Accounting Exam 4

The cost of a manufactured product generally consists of which of the following costs?

Direct labor cost, direct materials cost, and factory overhead cost

The cost of materials entering directly into the manufacturing process is classified as

direct materials cost.

Which of the following is an example of direct materials cost for an automobile manufacturer?

Cost of interior upholstery

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

factory overhead cost

The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished product is classified as

direct labor cost.

Which of the following is FALSE in regards to direct materials for an auto manufacturer?

Small plastic clips to hold on door panels, because they become part of the auto, must be accounted for as direct materials

Which of the following is an example of direct labor cost for an airplane manufacturer?

Cost of wages of assembly worker

Which of the following is considered a part of factory overhead cost?

Depreciation of factory buildings

The following are all product costs EXCEPT

sales and administrative expenses

Which of the following is an example of a factory overhead cost?

Factory heating and lighting cost

Which of the following items would NOT be classified as part of factory overhead?

Direct labor used

Which of the following manufacturing costs is an indirect cost of producing a product?

Oil lubricants used for factory machinery

Which of the following are the two main types of cost accounting systems for manufacturing operations?

Job order cost and process cost systems

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

Custom cabinet manufacturer

Which of the following would most likely use a job order costing system?

A swimming pool installer

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

Lumber mill

Which of the following costs are NOT included in finished goods inventory?

Company president’s salary

The document authorizing the issuance of materials from the storeroom is the

materials requisition.

Which of the following products probably would be manufactured using a job order costing system?

Wedding invitations

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

increase Work in Process, decrease Materials Inventory.

A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the materials from the materials account to

work in process and factory overhead.

Job order costing and process costing are

cost accounting systems.

In a job order cost accounting system, when goods that have been ordered are received, the receiving department personnel count, inspect the goods, and complete a

receiving report.

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

time tickets.

Which of the following is NOT true about why a service firm will use the job order costing system?

To determine department costs within the firm

The basis for recording direct and indirect labor costs incurred is a summary of the period’s

time tickets.

Recording direct labor costs in a job order cost accounting system

increases Work in Process, increases Wages Payable

Increases in the Work in Process account occur when

direct labor is recorded from the time sheets.

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

transferred to Cost of Goods Sold.

Each account in the work in process subsidiary ledger is called a

job cost sheet.

The recording of the factory labor incurred for general factory use would increase

Factory Overhead.

The recording of the application of factory overhead costs to jobs would decrease

Factory Overhead.

The recording of the jobs completed would increase

Finished Goods.

The recording of the jobs completed would decrease

Work in Process.

The recording of the jobs shipped and customers billed would increase

Cost of Goods Sold.

The finished goods account is the controlling account for the

stock ledger.

The sale of a finished good on account

increases Cost of Goods Sold, decreases Finished Goods, increases Accounts Receivable, and increases Sales.

Product costs include all of the following EXCEPT

CEO salary.

Which of the following would most likely be a period cost?

Salary of telephone receptionist in the sales office

Period costs include all of the following EXCEPT

wages of an assembly worker.

The period costs of a textbook printer would include

advertising expenses.

Which types of inventories does a manufacturing business report on its balance sheet?

Direct materials inventory, work in process inventory, and finished goods inventory

Costs that are treated as assets until the product is sold are called

product costs.

Which of the following would most likely be a product cost?

Drill bits for a drill press used in the plant assembly area

For a manufacturing business, inventory that is in the process of being manufactured is referred to as

work in process inventory.

Job cost sheets can provide information to managers for all but which of the following?

Utilities, managerial salaries, and depreciation of computers in the corporate office

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

inadequately trained employees. poor quality materials. employee carelessness.

Which of the following would probably NOT be found in the accounting system of a service provider?

Finished goods ledger

In a job order cost accounting system used by a service business, which of the following items would normally NOT be included as part of overhead?

Direct labor

The direct labor and overhead costs of providing services to clients are accumulated in

Work in process

Just-in-time processing is a business philosophy that focuses on reducing time and cost and eliminating poor quality. One of the ways in which this is accomplished in manufacturing and nonmanufacturing processes is by:

combining processing functions into work centers and cross-training workers to perform more than one function

A disadvantage of maintaining high inventory levels includes

both hiding underlying production problems and the fact that maintaining inventory is wasteful and unnecessary are disadvantages of maintaining inventory.

Which of the following statements is TRUE regarding lead time?

Reducing nonvalue-added lead time reduces costs and improves the speed of production.

Just-in-time manufacturing uses which of the following techniques?

Organizes the plant in such a way as to reduce product movement from station to station

Pull manufacturing is driven by which of the following?

Customer demand

Just-in-time manufacturing practices include all of the following EXCEPT

emphasizing push manufacturing to ensure inventory levels that will provide a buffer against production problems.

An activity-based costing system allocates factory overhead rates to products or services using

the cost of activities based on an activity rate times the number of activity-based usage quantities.

Cost behavior refers to the manner in which

a cost changes as the related activity changes.

Costs that remain constant on a per-unit level as the level of activity changes are called

variable costs.

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

Salary of a factory supervisor

Which of the following describes the behavior of the variable cost per unit?

Remains constant with changes in production

Which of the following activity bases would be the most appropriate for food costs of a hospital?

Number of patients who stay in the hospital

Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service such as UPS?

Number of miles driven

Costs that vary in total in direct proportion to changes in an activity level are called

variable costs.

Which of the following is an example of a cost that varies in total as the number of units produced changes?

Direct materials cost

As production increases, what would you expect to happen to fixed costs per unit?

Decrease

Which of the following statements is TRUE regarding fixed and variable costs?

Fixed costs are fixed in total, and variable costs are fixed per unit.

The graph of a variable cost when plotted against its related activity base appears as a

straight line.

Which of the following describes the behavior of the fixed cost per unit?

Decreases with increasing production

Knowing how costs behave is useful to management for all the following reasons EXCEPT for

predicting customer demand.

Which of the following costs is a mixed cost?

Rental costs of $5,000 per month plus $0.30 per machine hour of use

As production increases, what should happen to the variable costs per unit?

Stay the same

For purposes of analysis, mixed costs are generally

separated into their variable and fixed cost components.

The systematic examination of the relationships among selling prices, volume of sales and production, costs, expenses, and profits is termed

cost-volume-profit analysis.

In cost-volume-profit analysis, all costs are classified into the following two categories:

variable costs and fixed costs.

The contribution margin ratio is

the same as the profit-volume ratio.

Which ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

Contribution margin ratio

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would

increase.

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would

decrease.

Which of the following conditions would cause the break-even point to decrease?

Unit variable cost decreases

Which of the following conditions would cause the break-even point to increase?

Unit variable cost increases

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents

the break-even point.

The point where the profit line intersects the horizontal axis on the profit-volume chart represents

the break-even point.

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. Such an analysis is called

"what if" or sensitivity analysis.

The point where the profit line intersects the left vertical axis on the profit-volume chart represents

the maximum possible operating loss.

Clinton Co. has an operating leverage of 4. Sales are expected to increase by 8% next year. Operating income is

expected to increase by 32%.

The relative distribution of sales among the various products sold by a business is termed the

sales mix.

When a business sells more than one product at varying selling prices, the business’s break-even point can be determined as long as the number of products does not exceed

There is no limit.

The difference between the current sales revenue and the sales at the break-even point is called the

margin of safety.

Cost-volume-profit analysis CANNOT be used if which of the following occurs?

Costs cannot be properly classified into fixed and variable costs