ACCOUNTING 2110 MIDTERM REVIEW/
ACCOUNTING 2110: CH. 1, 2, 3, 4
QUESTIONS & ANSWERS
Managers Function - ANSWER-Planning, directing and controlling
Company types and inventory - ANSWER-Service company - none
Merchandising company- one inventory account
Inventory
manufacturing company- three inventory accounts
Raw material inventory
work in progress inventory
finished goods inventory
The sum of the direct materials costs, direct labor costs, and manufacturing
overhead incurred is the
a. cost of goods manufactured.
b. total manufacturing overhead.
c. total manufacturing costs.
d. total cost of work in process. - ANSWER-c. total manufacturing costs.
Sales commissions are classified as
a. overhead costs
b. period costs.
c. product costs.
d. indirect labor. - ANSWER-b. period costs
Direct materials and direct labor of a company total $8,000,000. If manufacturing
overhead is $4,000,000, what is direct labor cost?
a. $4,000,000
b. $8,000,000
c. $0
d. Cannot be determined from the information provided - ANSWER-d. cannot be
determined from the information provided
Which of the following is not a management function?
,a. Constraining
b. Planning
c. Controlling
d. Directing - ANSWER-a. constraining
The flow of costs in a job order cost system
a. involves accumulating manufacturing costs incurred and assigning the
accumulated costs to work done.
b. cannot be measured until all jobs are complete.
c. measures product costs for a set time period.
d. generally follows a LIFO cost flow assumption. - ANSWER-a. involves
accumulating manufacturing costs incurred and assigning the accumulated costs to
work done.
Process costing is not used when
a. similar goods are being produced.
b. large volumes are produced.
c. jobs have distinguishing characteristics.
d. a series of connected manufacturing processes is necessary. - ANSWER-c. jobs
have distinguishing characteristics.
Kinney Company applies overhead on the basis of 150% of direct labor cost. Job
No. 176 is charged with $150,000 of direct materials costs and $180,000 of
manufacturing overhead. The total manufacturing costs for Job No. 176 is
a. $330,000.
b. $600,000.
c. $450,000.
d. $405,000. - ANSWER-c. $450,000
Prepare journal entries to record the following transaction:
Direct materials requisitioned during the month:
Job 101 $20,000
Job 102 16,000
Job 103 24,000
$60,000 - ANSWER-Work in Process Inventory 60,000
Raw Materials Inventory 60,000
,In a process cost system,
a. a Work in Process account is maintained for each product.
b. a materials requisition must identify the job on which the materials will be used.
c. a Work in Process account is maintained for each process.
d. one Work in Process account is maintained for all the processes, similar to a job
order cost system. - ANSWER-c. a Work in Process account is maintained for each
process
In the month of June, a department had 20,000 units in beginning work in process
that were 70% complete. During June, 90,000 units were transferred into
production from another department. At the end of June there were 10,000 units in
ending work in process that were 40% complete. Materials are added at the
beginning of the process, while conversion costs are incurred uniformly throughout
the process. The equivalent units of production for conversion costs for June were
a. 90,000 equivalent units.
b. 104,000 equivalent units.
c. 100,000 equivalent units.
d. 110,000 equivalent units. - ANSWER-b. 104,000 equivalent units.
Massey Corporation uses a process cost system and the weighted-average cost flow
assumption. Production begins in the Fabricating Department where materials are
added at the beginning of the process and conversion costs are incurred uniformly
throughout the process. On March 1, the beginning work in process inventory
consisted of 20,000 units which were 60% complete and had a cost of $175,000,
$145,000 of which were materials costs. During March, the following occurred:
Materials added $305,000
Conversion costs incurred $120,000
Units completed and transferred out in March 50,000
Units in ending work in process March 31 (40% complete) 25,000
Calculate the unit cost: - ANSWER-Materials unit cost $6.00 ($450,000* ÷ 75,000
units)
Conversion unit cost 2.50 ($150,000** ÷ 60,000 units)
Total unit cost $8.50
*($145,000 + $305,000) **[($175,000 - $145,000) + $120,000]
Which of the following is not an example of an activity cost pool?
a. Setting up machines
, b. Machining
c. Inspecting
d. Machine hours - ANSWER-d. machine hours
The last step in activity-based costing is to
a. assigns overhead costs to products, using overhead rates determined for each
cost pool.
b. computes the activity-based overhead rate per cost driver.
c. identifies and classifies the activities involved in the manufacture of specific
products, and allocate overhead to cost pools.
d. identifies the cost driver that has a strong correlation to the activity cost pool. -
ANSWER-a. assign overhead costs to products, using overhead rates determined
for each cost pool.
Which would be an appropriate cost driver for the machining activity cost pool?
a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections - ANSWER-Machine hours
Which of the following is not a facility-level activity?
a. Plant management
b. Product design
c. Personnel administration
d. Training - ANSWER-product design
A company incurs $4,050,000 of overhead each year in three departments:
Ordering and Receiving, Mixing, and Testing. The company prepares 2,000
purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in
producing 200,000 drums of Goo and 600,000 drums of Slime. The following data
are available:
Department Expected use of Driver Cost
Ordering and Receiving 2,000 $1,200,000
Mixing 50,000 1,500,000
Testing 1,500 1,350,000
Production information for Goo is as follows:
ACCOUNTING 2110: CH. 1, 2, 3, 4
QUESTIONS & ANSWERS
Managers Function - ANSWER-Planning, directing and controlling
Company types and inventory - ANSWER-Service company - none
Merchandising company- one inventory account
Inventory
manufacturing company- three inventory accounts
Raw material inventory
work in progress inventory
finished goods inventory
The sum of the direct materials costs, direct labor costs, and manufacturing
overhead incurred is the
a. cost of goods manufactured.
b. total manufacturing overhead.
c. total manufacturing costs.
d. total cost of work in process. - ANSWER-c. total manufacturing costs.
Sales commissions are classified as
a. overhead costs
b. period costs.
c. product costs.
d. indirect labor. - ANSWER-b. period costs
Direct materials and direct labor of a company total $8,000,000. If manufacturing
overhead is $4,000,000, what is direct labor cost?
a. $4,000,000
b. $8,000,000
c. $0
d. Cannot be determined from the information provided - ANSWER-d. cannot be
determined from the information provided
Which of the following is not a management function?
,a. Constraining
b. Planning
c. Controlling
d. Directing - ANSWER-a. constraining
The flow of costs in a job order cost system
a. involves accumulating manufacturing costs incurred and assigning the
accumulated costs to work done.
b. cannot be measured until all jobs are complete.
c. measures product costs for a set time period.
d. generally follows a LIFO cost flow assumption. - ANSWER-a. involves
accumulating manufacturing costs incurred and assigning the accumulated costs to
work done.
Process costing is not used when
a. similar goods are being produced.
b. large volumes are produced.
c. jobs have distinguishing characteristics.
d. a series of connected manufacturing processes is necessary. - ANSWER-c. jobs
have distinguishing characteristics.
Kinney Company applies overhead on the basis of 150% of direct labor cost. Job
No. 176 is charged with $150,000 of direct materials costs and $180,000 of
manufacturing overhead. The total manufacturing costs for Job No. 176 is
a. $330,000.
b. $600,000.
c. $450,000.
d. $405,000. - ANSWER-c. $450,000
Prepare journal entries to record the following transaction:
Direct materials requisitioned during the month:
Job 101 $20,000
Job 102 16,000
Job 103 24,000
$60,000 - ANSWER-Work in Process Inventory 60,000
Raw Materials Inventory 60,000
,In a process cost system,
a. a Work in Process account is maintained for each product.
b. a materials requisition must identify the job on which the materials will be used.
c. a Work in Process account is maintained for each process.
d. one Work in Process account is maintained for all the processes, similar to a job
order cost system. - ANSWER-c. a Work in Process account is maintained for each
process
In the month of June, a department had 20,000 units in beginning work in process
that were 70% complete. During June, 90,000 units were transferred into
production from another department. At the end of June there were 10,000 units in
ending work in process that were 40% complete. Materials are added at the
beginning of the process, while conversion costs are incurred uniformly throughout
the process. The equivalent units of production for conversion costs for June were
a. 90,000 equivalent units.
b. 104,000 equivalent units.
c. 100,000 equivalent units.
d. 110,000 equivalent units. - ANSWER-b. 104,000 equivalent units.
Massey Corporation uses a process cost system and the weighted-average cost flow
assumption. Production begins in the Fabricating Department where materials are
added at the beginning of the process and conversion costs are incurred uniformly
throughout the process. On March 1, the beginning work in process inventory
consisted of 20,000 units which were 60% complete and had a cost of $175,000,
$145,000 of which were materials costs. During March, the following occurred:
Materials added $305,000
Conversion costs incurred $120,000
Units completed and transferred out in March 50,000
Units in ending work in process March 31 (40% complete) 25,000
Calculate the unit cost: - ANSWER-Materials unit cost $6.00 ($450,000* ÷ 75,000
units)
Conversion unit cost 2.50 ($150,000** ÷ 60,000 units)
Total unit cost $8.50
*($145,000 + $305,000) **[($175,000 - $145,000) + $120,000]
Which of the following is not an example of an activity cost pool?
a. Setting up machines
, b. Machining
c. Inspecting
d. Machine hours - ANSWER-d. machine hours
The last step in activity-based costing is to
a. assigns overhead costs to products, using overhead rates determined for each
cost pool.
b. computes the activity-based overhead rate per cost driver.
c. identifies and classifies the activities involved in the manufacture of specific
products, and allocate overhead to cost pools.
d. identifies the cost driver that has a strong correlation to the activity cost pool. -
ANSWER-a. assign overhead costs to products, using overhead rates determined
for each cost pool.
Which would be an appropriate cost driver for the machining activity cost pool?
a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections - ANSWER-Machine hours
Which of the following is not a facility-level activity?
a. Plant management
b. Product design
c. Personnel administration
d. Training - ANSWER-product design
A company incurs $4,050,000 of overhead each year in three departments:
Ordering and Receiving, Mixing, and Testing. The company prepares 2,000
purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in
producing 200,000 drums of Goo and 600,000 drums of Slime. The following data
are available:
Department Expected use of Driver Cost
Ordering and Receiving 2,000 $1,200,000
Mixing 50,000 1,500,000
Testing 1,500 1,350,000
Production information for Goo is as follows:
