WGU D101 Cost and Managerial Accounting Exam Study Guide 2022/2023

What is a price taker? - ANSWER A company that has to accept the price that the market sets for a good. They have no influence over setting the price. What is a price maker? - ANSWER a firm possessing the power to set the price within the market. They still need to track all costs in order to make sure they are making an adequate return. What is the major purpose and use of job order costing? a. To create a system that tracks both manufacturing and period costs and assigns both to products b. To create a system in which manufacturing costs are tracked by period instead of by products c. To create a system in which manufacturing costs are accumulated by separate product orders or batches d. To create a system that is exclusively used by price makers and not by price takers - ANSWER c. Which statement is true? a. Having accurate product or service cost information is important for both price takers and price makers. b. Having accurate product or service cost information is important for price takers, but not price makers. c. Having accurate produce or service cost information is not important for either price takers or price makers. d. Having accurate product or service cost information is important for price makers, but not price takers. - ANSWER a. Two competitors exist in the same industry. The first company has accurate product cost information while the second company does not. What is the reason behind why the first company is more successful than the second? a. With accurate job cost information, the first company can undercut the second company's prices, thus driving the second company out of business. b. With accurate job cost information, the first company can set prices that guarantee making a profit, can understand which costs need to be worked on, and can determine which actions can be taken to make the company more efficient and profitable. c. With accurate job cost information, the first company can pay higher wages to employees, thus motivating them more than the employees of the second company. d. With accurate job cost information, the first company can set prices higher than the second company, thus earning higher profits. - ANSWER b. Job order costing is appropriate when which two conditions exist? a. Products produced are all the same, and the manufacturing processes used to produce them are the same. b. Products produced are distinct from each other, and the manufacturing processes used are different for different products. c. Products produced are distinct, but the manufacturing processes used are the same for different products. d. Products produced are all the same, but the manufacturing processes used to produce them are different for different products. - ANSWER b. Why is having accurate product cost information important? a. So manufacturers can charge a price based on costs and a reasonable markup b. So companies can minimize the profits they are earning c. So manufacturers can charge a price based on estimated product costs, not including a reasonable markup d. So companies can grow faster than all competitors in their industry - ANSWER a. Which type of company should use job order costing? a. Air filter manufacturer b. Soda bottler c. Paper towel manufacturer d. Commercial aircraft manufacturer - ANSWER d. What is a condition to using job order costing? a. Tracking total direct materials for a given period of time b. Having no manufacturing overhead assigned to the product cost c. Tracking total direct labor costs for a period of time d. Identifying each specific job or product manufactured - ANSWER d. Which costs should be assigned to each product under a job order costing system? a. Direct materials, direct labor, and manufacturing overhead b. Direct labor, manufacturing overhead, and administrative expenses c. Direct materials, direct labor, and administrative expenses d. Manufacturing overhead, administrative expenses, and depreciation of office buildings - ANSWER a. Which company should use a job ordering costing system? a. Manufacturer of custom furniture b. Manufacturer of paint c. Food processing plant d. Loan processing firm - ANSWER a. The profitability of each separate job or product can only be tracked using which product costing system? a. Process costing b. Average unit costing c. Profitability costing d. Job order costing - ANSWER d. In completing its job order costing journal entries, ABC Company's accountants made a credit entry to finished goods inventory. When is this entry made? a. When work-in-process inventory is transferred to finished goods inventory b. When finished goods inventory is sold c. When the cost of goods manufactured is being calculated d. When manufacturing overhead costs are applied to products being made - ANSWER b. Which account are the costs of the raw materials, direct labor, and miscellaneous manufacturing overhead transferred to when the product is being manufactured? a. Finished goods inventory b. Cost of goods sold c. Work-in-process inventory d. Direct materials - ANSWER c. When manufacturing is completed on specific products, their costs are transferred to which account? a. Cost of goods sold b. Work-in-process inventory c. Finished goods inventory d. Direct materials - ANSWER c. The cost of which items should be included as a manufacturing overhead cost? a. The wages of employees who work on production lines b. The raw materials used in the finishing department c. The direct materials used to make a product d. The wages of factory custodians - ANSWER d. The glue and nails used in a manufacturing process should be included in which cost? a. Administrative costs b. Manufacturing overhead costs c. Prepaid supplies d. Direct materials costs - ANSWER b. The purchase of raw materials on open account is recorded by which journal entry? a. Debit to accounts payable b. Credit to raw materials inventory c. Credit to work-in-process inventory d. Debit to raw materials inventory - ANSWER d. Which journal entry is used to record payment of factory rent in cash? a. Debit to finished goods inventory b. Debit to cost of goods sold c. Debit to work-in-process inventory d. Debit to manufacturing overhead - ANSWER d. What is the manufacturing overhead rate that is applied to work-in-process during the manufacturing of products? a. An estimate of what the total overhead will be for the product being made based on how much the completed products should cost to earn a normal profit b. The actual costs of manufacturing overhead computed by adding together each of the expected manufacturing overhead components c. An estimate of what the total overhead will be for the product being made based on some allocation method such as machine hours or direct labor hours d. The actual costs of the manufacturing overhead divided by the number of products expected to be made - ANSWER c. In using a job order costing system, the cost accountant for Paradigm Toys made an entry debiting work-in-process inventory and crediting salaries and wages payable. What was the purpose of this entry? a. To recognize total labor costs, regardless of whether the labor was directly or indirectly related to products b. To apply the indirect labor costs to work-in-process inventory c. To assign direct labor costs to the products being manufactured d. To pay for the salaries of factory employees - ANSWER c. The cost accountant for Bullzai, Inc., made a journal entry debiting manufacturing overhead and crediting salaries and wages payable. What was the purpose of the entry? a. To record indirect labor costs to manufacturing overhead b. To pay for the salaries of the indirect laborers associated with manufacturing but not working directly on products c. To record direct labor costs on products being made d. To pay for the salaries of direct laborers working in manufacturing - ANSWER a. Quiet Flag Industries has decided that direct labor hours are a good basis on which to apply overhead costs to production. Budgeted manufacturing overhead costs for the coming year are $500,000. Budgeted direct materials purchases are $400,000. The budgeted direct labor cost is $720,000, and budgeted direct labor hours for the coming year are 20,000 hours. What is Quiet Flag Industries' predetermined overhead rate? a. $36 per direct labor hour b. $20 per direct labor hour c. $25 per direct labor hour d. $61 per direct labor hour - ANSWER c What is the order of the steps followed in accounting for manufacturing overhead costs? a. Budget the estimated manufacturing overhead, eliminate overapplied or underapplied overhead, record actual manufacturing overhead, and apply manufacturing overhead to work-in-process b. Budget the estimated manufacturing overhead, record actual manufacturing overhead, apply manufacturing overhead to work-in-process, and eliminate overapplied or underapplied overhead