Test Bank Principles of Cost Accounting 17th Edition Edward J. Vanderbeck A+

$35.00
Test Bank Principles of Cost Accounting 17th Edition Edward J. Vanderbeck A+

Test Bank Principles of Cost Accounting 17th Edition Edward J. Vanderbeck A+

$35.00
Test Bank Principles of Cost Accounting 17th Edition Edward J. Vanderbeck A+

1. The business entity that converts purchased raw materials into finished goods by using labor, technology, and facilities is a:

a.

Manufacturer.

b.

Merchandiser.

c.

Service business.

d.

Not-for-profit service agency.

ANSWER:

a

RATIONALE:

The business entity that converts purchased raw materials into finished goods by using labor, technology, and facilities is a manufacturer.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Business Applications

OTHER:

Bloom's: Remembering

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

a.

Manufacturer.

b.

Merchandiser.

c.

Service business.

d.

Wholesaler.

ANSWER:

b

RATIONALE:

The business entity that purchases finished goods for resale is a merchandiser.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Business Applications

OTHER:

Bloom's: Remembering

3. The type of merchandiser who purchases goods from the producer and sells them to retailers that sell them to the consumer is a:

a.

Manufacturer.

b.

Retailer.

c.

Wholesaler.

d.

Service business.

ANSWER:

c

RATIONALE:

A wholesaler purchases goods from the producer and sells them to the retailer.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Business Applications

OTHER:

Bloom's: Remembering

4. Examples of service businesses include:

a.

Airlines, accountants, and hair stylists.

b.

Department stores, poster shops, and wholesalers.

c.

Aircraft producers, home builders, and machine tool makers.

d.

None of these are correct.

ANSWER:

a

RATIONALE:

Examples of service businesses include airlines, architects, and hair stylists.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Business Applications

OTHER:

Bloom's: Understanding

5. ISO 9000 is a set of international standards for:

a.

determining the selling price of a product.

b.

cost control.

c.

quality management.

d.

delivering product,

ANSWER:

c

RATIONALE:

ISO 9000 is a set of international standards for quality management.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Strategic Planning

OTHER:

Bloom's: Remembering

6. Unit cost information is important for making all of the following marketing decisions except:

a.

Determining the selling price of a product.

b.

Bidding on contracts.

c.

Determining the amount to spend on social media to promote the product.

d.

Determining the amount of profit that each product earns.

ANSWER:

c

RATIONALE:

Unit cost information is used in determining selling price, bidding on contracts and determining product profitability, but would not have a bearing on determining how much the product would need to be advertised.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Strategic Marketing

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Remembering

7. The process of establishing objectives or goals for the firm and determining the means by which they will be met is:

a.

controlling.

b.

analyzing profitability.

c.

planning.

d.

assigning responsibility.

ANSWER:

c

RATIONALE:

The process of establishing goals and objectives for a firm is planning. Controlling, analyzing profitability and assigning responsibility are functions that take place after the planning process to determine whether or how successfully goals have been obtained.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Budget Preparation

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Remembering

8. Effective control of a company's operations is achieved through all of the following except:

a.

periodically measuring and comparing company results.

b.

assigning responsibility for costs to employees responsible for those costs.

c.

constantly monitoring employees to ensure they do exactly as they are told.

d.

taking necessary corrective action when variances suggest it is needed.

ANSWER:

c

RATIONALE:

While periodically measuring and comparing company results, assigning responsibility for those results to employees and taking necessary corrective action are all part of control; it does not include constantly monitoring employees to make sure they are following directions.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Remembering

9. Dan Louis is the supervisor of the Assembly Department of Wiggerman Corporation. He has control over and is responsible for manufacturing costs traced to the department. The Assembly Department is an example of a(n):

a.

cost center.

b.

inventory center.

c.

supervised work center.

d.

worker’s center.

ANSWER:

a

RATIONALE:

The criteria for a cost center are 1) a reasonable basis on which manufacturing costs may be traced and 2) a person who has control over and is accountable for many of the costs charged to that center.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Understanding

10. Which of the following costs would be least likely to appear on a responsibility accounting report for the supervisor of an assembly line in a large manufacturing situation?

a.

Direct labor

b.

Indirect materials

c.

Selling expenses

d.

Repairs and maintenance

ANSWER:

c

RATIONALE:

Selling expenses would be least likely to appear on a performance report, because the supervisor would not have responsibility for the sales function.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Understanding

11. Which of the following costs would be least likely to appear on a responsibility accounting report for the supervisor of an assembly line in a large manufacturing situation?

a.

Direct labor

b.

Supervisor's salary

c.

Materials

d.

Repairs and maintenance

ANSWER:

b

RATIONALE:

A supervisor's salary would be least likely to appear on a performance report, because that person's salary is determined by the company and is not controllable by the supervisor.

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Understanding

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

a.

cost of raw materials.

b.

quantity of raw materials used.

c.

the number of units ordered.

d.

amount of taxes incurred.

ANSWER:

b

RATIONALE:

In responsibility accounting the manager of a cost center is only responsible for those costs and activities that manager controls. A manufacturing manager would not likely be responsible for the cost of the materials (the purchasing manager would have that responsibility), the number of units ordered (that would be driven by demand) or the taxes incurred.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Understanding

13. Which of the following statements characterizes a performance report prepared for use by a production line department head?

a.

The costs in the report should include only those controllable by the department head.

b.

The report should be stated in dollars rather than in physical units so the department head knows the financial magnitude of any variances.

c.

The report should include information on all costs chargeable to the department, regardless of their origin or control.

d.

It is more important that the report be precise than timely.

ANSWER:

a

RATIONALE:

The performance report should include only those costs controllable by the department head. It should also be timely and should include production data as well as dollar amounts.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Understanding

14. A budget:

a.

is a monthly financial statement issued to a company’s shareholders.

b.

is management’s operating plan expressed in units and dollars.

c.

documents the production department’s schedule.

d.

is the basis for the annual sales forecast.

ANSWER:

b

RATIONALE:

A budget is management’s operating plan expressed in quantitative terms.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Budget Preparation

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Remembering

15. 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:

a.

$200 F; $8,500 F

b.

$200 F; $3,300 U

c.

$200 U; $3,300 U

d.

$200 U; $8,500 F

ANSWER:

b

RATIONALE:

Calculation of monthly variance:

Budgeted wages for August

$12,000

Actual wages for August

11,800

Variance for August

$ 200 F

Calculation of year-to-date variance:

Budgeted wages for the eight-month period ended August 31

$100,000

Actual wages for the eight-month period ended August 31 (91,500 + 11,800)

103,300

Variance for eight-month period ended August 31

$ 3,300 U

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Applying

16. The January performance report for cab no. 52 of Teri’s Taxi Service was as follows:

Expense

Budgeted

Actual

Variance

Driver’s wages

$2,000

$1,800

$200 F

Gasoline

300

270

30 F

Maintenance

200

400

200 U

Insurance

100

110

10 U

Total

$2,600

$2,580

$ 20 F

Possible reason(s) for the variance in the driver’s wages could be:

a.

A new driver was assigned to cab no. 52 on January 5, replacing one who retired after 30 years of service.

b.

The cab was in the shop for repairs for a few days.

c.

Business was slow so cab no. 52 was idled for two days.

d.

All of the above are possible reasons.

ANSWER:

d

RATIONALE:

The decrease in driver’s wages could be due to the driver working less time (as in options b or c) or for less wages as in option a where a less experienced driver would likely be working for a lower rate.

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Analyzing

17. 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

a.

management accounting.

b.

corporate governance.

c.

professional competence.

d.

the corporate legal process.

ANSWER:

b

RATIONALE:

The Sarbanes-Oxley act was written primarily to improve the corporate governance of publicly held companies.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance.

ACCREDITING STANDARDS:

AACSB Ethics
ACCT.AICPA.FN.03 - Measurement
BUSPROG.02 - Ethics
IMA-Business Applications

TOPICS:

Professional Ethics, CMA Certification and Corporate Governance

OTHER:

Bloom's: Remembering

18. Which of the following is not a key element of the Sarbanes Oxley Act?

a.

The establishment of the Public Company Accounting Oversight Board

b.

Requiring a company’s annual report to contain an internal control report that includes management’s opinion on the effectiveness of internal control

c.

Severe criminal penalties for retaliation against “whistleblowers”

d.

Requiring that the company’s performance reports are prepared in accordance with generally accepted accounting principles

ANSWER:

d

RATIONALE:

The Sarbanes-Oxley Act does not require that companies prepare performance reports in accordance with generally accepted accounting principles.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance.

ACCREDITING STANDARDS:

AACSB Ethics
ACCT.AICPA.FN.03 - Measurement
BUSPROG.02 - Ethics
IMA-Business Applications

TOPICS:

Professional Ethics, CMA Certification and Corporate Governance

OTHER:

Bloom's: Remembering

19. Cost accounting differs from financial accounting in that financial accounting:

a.

Is mostly concerned with external financial reporting.

b.

Is mostly concerned with individual departments of the company.

c.

Provides the additional information required for special reports to management.

d.

Puts more emphasis on future operations.

ANSWER:

a

RATIONALE:

Items (b) through (d) are characteristics of cost accounting, whereas Item (a) is a feature of financial accounting.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Reporting

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Understanding

20. 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)

a.

certified financial planner.

b.

management accountant.

c.

financial accountant.

d.

auditor.

ANSWER:

b

RATIONALE:

A management accountant prepares reports that focus on both historical and estimated data that are used to conduct ongoing operations and do long-range planning. Financial accountants prepare financial statements needed by external users to evaluate a business, while auditors conduct examinations on those financial statements. A certified financial planner is a consultant that helps individuals with financial planning, including investment advice.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Business Applications

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Understanding

21. The following data were taken from Mansfield Merchandisers on January 31:

Merchandise inventory, January 1

$ 100,000

Sales salaries

35,000

Merchandise inventory, January 31

65,000

Purchases

560,000

What was the Cost of goods sold in January?

a.

$595,000

b.

$660,000

c.

$630,000

d.

$545,000

ANSWER:

a

RATIONALE:

Merchandise Inventory, January 1

$100,000

Plus Purchases

560,000

Merchandise Available for Sale

$660,000

Less Merchandise Inventory, January 31

65,000

Cost of Goods Sold

$595,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Applying

22. Umberg Merchandise Company’s cost of goods sold last month was $1,450,000. Merchandise Inventory at the beginning of the month was $250,000 and $325,000 at the end of the month. Umberg’s merchandise purchases were:

a.

$1,450,000

b.

$1,375,000

c.

$1,525,000

d.

$1,775,000

ANSWER:

c

RATIONALE:

Merchandise purchases added to Merchandise Inventory at the beginning of the month results in the merchandise available for sale. At the end of the month, these goods either remain in Merchandise Inventory or are sold, which results in Cost of Goods Sold, so the total of ending Merchandise Inventory and Cost of Goods Sold is also the merchandise available for sale. Therefore, the equation can be rearranged to compute the merchandise purchases as follows:

Cost of Goods Sold

$1,450,000

Plus Ending Merchandise Inventory

325,000

Merchandise Available for Sale

1,775,000

Less Beginning Merchandise Inventory

250,000

Merchandise Purchases

$1,525,000

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Applying

23. Chen Corp. had finished goods inventory of $60,000 and $70,000 at May 1 and May 31, respectively, and cost of goods manufactured of $175,000. Cost of goods sold in May was:

a.

$165,000

b.

$175,000

c.

$185,000

d.

$225,000

ANSWER:

a

RATIONALE:

Finished Goods Inventory, May 1

$ 60,000

Plus Cost of Goods Manufactured

175,000

Finished Goods Available for Sale

225,000

Finished Goods Inventory, May 31

70,000

Cost of Goods Sold

$165,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Applying

24. The balance in Electric Industries’ Finished Goods account at December 31 was $325,000. Its December cost of goods manufactured was $1,350,000, its total manufacturing costs were $1,500,000 and its cost of goods sold in December was $1,455,000. What was the balance in Electric’s Finished Goods at December 1?

a.

$280,000

b.

$220,000

c.

$370,000

d.

$430,000

ANSWER:

d

RATIONALE:

Cost of goods manufactured added to Finished Goods at the beginning of the month results in the finished goods available for sale. At the end of the month, these goods either remain in Finished Goods or are sold, which results in Cost of Goods Sold, so the total of ending Finished Goods and Cost of Goods Sold is also the finished goods available for sale. Therefore, the equation can be rearranged to compute the beginning balance in Finished Goods as follows:

Cost of Goods Sold

$1,455,000

Plus Finished Goods Inventory, December 30

325,000

Finished Goods Available for Sale

1,780,000

Less Cost of Goods Manufactured

1,350,000

Finished Goods Inventory, December 1

$ 430,000

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Applying

25. Inventory accounts for a manufacturer include all of the following except:

a.

Merchandise Inventory.

b.

Finished Goods.

c.

Work in Process.

d.

Raw Materials.

ANSWER:

a

RATIONALE:

Inventory accounts for a manufacturer include Raw Materials, Work in Process, and Finished Goods. Merchandise Inventory is the inventory account for a merchandiser.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Remembering

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

a.

Merchandise Inventory.

b.

Finished Goods.

c.

Work in Process.

d.

Raw Materials.

ANSWER:

b

RATIONALE:

Merchandise Inventory refers to inventory held by a merchandising operation. Finished goods are goods completed, but still on hand, while Work in Process are goods which have been started and are in various stages of production, but are not yet completed. Raw materials are items which have been purchased and on hand to be used in the manufacturing process, but have not yet been issued into production.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Remembering

27. For a manufacturer, manufacturing costs incurred to date for goods in various stages of production, but not yet completed is:

a.

Merchandise Inventory.

b.

Finished Goods.

c.

Work in Process.

d.

Raw Materials.

ANSWER:

c

RATIONALE:

Merchandise Inventory refers to inventory held by a merchandising operation. Finished goods are goods completed, but still on hand, while Work in Process are goods which have been started and are in various stages of production, but are not yet completed. Materials are items which have been purchased and on hand to be used in the manufacturing process, but have not yet been issued into production.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Remembering

28. For a manufacturer, the cost of all materials purchases and on hand to be used in the manufacturing process is:

a.

Merchandise Inventory.

b.

Finished Goods.

c.

Work in Process.

d.

Raw Materials.

ANSWER:

d

RATIONALE:

Merchandise Inventory refers to inventory held by a merchandising operation. Finished goods are goods completed, but still on hand, while Work in Process are goods which have been started and are in various stages of production, but are not yet completed. Raw materials are items which have been purchased and on hand to be used in the manufacturing process, but have not yet been issued into production.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Remembering

29. In the financial statements, Materials should be categorized as:

a.

Revenue.

b.

Expenses.

c.

Assets.

d.

Liabilities.

ANSWER:

c

RATIONALE:

Materials are included in inventory, which is an asset on the balance sheet because it has a future benefit.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Reporting

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Understanding

30. A(n) __________ requires estimating inventory balances during the year for interim financial statements and a formal count of all inventory items at the end of the year.

a.

periodic inventory system

b.

inventory control account

c.

perpetual inventory system

d.

inventory cost method

ANSWER:

a

RATIONALE:

A periodic inventory system requires a company to make estimates of inventory balances throughout the year, and a complete physical count of inventory at the end of the year. A perpetual inventory system provides a continuous record of purchases, issues and inventory balances. The inventory balances are verified with periodic counts of selected inventory items throughout the year.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Remembering

31. Witt Company 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)

a.

perpetual inventory system.

b.

inventory control account.

c.

periodic inventory system.

d.

inventory cost method.

ANSWER:

a

RATIONALE:

A perpetual inventory system maintains a continuous record of purchases, issues and inventory balances. A periodic inventory system requires a physical count of all inventory at the end of the year and estimates of inventory balances throughout the year when preparing interim financial statements.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Remembering

32. Which of the following is most likely to be considered an indirect material in the manufacture of a sofa?

a.

Lumber

b.

Glue

c.

Fabric

d.

Foam rubber

ANSWER:

b

RATIONALE:

While glue would be included in the finished product, its cost would be relatively insignificant, therefore, it would not be cost effective to trace its cost to specific products.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

33. The Lauren Company’s payroll summary showed the following in November:

Sales department salaries

$10,000

Supervisor salaries

20,000

Assembly workers’ wages

45,000

Machine operators’ wages

35,000

Maintenance workers’ wages

15,000

Accounting department salaries

5,000

What amount would be included in direct labor in November?

a.

$25,000

b.

$80,000

c.

$45,000

d.

$140,000

ANSWER:

b

RATIONALE:

Assembly workers and machine operators would be considered direct labor.

Assembly workers’ wages

$45,000

Machine operators’ wages

35,000

Total direct labor

$80,000

The supervisors and maintenance workers would be included in overhead, while the sales and accounting department salaries would be included in selling and administrative expense.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

34. The wages of which of the following employees would not be included in the product cost for a manufacturer of custom-built home cooking appliances?

a.

shipping clerk

b.

appliance body welder

c.

factory janitor

d.

shop floor supervisor

ANSWER:

a

RATIONALE:

The shipping clerk’s wages would be included in the Income Statement as a Selling Expense. The others represent direct or indirect manufacturing costs that would be included in the cost of the product.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

35. The Shiplett Company’s payroll summary showed the following in November:

Supervisors’ salaries

$50,000

Legal department salaries

10,000

Maintenance workers’ wages

30,000

Machine operators’ wages

70,000

Assembly workers’ wages

50,000

Sales department salaries

20,000

What is total factory overhead for November?

a.

$250,000

b.

$200,000

c.

$80,000

d.

$40,000

ANSWER:

c

RATIONALE:

The supervisors’ salaries and maintenance workers’ wages would be included in factory overhead.

Supervisors’ salaries

$50,000

Maintenance workers’ wages

30,000

Total indirect labor

$80,000

The wages of the assembly workers and machine operators would be included in direct labor, while the sales and accounting department salaries would be included in selling and administrative expense.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

36. Factory overhead includes:

a.

Indirect labor but not indirect materials.

b.

Indirect materials but not indirect labor.

c.

All manufacturing costs, except indirect materials and indirect labor.

d.

All manufacturing costs, except direct materials and direct labor.

ANSWER:

d

RATIONALE:

Factory overhead includes all manufacturing costs except direct materials and direct labor.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Remembering

37. A typical factory overhead cost is:

a.

Freight out.

b.

Stationery and printing.

c.

Depreciation on machinery and equipment.

d.

Postage.

ANSWER:

c

RATIONALE:

Depreciation on machinery and equipment is a factory overhead cost because it is a manufacturing cost that is not direct labor or direct material. The other three items are marketing or administrative expenses.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

38. Factory overhead includes:

a.

Wages of office clerk.

b.

Sales manager’s salary.

c.

Supervisor’s salary.

d.

Tax accountant’s salary.

ANSWER:

c

RATIONALE:

The supervisor’s salary is considered indirect labor because the supervisor is required for the manufacturing process, but does not work directly on the units being manufactured. Indirect labor is included in factory overhead. The office clerk’s wages, sales manager’s salary and tax accountant’s salary are marketing or administrative costs.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

39. The term "prime cost" refers to:

a.

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

b.

The sum of direct material costs and direct labor costs.

c.

All costs associated with manufacturing other than direct labor costs and direct material costs.

d.

Manufacturing costs incurred to produce units of output.

ANSWER:

b

RATIONALE:

The term "prime cost" refers to the sum of direct materials costs and direct labor costs.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Remembering

40. The following data are from Burton Corporation, a manufacturer, for the month of September:

Direct materials used

$145,000

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

Total prime costs are:

a.

$354,000

b.

$145,000

c.

$345,000

d.

$256,000

ANSWER:

c

RATIONALE:

Prime costs include direct materials and direct labor. Of the salaries and wages listed, only the wages of the machine operators would be considered direct labor as they are the only employees listed who would actually work on the products themselves.

Direct materials used

$145,000

Machine operators’ wages

200,000

Total prime costs

$345,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

41. The term "conversion costs" refers to:

a.

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

b.

The sum of direct material costs and direct labor costs.

c.

All costs associated with manufacturing other than direct labor costs.

d.

Direct labor costs incurred to produce units of output.

ANSWER:

a

RATIONALE:

The term "conversion costs" refers to the sum of direct labor costs and all factory overhead costs.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Remembering

42. The following data are from Baker Company, a manufacturer, for the month of October:

Machine operators’ wages

$110,000

Supervisors’ salaries

3,000

Factory insurance

7,500

Secretary to the Chief Executive Officer salary

1,500

Machine depreciation

17,500

Sales office rent and utilities

11,000

Direct materials used

67,500

Total conversion costs are:

a.

$177,500

b.

$114,500

c.

$150,500

d.

$138,000

ANSWER:

d

RATIONALE:

Conversion costs include direct labor and factory overhead costs, including indirect labor. Of the salaries and wages listed, only the machine operators are considered direct labor as they are the only employees listed who would actually work on the products themselves. The supervisors are considered factory overhead because their efforts are essential to the manufacturing process, however they do not actually work on the products themselves. The sales office costs and the salary of the secretary would be marketing and administrative expenses as they do not contribute to the manufacturing process.

Machine operators’ wages

$110,000

Supervisors’ salaries

3,000

Machine depreciation

17,500

Factory insurance

7,500

Total conversion costs

$138,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

43. Payroll is debited and Wages Payable is credited to:

a.

Pay the payroll taxes.

b.

Record the payroll.

c.

Pay the payroll.

d.

Distribute the payroll.

ANSWER:

b

RATIONALE:

When the payroll is recorded, Payroll is debited and Wages Payable is credited. When payroll taxes are paid, the various liability accounts are debited and Cash is credited. When the payroll is paid, Wages Payable is debited and Cash is credited. When the payroll is distributed, Work in Process, Factory Overhead, and Selling and Administrative Expenses are debited and Payroll is credited.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Understanding

44. Which of the following is not a cost that is accumulated in Work in Process?

a.

Direct materials

b.

Administrative expense

c.

Direct labor

d.

Factory overhead

ANSWER:

b

RATIONALE:

Administrative expense is not a manufacturing cost, so it would not be included in Work in Process.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Understanding

45. The entry to record depreciation of the production equipment would be:

a.

Debit - Depreciation Expense - Equipment
Credit - Accumulated Depreciation - Equipment

b.

Debit - Depreciation Expense - Equipment
Credit - Factory Overhead

c.

Debit - Factory Overhead
Credit - Accumulated Depreciation - Equipment

d.

Debit - Work-in-Process
Credit - Accumulated Depreciation - Equipment

ANSWER:

c

RATIONALE:

Factory depreciation and other factory expenses are debited to the Factory Overhead account as they are incurred.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

46. 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:

a.

20 percent.

b.

60 percent.

c.

33 percent.

d.

25 percent.

ANSWER:

b

RATIONALE:

Selling price - Manufacturing costs

= Mark-on percentage

Manufacturing costs

$80 - $50

= 60%

$50

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

47. Arnold Furniture Company produced 4,000 chairs in July. The manufacturing costs were:

Direct materials

$25,000

Direct labor

11,000

Factory overhead

12,000

Selling expense

5,000

Administrative expense

6,000

The cost per tent is:

a.

$14.75.

b.

$12.00.

c.

$9.00.

d.

$6.25.

ANSWER:

b

RATIONALE:

Direct materials

$25,000

Direct labor

11,000

Factory overhead

12,000

Total manufacturing costs

$48,000

$48,000 / 4,000 units = $12.00 cost per unit

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

48. 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:

a.

$12.00.

b.

$15.60.

c.

$23.60.

d.

$31.20.

ANSWER:

b

RATIONALE:

Direct materials

$125,000

Direct labor

55,000

Factory overhead

60,000

Total manufacturing costs

$240,000

$240,000 / 20,000 units = $12.00 cost per unit $12.00 x 30% = $3.60 + $12.00 = $15.60

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA 2B - Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

49. The statement of cost of goods manufactured includes:

a.

Office supplies used in accounting office.

b.

Deprecation of factory building.

c.

Salary of sales manager.

d.

Rent paid on finished goods warehouse.

ANSWER:

b

RATIONALE:

The depreciation of the factory building is a cost necessary to manufacture goods. The office supplies, sales manager’s salary and warehouse rent are marketing and administrative costs and would not be included in the Statement of Cost of Goods Manufactured.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.04 - Reporting
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Understanding

50. 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:

a.

$455.

b.

$450.

c.

$365.

d.

$360.

ANSWER:

d

RATIONALE:

Materials purchased added to Materials inventory at the beginning of the month results in the materials available for use. During the year, the materials are used or they remain in the Materials inventory at the end of the year, so the total of materials used and ending Materials inventory is also the total of the amount of materials available. Therefore, the equation can be rearranged to compute the materials purchases as follows:

Direct materials used

$365

Add ending inventory of materials

85

Materials available during the year

$450

Less beginning inventory of materials

90

Purchases of materials during the year

$360

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

51. Selected data concerning the past fiscal year's operations (000's omitted) of Kraig Fabricators are presented below:

INVENTORIES

Beginning

Ending

Materials

$180

$ 170

Work in process

100

130

Finished goods

200

180

Other data:

Direct materials used

$ 730

Total manufacturing costs charged to production during
the year (includes direct materials, direct labor, and factory
overhead)



1,360

Cost of goods available for sale

1,530

Selling and general expenses

500

The cost of goods manufactured during the year was:

a.

$1,410.

b.

$1,330.

c.

$1,420.

d.

$1,470.

ANSWER:

b

RATIONALE:

Beginning work in process inventory

$ 100

Add total manufacturing costs during the year

1,360

Total

$1,460

Less ending work in process inventory

130

Cost of goods manufactured during the year

$1,330

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

52. Selected data concerning the past fiscal year's operations (000's omitted) of Hercules Mills are presented below:

INVENTORIES

Beginning

Ending

Materials

$ 18

$ 17

Work in process

10

13

Finished goods

20

18

Other data:

Direct materials used

$ 73

Total manufacturing costs charged to production during
the year (includes direct materials, direct labor, and factory
overhead)



136

Cost of goods available for sale

153

Selling and general expenses

50

The cost of goods sold during the year was:

a.

$135.

b.

$146.

c.

$153.

d.

$155.

ANSWER:

a

RATIONALE:

Beginning finished goods inventory

$ 20

Add cost of goods manufactured during the year ($136 + $10 - $13)

133

Total cost of goods available for sale

$153

Less ending finished goods inventory

18

Cost of goods sold during the year

$135

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

53. Which of the following production operations would be most likely to employ a job order system of cost accounting?

a.

Candy manufacturing

b.

Crude oil refining

c.

Creating custom-made suits

d.

Flour milling

ANSWER:

c

RATIONALE:

Creating custom suits would be most likely to employ a job order system of cost accounting due to the number of custom jobs involved. The manufacture of candy, the vulcanizing of rubber, and the refining of crude oil would normally be a continuous process of producing like goods and would be accounted for under the process cost system.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.7 - LO6: Distinguish between the two basic types of cost accounting systems

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Cost Accounting Systems

OTHER:

Bloom's: Understanding

54. A law firm wanting to track the costs of serving different clients may use a:

a.

process cost system.

b.

job order cost system.

c.

cost control system.

d.

standard cost system.

ANSWER:

b

RATIONALE:

Professional firms use job order cost systems to track the costs of serving different clients.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.7 - LO6: Distinguish between the two basic types of cost accounting systems

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Cost Accounting Systems

OTHER:

Bloom's: Understanding

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

a.

In situations where standard costing techniques should not be used

b.

If products manufactured are substantially identical

c.

When production is only partially completed during the accounting period

d.

If products are manufactured on the basis of each order received

ANSWER:

b

RATIONALE:

Process costing techniques should be used in assigning costs to products if the product is composed of mass-produced units that are substantially identical.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.7 - LO6: Distinguish between the two basic types of cost accounting systems

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA 2B - Cost Management

TOPICS:

Cost Accounting Systems

OTHER:

Bloom's: Remembering

56. An industry that would most likely use process costing procedures is:

a.

Beverage.

b.

Home Construction.

c.

Printing.

d.

Shipbuilding.

ANSWER:

a

RATIONALE:

Beverage production usually consists of continuous output of homogeneous products for which process costing is used. The other three industries would utilize job order costing because each product or group of products is made to order.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.7 - LO6: Distinguish between the two basic types of cost accounting systems

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.06 - Reflective Thinking
IMA-Cost Management

TOPICS:

Cost Accounting Systems

OTHER:

Bloom's: Understanding

57. A standard cost system is one:

a.

that provides a separate record of cost for each special-order product.

b.

that uses predetermined costs to furnish a measurement that helps management make decisions regarding the efficiency of operations.

c.

that accumulates costs for each department or process in the factory.

d.

where costs are accumulated on a job cost sheet.

ANSWER:

b

RATIONALE:

A standard cost system uses predetermined standard costs to furnish a measurement that helps management make decisions regarding the efficiency of operations.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.7 - LO6: Distinguish between the two basic types of cost accounting systems

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Cost Accounting Systems

OTHER:

Bloom's: Remembering

58. In job order costing, the basic document for accumulating the cost of each job is the:

a.

Job cost sheet.

b.

Requisition sheet.

c.

Purchase order.

d.

Invoice.

ANSWER:

a

RATIONALE:

In job order costing, the basic document to accumulate the cost of each job is the job cost sheet.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.8 - LO7: Illustrate a job order cost system

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of a Job Order Cost System

OTHER:

Bloom's: Remembering

59. Under a job order cost system of accounting, the entry to distribute payroll to the appropriate accounts would be:

a.

Debit-Payroll
Credit-Wages Payable

b.

Debit-Work in Process
Debit-Factory Overhead

Debit-Selling and Administrative Expense
Credit-Payroll

c.

Debit-Work in Process
Debit-Finished Goods
Debit-Cost of Goods Sold
Credit-Payroll

d.

Debit-Work in Process
Debit-Factory Overhead
Debit-Selling and Administrative Expense
Credit-Wages Payable

ANSWER:

b

RATIONALE:

Payroll is credited when the amounts are distributed to the appropriate accounts. Those accounts include Work in Process for direct labor, Factory Overhead for indirect labor and Selling and Administrative Expense for salaries and wages incurred outside of the factory.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.8 - LO7: Illustrate a job order cost system

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of a Job Order Cost System

OTHER:

Bloom's: Understanding

60. 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:

a.

In process during the period.

b.

Completed and sold during the period.

c.

Completed during the period.

d.

Started in process during the period.

ANSWER:

c

RATIONALE:

When jobs are completed during the period, Finished Goods is debited and Work in Process is credited for the cost of the completed jobs.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.8 - LO7: Illustrate a job order cost system

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of a Job Order Cost System

OTHER:

Bloom's: Understanding

61. Under a job order system of cost accounting, Cost of Goods Sold is debited and Finished Goods is credited for a:

a.

Transfer of materials to the factory.

b.

Shipment of completed goods to the customer.

c.

Transfer of completed production to the finished goods storeroom.

d.

Purchase of goods on account.

ANSWER:

b

RATIONALE:

When completed goods are shipped to customers, Cost of Goods Sold is debited and Finished Goods is credited.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.8 - LO7: Illustrate a job order cost system

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of a Job Order Cost System

OTHER:

Bloom's: Understanding

62. The Institute of Management Accountants (IMA) Statement of Professional Practice includes all of the following standards except:

a.

Confidentiality.

b.

Commitment.

c.

Integrity.

d.

Competence.

ANSWER:

b

RATIONALE:

The four IMA Professional Standards are: Competence, Confidentiality, Integrity and Credibility.

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance.

ACCREDITING STANDARDS:

AACSB Ethics
ACCT.AICPA.BB.07 - Critical Thinking
BUSPROG.02 - Ethics
IMA 4 - Business Applications

TOPICS:

Appendix

OTHER:

Bloom's: Remembering

63. 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?

a.

Competence

b.

Confidentiality

c.

Integrity

d.

Credibility

ANSWER:

a

RATIONALE:

Performing technical duties in accordance with relevant laws, regulations and technical standards is a component of the competence standard.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance.

ACCREDITING STANDARDS:

AACSB Ethics
ACCT.AICPA.BB.07 - Critical Thinking
BUSPROG.02 - Ethics
IMA-Business Applications

TOPICS:

Appendix

OTHER:

Bloom's: Remembering

64. Joey Bruce is a cost accountant at ABC Industries. Joey told Tanner Scott, his financial advisor, that he was working on a project to determine the feasibility of a merger of ABC Industries with Left Guard Company, a major competitor. Which of the Institute of Management Accountant’s (IMA) ethical standards may have been violated?

a.

Competence

b.

Confidentiality

c.

Integrity

d.

Credibility

ANSWER:

b

RATIONALE:

The IMA Statement of Professional Practice’s Confidentiality standard, members have the responsibility to keep information confidential except when disclosure is authorized or legally required, and to refrain from using confidential information for unethical and legal advantage.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance.

ACCREDITING STANDARDS:

AACSB Ethics
ACCT.AICPA.BB.07 - Critical Thinking
BUSPROG.02 - Ethics
IMA-Business Applications

TOPICS:

Professional Ethics, CMA Certification and Corporate Governance

OTHER:

Bloom's: Understanding

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

a.

Communicate information fairly and objectively.

b.

Keep information confidential.

c.

Mitigate actual conflicts of interest.

d.

Maintain an appropriate level of professional competence.

ANSWER:

c

RATIONALE:

Under the Integrity Standard, IMA members have the responsibility to mitigate actual conflicts of interest and avoid apparent conflicts of interest.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance.

ACCREDITING STANDARDS:

AACSB Ethics
ACCT.AICPA.BB.07 - Critical Thinking
BUSPROG.02 - Ethics
IMA-Business Applications

TOPICS:

Appendix

OTHER:

Bloom's: Remembering

66. Tom Jones, a management accountant, was faced with an ethical conflict at the office. According to the Institute of Management Accountants’ (IMA) Statement of Professional Practice, the first action Tom should pursue is to:

a.

follow his organization’s established policies on the resolution of such conflict.

b.

contact the local newspaper.

c.

contact the company’s audit committee.

d.

consult an attorney.

ANSWER:

a

RATIONALE:

When faced with ethical issues, one should follow the organization’s established policies on the resolution of such conflict. If these policies do not resolve the ethical conflict, one should consider discussing the matter with one’s supervisor or, if it appears he or she is involved, other internal sources. It is not appropriate to contact parties outside the organization unless it is the authorities if one believes there is a violation of the law.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance.

ACCREDITING STANDARDS:

AACSB Ethics
ACCT.AICPA.BB.07 - Critical Thinking
BUSPROG.02 - Ethics
IMA-Business Applications

TOPICS:

Appendix

OTHER:

Bloom's: Applying

67. Prepare a performance report showing both month and year-to-date data for Post Manufacturing’s Machining Department for February, 201X using the following data:

January

February

Budgeted Data:

Machinists’ wages

$6,200

$5,600

Supplies

3,200

3,000

Depreciation

2,000

2,000

Utilities

1,500

1,400

Actual Data:

Machinists’ wages

$6,120

$5,650

Supplies

3,300

3,180

Depreciation

2,000

2,000

Utilities

1,580

1,390

ANSWER:

Post Manufacturing - Machining Department
Performance Report
For Period Ended February 28, 201X

Expense Budget Actual Variance

February

Year-to-Date

February

Year-to- Date

February

Year-to-Date

Machinists’ wages

$ 5,600

$11,800

$ 5,650

$11,770

$ 50 U

$ 30 F

Supplies

3,000

6,200

3,180

6,480

180 U

280 U

Depreciation

2,000

4,000

2,000

4,000

--

--

Utilities

1,400

2,900

1,390

2,970

10 F

70 U

Total

$12,000

$24,900

$12,220

$25,220

$220 U

$320 U

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Performance Measurement

TOPICS:

Uses of Cost Accounting Information

OTHER:

Bloom's: Applying

68. The following data were taken from the general ledger of Data Corp., a retailer of computers and accessories:

Merchandise Inventory, August 1

$ 323,000

Merchandise Inventory, August 31

296,000

Purchases

1,684,000


Compute the cost of goods sold for the month of August.

ANSWER:

Merchandise Inventory, August 1

$ 323,000

Plus Purchases

1,684,000

Merchandise Available for Sale

2,007,000

Less Merchandise Inventory, August 31

296,000

Cost of Goods Sold

$1,711,000

POINTS:

1

DIFFICULTY:

Easy

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Understanding

69. The following data were taken from the general ledger and other data of Price Fabricators on July 31:

Work in Process, July 1

$ 94,000

Finished Goods, July 1

78,000

Materials purchased in July

221,000

Cost of goods manufactured in July

464,000

Marketing and administrative costs in July

46,000

Finished Goods, July 31

82,000

Work in Process, July 31

75,000


Compute the cost of goods sold for Price Fabricators, selecting the appropriate items from the list provided.

ANSWER:

Finished Goods Inventory, July 1

$ 78,000

Plus Cost of Goods Manufactured

464,000

Cost of Goods Available for Sale

542,000

Less Finished Goods Inventory, July 31

82,000

Cost of Goods Sold

$460,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Applying

70. The following data were taken from Middletown Merchandisers on July 31, for the first month of its fiscal year:

Merchandise Inventory, July 31

$ 25,000

Purchases

735,000

Cost of Goods Sold

750,000

Compute the inventory at July 1.

ANSWER:

Cost of Goods Sold

$750,000

Plus Merchandise Inventory, July 31

25,000

Equals Cost of Goods Available for Sale

$775,000

Less Purchases

735,000

Equals Merchandise Inventory, July 1

$40,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Relationship of Cost Accounting to Financial and Management Accounting

OTHER:

Bloom's: Understanding

71. Campus Carriers Co. manufactures and sells backpacks to college students. The company operates a factory in Small Town and two stores in College Town and University City. Classify the following costs incurred by Campus Carriers as Direct Materials, Direct Labor, Factory Overhead or Selling and Administrative Expense.

a. Rent paid to lease the store in College Town.

b. Canvas fabric.

c. Wages paid to students distributing advertising fliers in University City.

d. Sewing machine operator’s wages.

e. Building depreciation on the factory building.

f. Thread.

g. The cost of transporting the backpacks from the factory in Small Town to the University City store.

h. Depreciation of the cash register at the College Town Store.

i. Factory manager’s salary.

j. Security guard at the factory.

k. Store manager’s salary.

l. Electricity to power sewing machines.

m. Electricity to light the College Town store.

ANSWER:

a. Selling and administrative expense would include costs related to stores.

b. Direct material - canvas would be used to make back packs.
c. Selling and administrative expense would include advertising.
d. Direct labor - sewing machine operators are “touch” labor.

e. Factory overhead - depreciation is a factory expense that cannot be traced directly to the products.
f. Factory overhead. While thread is included in the final product, the cost is insignificant and would be accounted for as an indirect cost.

g. Selling and administrative expense. Transportation is incurred outside of the factory.
h. Selling and administrative expense would include costs relating to the stores.

i. Factory overhead - the factory manager’s salary is a factory cost that cannot be traced directly to products.
j. Factory overhead - the security guard’s salary is a factory cost that cannot be traced directly to products.

k. Selling and administrative expense would include all costs related to the stores.

l. Factory overhead - electricity to run the machines is a factory cost that cannot be traced directly to products..

m. Selling and administrative expense would include all costs related to the stores.

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs

ACCREDITING STANDARDS:

AACSB Reflective Thinking
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs

OTHER:

Bloom's: Understanding

72. The following inventory data relate to the Reta Company:

INVENTORIES

Beginning

Ending

Finished goods

$80,000

$100,000

Work in process

65,000

70,000

Direct materials

60,000

64,000


Revenues and costs for the period:

Sales

$740,000

Cost of goods available for sale

650,000

Total manufacturing costs

575,000

Factory overhead

154,000

Direct materials used

164,000

Selling and administrative expenses

51,000


Compute the following for the year:

a.

Direct materials purchased

b.

Direct labor costs incurred

c.

Cost of goods sold

d.

Gross profit

ANSWER:

(a)

Direct materials used during the period

$164,000

Add inventory of direct materials at the end of the period

64,000

Direct materials available during the period

$228,000

Less inventory of direct materials at the beginning of the period

60,000

Direct materials purchased during the period

$168,000


(b)

Total manufacturing costs incurred during the period

$575,000

Less: Direct materials used

$164,000

Factory overhead incurred

154,000

318,000

Direct labor costs incurred during the period

$257,000


(c)

Cost of goods available for sale

$650,000

Less finished goods inventory at the end of the period

100,000

Cost of goods sold during the period

$550,000


(d)

Sales

$740,000

Cost of goods sold

550,000

Gross profit

$190,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs
PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs
Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

73. The following inventory data relate to the Anaheim Ltd.:

INVENTORIES

Beginning

Ending

Finished goods

$160,000

$200,000

Work in process

130,000

140,000

Direct materials

120,000

128,000


Revenues and costs for the period:

Sales

$1,480,000

Cost of goods available for sale

1,300,000

Total manufacturing costs

1,150,000

Factory overhead

308,000

Direct materials used

328,000

Selling and administrative expenses

102,000


Prepare journal entries for the following, making any necessary computations:

a.

Purchase of materials on account

b.

Issuance of materials into production

c.

Transfer the cost of completed work to Finished Goods

d.

Record the sale of the goods on account and the related cost of goods sold.

ANSWER:

(a)

Direct materials used during the period

$328,000

Add inventory of direct materials at the end of the period

128,000

Direct materials available during the period

$456,000

Less inventory of direct materials at the beginning of the period

120,000

Direct materials purchased during the period

$336,000

Materials

336,000

Accounts Payable

336,000


(b)

Work in Process

328,000

Materials

328,000


(c)

Work in Process Inventory, beginning of the period

$ 130,000

Plus Total Manufacturing Costs

1,150,000

$1,280,000

Less Work in Process Inventory, end of the period

140,000

Cost of Goods Manufactured

$1,140,000

Finished Goods

1,140,000

Work in Process

1,140,000


(d)

Finished Goods Inventory, beginning of the period

$ 160,000

Plus Cost of Goods Manufactured

1,140,000

Cost of Goods Available for Sale

$1,305,000

Less Finished Goods Inventory, end of the period

200,000

Cost of Goods Sold

$1,100,000

Accounts Receivable

1,480,000

Sales

1,480,000

Cost of Goods Sold

1,100,000

Finished Goods

1,100,000

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs
PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Elements of Manufacturing Costs
Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Analyzing

74. Following is a list of costs incurred by the Sitka Products Co. during the month of June:

Direct materials used

$12,000

Expired insurance

$3,000

Indirect materials used

3,000

Utilities

800

Direct labor employed

20,000

Repairs

700

Indirect labor employed

4,500

Depreciation expense

Selling expenses

6,000

--Machinery and equipment

1,200


Prepare the journal entries necessary to record the issuance of materials, the distribution of labor cost, the recording of factory overhead, and the entry transferring Factory Overhead to Work in Process.

ANSWER:

Work in Process (Direct Materials)

12,000

Factory Overhead (Indirect Materials)

3,000

Materials

15,000

Work in Process (Direct Labor)

20,000

Factory Overhead (Indirect Labor)

4,500

Payroll

24,500

Factory Overhead

5,700

Prepaid Insurance

3,000

Accounts Payable (Utilities)

800

Accounts Payable (Repairs)

700

Accumulated Depreciation (Machinery and Equipment)

1,200

Work in Process

13,200

Factory Overhead

13,200

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

75. The following data was taken from the general ledger and other records of Martinez Manufacturing Co. at July 31, the end of the first month of operations in the current fiscal year:

Sales

$50,000

Materials inventory (July 1)

15,000

Work in process inventory (July 1)

20,000

Finished goods inventory (July 1)

28,000

Materials purchased

21,000

Direct labor cost

12,500

Factory overhead (including $5,000 of indirect materials used and $2,500 of indirect labor cost)


11,500

Selling and administrative expense

8,000

Inventories at July 31:

Materials

16,000

Work in process

18,000

Finished goods

30,000

a.

Prepare a statement of cost of goods manufactured.

b.

Determine the cost of goods sold for the month.

ANSWER:

(a)

Martinez Manufacturing Co.
Statement of Cost of Goods Manufactured
For the Month Ended July 31, 20--

Direct Materials:

Inventory, July 1

$15,000

Purchases

21,000

Total cost of available materials

$36,000

Less inventory, July 31

16,000

Cost of materials used

$20,000

Less indirect materials used

5,000

Cost of direct materials used in production

$15,000

Direct labor

12,500

Factory overhead:

Indirect materials

$ 5,000

Indirect labor

2,500

Other

4,000

Total factory overhead

11,500

Total manufacturing cost

$39,000

Add work in process inventory, July 1

20,000

Total

$59,000

Less work in process inventory, July 31

18,000

Cost of goods manufactured during the month

$41,000


(b)

Finished goods inventory, July 1

$28,000

Add cost of goods manufactured during July

41,000

Goods available for sale

$69,000

Less finished goods inventory, July 31

30,000

Cost of goods sold

$39,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

76. The following data was taken from the general ledger and other records of Marwick Manufacturing Co. at January31, the end of the first month of operations in the current fiscal year:

Sales

$650,000

Inventories at January 1:

Materials inventory

25,000

Work in process inventory

29,000

Finished goods inventory

48,000

Inventories at January 31:

Materials inventory

20,000

Work in process inventory

32,000

Finished goods inventory

54,000

Materials purchased

154,000

Labor Costs:

Assembly workers’ wages

185,000

Supervisors’ salaries

30,000

Sales personnel salaries

52,000

Depreciation:

Factory building

73,000

Sales office

28,000

Indirect materials used

3,000

Factory utilities

67,000

a.

Prepare a statement of cost of goods manufactured.

b.

Determine the cost of goods sold for the month.

ANSWER:

(a)

Marwick Manufacturing Co.
Statement of Cost of Goods Manufactured
For the Month Ended January 31, 20--

Direct Materials:

Inventory, January 1

$25,000

Purchases

154,000

Total cost of available materials

$179,000

Less inventory, July 31

20,000

Cost of materials used

$159,000

Less indirect materials used

3,000

Cost of direct materials used in production

$156,000

Direct labor

185,000

Factory overhead:

Indirect materials

$ 3,000

Indirect labor (Supervisors)

30,000

Depreciation

73,000

Utilities

67,000

Total factory overhead

173,000

Total manufacturing cost

$514,000

Add work in process inventory, January 1

29,000

Total

$543,000

Less work in process inventory, January 31

32,000

Cost of goods manufactured during the month

$511,000

(b)

Finished goods inventory, January 1

$48,000

Add cost of goods manufactured during July

511,000

Goods available for sale

$559,000

Less finished goods inventory, January 31

54,000

Cost of goods sold

$505,000

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.6 - LO5: Illustrate basic cost accounting procedures

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.04 - Reporting
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of Accounting for Manufacturing Costs

OTHER:

Bloom's: Applying

77. Custom Cabinets Inc. manufactures goods on a job order basis. During the month of November, three jobs were started. (There was no work in process at the beginning of the month.) Jobs 401 and 402 were completed and sold for $14,500 and $19,000, respectively, during the month; Job 403 was still in process at the end of November.

The following data are taken from the job cost sheets for each job. Factory overhead charges include a total of $900 of indirect materials and $600 of indirect labor. One work in process control account is used.

Job 401

Job 402

Job 403

Direct materials

$3,200

$3,800

$2,000

Direct labor

2,400

3,500

1,500

Factory overhead

1,250

2,000

850


Prepare a journal entry to record each of the following:

a.

Materials used

b.

Factory wages and salaries earned

c.

Factory Overhead transferred to Work in Process

d.

Jobs completed

e.

Jobs sold

ANSWER:

(a)

Work in Process (3,200 + 3,800 + 2,000)

9,000

Factory Overhead

900

Materials

9,900


(b)

Work in Process (2,400 + 3,500 + 1,500)

7,400

Factory Overhead

600

Payroll

8,000


(c)

Work in Process (1,250 + 2,000 + 850)

4,100

Factory Overhead

4,100


(d)

Finished Goods

16,150

Work in Process*

16,150

* Jobs completed:

401 (3,200 + 2,400 + 1,250)

$ 6,850

402 (3,800 + 3,500 + 2,000)

9,300

Total

$16,150


(e)

Cost of Goods Sold

16,150

Finished Goods

16,150

Accounts Receivable (14,500 + 19,000)

33,500

Sales

33,500

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.8 - LO7: Illustrate a job order cost system

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of a Job Order Cost System

OTHER:

Bloom's: Applying

78. The Shawshank Manufacturing Co. uses a job order cost system of accounting. The following information was taken from the books of the company after all posting had been completed at the end of January:

Jobs
Completed

Direct
Materials Cost

Direct
Labor Cost

Factory
Overhead

Units
Completed

101

$1,800

$2,000

$1,000

200

102

1,235

1,250

890

150

104

900

850

350

100

a.

Prepare the journal entries to allocate the costs of materials, labor, and factory overhead to each job and to transfer the costs of jobs completed to Finished Goods.

b.

Compute the total production cost of each job.

c.

Compute the unit cost of each job.

d.

Compute the selling price per unit for each job, assuming a mark-on percentage of 40 percent.

ANSWER:

(a)

Work in Process--Job 101

1,800

Work in Process--Job 102

1,235

Work in Process--Job 104

900

Materials

3,935

Work in Process--Job 101

2,000

Work in Process--Job 102

1,250

Work in Process--Job 104

850

Payroll

4,100

Work in Process--Job 101

1,000

Work in Process--Job 102

890

Work in Process--Job 104

350

Factory Overhead

2,240

Finished Goods

10,275

Work in Process--Job 101

4,800

Work in Process--Job 102

3,375

Work in Process--Job 104

2,100


(b)


Jobs
Completed


Direct
Materials Cost


Direct
Labor Cost


Factory
Overhead

Total
Production
Cost

101

$1,800

$2,000

$1,000

$4,800

102

1,235

1,250

890

3,375

104

900

850

350

2,100

Total

$3,935

$4,100

$2,240

$10,275


(c)

Unit Cost:

Job 101 ($4,800 / 200)

$24.00

Job 102 ($3,375 / 150)

$22.50

Job 104 ($2,100 / 100)

$21.00


(d)

Selling Price Per Unit:

Job 101 ($24.00 × 40%) + $24.00

$33.60

Job 102 ($22.50 × 40%) + $22.50

$31.50

Job 104 ($21.00 × 40%) + $21.00

$29.40

POINTS:

1

DIFFICULTY:

Challenging

LEARNING OBJECTIVES:

PRIN.EDWA.16.8 - LO7: Illustrate a job order cost system

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of a Job Order Cost System

OTHER:

Bloom's: Applying

79. Megerle Motors manufactures specialty motors for the medical industry and uses a job order cost system. During its first month of operations, the following selected transactions took place:

a. Materials purchased on account

$25,000

b. Materials issued to the factory:

Job A25

$ 3,300

Job B43

2,500

Job C89

4,700

Job D52

6,200

For general use in the factory

1,200

c. Factory wages and salaries earned and distributed:

Job A25

$ 2,400

Job B43

4,300

Job C89

5,600

Job D52

3,800

For general work in the factory

2,900

d. Miscellaneous factory overhead costs on account

$ 4,500

e. Depreciation of factory machinery

$ 2,100

f. Factory overhead allocated as follows:

Job A25

$ 2,500

Job B43

3,000

Job C89

2,800

Job D52

2,400

g. Jobs A25, B43 and C89 completed

h. Jobs A25 and B43 shipped to the customer and billed

$45,000

Required:
1. Compute the cost of each job.
2. Determine the ending balances in materials, work in process, finished goods and cost of goods sold by preparing the necessary T- accounts and record the transactions in them.

ANSWER:

1. Job A25: $3,300 + 2,400 + 2,500 = $ 8,200
Job B43: $2,500 + 4,300 + 3,000 = $ 9,800
Job C89: $4,700 + 5,600 + 2,800 = $13,100
Job D52: $6,200 + 3,800 + 2,400 = $12,400

2.

Materials

Work in process

Finished goods

a. 25,000

b.17,900 (1)

b. 16,700

g. 31,100

g. 31,100 (4)

h. 18,000 (5)

c. 16,100

f. 10,700

7,100

12,400

13,100

Cost of goods sold

Overhead

Accumulated Depreciation

h. 18,000

b. 1,200

f. 10,700(3)

e. 2,100

c. 2,900

d. 4,500

e. 2,100

18,000

0

2,100

Accounts Payable

Payroll

Accrued Payroll

a. 25,000

c.19,000 (2)

c. 19,000

c. 19,000

d. 4,500

Accounts Receivable

Sales

h. 45,000

h. 45,000


(1) $3,300 + 2,500 + 4,700 + 6,200 = $16,700 (to WIP) + 1,200 (to OH) = $17,900
(2) $2,400 + 4,300 + 5,600 + 3,800 = $16,100 (to WIP) = 2,900 (to OH) = $19,000
(3) $2,500 + 3,000 + 2,800 + 2,400 = $10,700
(4) $8,200 + 9,800 + 13,100 = $31,100
(5) $8,200 + 9,800 = $18,000

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.8 - LO7: Illustrate a job order cost system

ACCREDITING STANDARDS:

AACSB Analytic
ACCT.AICPA.FN.03 - Measurement
BUSPROG.03 - Analytic
IMA-Cost Management

TOPICS:

Illustration of a Job Order Cost System

OTHER:

Bloom's: Applying

80. The Institute of Management Accountants (IMA) Statement of Professional Practice includes four standards of ethical behavior.
a. List the four standards of ethical behavior.
b. For each of the items listed below, identify the IMA standard under which each of the following responsibilities is included.

1. Refrain from using confidential information for unethical or illegal advantage.
2. Communicate information fairly and objectively.
3. Abstain from engaging or supporting any activity that might discredit the profession.
4. Perform professional duties in accordance with relevant laws, regulations, and technical standards.
5. Maintain an appropriate level of professional expertise by continually developing knowledge and skills.
6. Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid any apparent conflict of interest. Advise all parties of potential conflicts.
7. Disclose all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses or recommendations.

ANSWER:

a. The four standards of ethical behavior are: Competence, Confidentiality, Integrity and Credibility

b. 1. Confidentiality
2. Credibility
3. Integrity
4. Competence
5. Competence
6. Integrity
7. Credibility

POINTS:

1

DIFFICULTY:

Moderate

LEARNING OBJECTIVES:

PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance.

ACCREDITING STANDARDS:

AACSB Ethics
ACCT.AICPA.BB.07 - Critical Thinking
BUSPROG.02 - Ethics
IMA-Business Applications

TOPICS:

Appendix

OTHER:

Bloom's: Understanding

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