed during the period, and units partially completed in ending inventory. c. started during the period and units transferred out during the period. d. processed during the period and units completed during the period. ANSWER:

14.

b

b

The primary difference between the FIFO and weighted average methods of process costing is a. in the treatment of beginning Work in Process Inventory. b. in the treatment of current period production costs. c. in the treatment of spoiled units. d. none of the above. ANSWER:

a

16.

Material is added at the beginning of a process in a process costing system. The beginning Work in Process Inventory for the process was 30 percent complete as to conversion costs. Using the FIFO method of costing, the number of equivalent units of material for the process during this period is equal to the a. beginning inventory this period for the process. b. units started this period in the process. c. units started this period in the process plus the beginning Work in Process Inventory. d. units started and completed this period plus the units in ending Work in Process Inventory. ANSWER:

17.

In a cost of production report using process costing, transferred-in costs are similar to the a. cost of material added at the beginning of production. b. conversion cost added during the period. c. cost transferred out to the next department. d. cost included in beginning inventory. ANSWER:

18.

In of a. b. c. d.

c

EASY

Transferred-in cost represents the cost from a. the last department only. b. the last production cycle. c. all prior departments. d. the current period only. ANSWER:

20.

a

a process costing system, the journal entry to record the transfer goods from Department #2 to Finishe...