Principles of Cost Accounting 17th Edition by Vanderbeck - Test Bank

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 Financ