True/False and Multiple Choice Accounting Problems

True/False

1.                  The vice presidents of production
and sales and the controller hold line positions in most large
organization.

2.                  Managerial accounting information
includes both historical and estimated data.

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

4.                  A manufacturer may employ a job
order cost system for some of its products and a process cost system for
others.

5.                  A process cost accounting system
accumulates costs for each of the departments or processes within the
factory.

6.                  In a perpetual inventory system,
when the goods are sold, their costs are transferred from Work in
Process to Finished Goods.

7.                  The document that serves as the
basis for crediting accounts in the materials ledger is the purchase
order.

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

9.                  The inventory accounts generally
maintained by a manufacturing firm are Finished Goods and Materials.

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

11.              Generally accepted accounting principles
require companies to use only one factory overhead rate for product
costing.

12.              In the job order system, the finished
goods account is the controlling account for the factory overhead
ledger.

13.              The cost of production report reports the
cost of the goods sold.

14.              In a process cost system, product costs
are accumulated by processing departments rather than by job.

15.              Conversion costs are usually incurred
evenly throughout a process.

16.              Both process and job order cost systems
maintain perpetual inventory accounts with subsidiary ledgers.

17.              The direct materials costs and direct
labor costs incurred by a production department are referred to as
conversion costs.

18.              Both job order and process cost accounting
use equivalent units of production to determine cost.

19.              One of the primary uses of a cost of
production report is to assist management in controlling production
costs.

20.              The first step in determining the cost of
goods completed and ending inventory valuation using process costing is
to calculate equivalent units of production.

21.              Process manufacturers typically use large
machines to process a continuous flow of raw materials into a finished
state.

22.              Cost allocation is the process of
assigning indirect costs to a cost object, such as a job.

23.              The cost of finished products on hand that
have not been sold is work in process inventory.

24.              If 20,000 units of materials enter
production during the first year of operations, 16,000 of the units are
finished, and 4,000 are 40% completed, the number of equivalent units of
production would be 18,400.

25.              If the costs for direct materials, direct
labor, and factory overhead were $436,800, $54,600, and $26,600,
respectively, for 14,000 equivalent units of production, the conversion
cost per equivalent unit was $5.80.

Multiple-Choice

1. What is the primary criterion for the preparation of managerial
accounting reports?

A.                 Relevance of the reports

B.                 Meet the manager needs

C.                 Timing of the reports

D.                 Cost of the reports

All of the following employees hold line positions in Althea Electric
except:

A.                 Vice president of production

B.                 Vice president of finance

C.                 Manger of the Valhalla Plant

D.                 Vice president of sales

Compute conversion costs given the following data: Direct Materials,
$247,800; Direct Labor, $183,400; Factory Overhead, $121,300.

A.                 $431,200

B.                 $552,500

C.                 $304,700

D.                 $369,100

For which of the following businesses would the process cost system be
appropriate?

A.                 Book publisher

B.                 Dress designer

C.                 Lumber mill

D.                 Printing firm

The source of the data for debiting Work-in-Process for direct materials
is the:

A.                 Purchase order

B.                 Purchase requisition

C.                 Materials requisition

D.                 Receiving report

In a job order cost accounting system, the entry to record the flow of
direct materials into production is:

A.                 Debit Work in Process, credit
material

B.                 Debit Materials, credit Work in
Process

C.                 Debit Factory Overhead, credit
materials

D.                 Debit Work in Process, credit
Supplies

In a process cost system, ending inventory is valued by:

A.                 Finding the sum of all open job costs

B.                 Allocating departmental costs between
completed and partially completed units

C.                 Multiplying units in ending inventory
by the direct materials cost per unit

D.                 All of the above

In a process cost accounting, the costs of direct materials and direct
labor are charged to:

A.                 Service departments

B.                 Processing departments

C.                 Customer accounts receivable

D.                 Job orders

Which of the following costs incurred by a paper manufacturer would be
included in the group of costs referred to as conversion costs?

A.                 Advertising costs

B.                 Raw lumber

C.                 Machine operator’s wages

D.                 Sales salaries

The three categories of manufacturing costs comprising the cost of work
in process are direct labor, direct materials, and:

A.                 Indirect expenses

B.                 Direct expenses

C.                 Sales salaries expense

D.                 Factory overhead

Another term often used to refer to factory overhead is:

A.                 Surplus

B.                 Other manufacturing cost

C.                 Supervisory cost

D.                 Factory burden

What term is used to refer to the cost of changing direct materials into
a finished manufactured product?

A.                 Factory overhead cost

B.                 Period cost

C.                 Conversion cost

D.                 Direct labor cost

Which of the following is not a way in which process and job order cost
systems are similar?

A.                 Both accumulate product
costs—direct materials, direct labor, and factory overhead

B.                 Both allocate product cost to unit
produced

C.                 Both maintain perpetual inventories

D.                 Both use job order cost cards

If the cost of direct materials is a small portion of total production
cost, it may be classified as part of:

A.                 Direct labor cost

B.                 Selling and administrative costs

C.                 Miscellaneous costs

D.                 Factory overhead cost

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

The amount of time spent by each employee and the labor cost incurred
for each individual job or for factory overhead are recorded on:

A.                 Clock cards

B.                 In-and-out cards

C.                 Time tickets

D.                 Employees’ earnings records

The entry to record direct labor costs into production in a job order
cost accounting system is:

A.                 Debit Factory Overhead, credit Work
in Process

B.                 Debit Finished Goods, credit Wages
Payable

C.                 Debit Work in Process, credit Wages
Payable

D.                 Debit Factory Overhead, credit Wages
Payable

At the end of the fiscal year, the balance in Factory Overhead is
small.  This balance 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

The details concerning the costs incurred on each job order are
accumulated in a subsidiary ledger known as the:

A.                 Stock ledger

B.                 Materials ledger

C.                 Cost ledger

D.                 Creditors ledger

Each account in the cost ledger is called a:

A.                 Finished goods sheet

B.                 Stock record

C.                 Materials requisition

D.                 Job cost sheet

The recording of the application of factory overhead costs to jobs would
include a credit to:

A.                 Factory Overhead

B.                 Wages Payable

C.                 Work in Process

D.                 Cost of Goods Sold

The finished goods account is the controlling account for the:

A.                 Cost ledger

B.                 Materials ledger

C.                 Work in process ledger

D.                 Cost of Goods Sold

A widely used activity base for developing factory overhead rates in
highly automated settings is:

A.                 Direct labor hours

B.                 Direct labor dollars

C.                 Direct materials

D.                 Machine hours

When job 711 was completed, direct materials totaled $3,000;direct
labor, $3,500; and factory overhead, $1,500, respectively.  Units
produced totaled 1,000. Unit costs are:

A.                 $8,000

B.                 $800

C.                 $80

D.                 $8

A difference in quantity of materials used on two comparable jobs may be
caused by:

A.                 Inadequately trained employees

B.                 Poor quality materials

C.                 Employee carelessness

D.                 All of the above