exam 1, sp07
TRANSCRIPT
1. In decision making, managers use:
A) financial accounting information exclusively since it is more objective and precise
due to well-established principles and conventions.
B) information regarding the organization as a whole rather than segments of the
organization in order to capture a broader perspective of the company's operations.
C) information that is as precise as humanly possible.
D) whatever information is relevant to the decision even though the information may
not conform to generally accepted accounting principles.
2. Financial accounting:
A) is required by regulatory bodies such as the SEC.
B) has its primary emphasis on the future.
C) provides data primarily for internal uses by managers.
D) is concerned primarily with the performance of segments rather than with the
performance of the entire organization.
3. The provisions of The Foreign Corrupt Practices Act of 1977 state that multinational
companies:
A) must not give nominal "tips" where such tips are common practice for the service
performed.
B) can give bribes only in countries where giving bribes is common practice in the
country in which the multinational company is doing business.
C) must devise and maintain a computerized accounting system.
D) must devise and maintain a system of internal controls sufficient to ensure that all
transactions are executed and recorded properly.
4. Management accounting primarily is concerned with providing:
A) information to managers inside the organization as well as information to
stockholders, creditors, and others outside the organization.
B) information to stockholders, creditors, and others outside the organization.
C) information to managers inside the organization.
D) information to governmental regulatory agencies.
5. The salary paid to the maintenance supervisor in a manufacturing plant is an example
of:
Product Cost Manufacturing Overhead
A) No Yes
B) Yes No
C) Yes Yes
D) No No
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6. Which of the following would most likely be included as part of manufacturing
overhead in the production of a wooden table?
A) The amount paid to the individual who stains the table.
B) The commission paid to the salesperson who sold the table.
C) The cost of glue used in the table.
D) The cost of the wood used in the table.
7. Wages paid to factory machine operators of a manufacturing plant are an element of:
Prime cost Conversion cost
A) No No
B) No Yes
C) Yes No
D) Yes Yes
8. Within the relevant range:
A) variable cost per unit decreases as production decreases.
B) fixed cost per unit increases as production decreases.
C) fixed cost per unit decreases as production decreases.
D) variable cost per unit increases as production decreases.
9. All of the following can be differential costs except:
A) variable costs.
B) sunk costs.
C) opportunity costs.
D) fixed costs.
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Use the following to answer question 10:
The following data (in thousands of dollars) have been taken from the accounting records of
Karmint Corporation for the just completed year.
Sales $830
Raw materials inventory, beginning $50
Raw materials inventory, ending $40
Purchases of raw materials $150
Direct labor $140
Manufacturing overhead $160
Administrative expenses $120
Selling expenses $150
Work in process inventory,
beginning
$30
Work in process inventory, ending $50
Finished goods inventory, beginning $80
Finished goods inventory, ending $100
Use these data to answer the following series of questions.
10. The net operating income for the year (in thousands of dollars) was:
A) $140.
B) $170.
C) $110.
D) $410.
11. In a job-order cost system, the application of manufacturing overhead usually would be
recorded as a debit to:
A) Cost of Goods Sold.
B) Work in Process inventory.
C) Manufacturing Overhead.
D) Finished Goods inventory.
Source: CPA, adapted
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12. A proper journal entry to record issuing raw materials to be used on a job would be:
A) Finished Goods XXX
Raw Materials XXX
B)
Raw Materials XXX
Work in Process XXX
C)
Work in Process XXX
Raw Materials XXX
D)
Raw Materials XXX
Finished Goods XXX
13. Karvel Corporation uses a predetermined overhead rate based on machine-hours to
apply manufacturing overhead to jobs. For the month of August, Karvel estimated total
manufacturing overhead costs at $300,000 and total machine-hours at 75,000 hours.
Actual results for the period were manufacturing overhead costs of $290,000 and 75,000
machine-hours. As a result, Karvel would have:
A) applied more overhead to Work in Process than the actual amount of overhead cost
for the year.
B) applied less overhead to Work in Process than the actual amount of overhead cost
for the year.
C) applied an amount of overhead to Work in Process that was equal to the actual
amount of overhead.
D) found it necessary to recalculate the predetermined overhead rate.
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14. Jameson Company uses a predetermined overhead rate based on direct labor hours to
apply manufacturing overhead to jobs. The company has provided the following
estimated costs for the next year:
Direct materials $ 5,000
Direct labor 19,000
Rent on factory building 16,000
Sales salaries 24,000
Depreciation on factory equipment 7,000
Indirect labor 11,000
Production supervisor's salary 14,000
Jameson estimates that 24,000 direct labor hours will be worked during the year. The
predetermined overhead rate per hour will be:
A) $2.00
B) $2.79
C) $3.00
D) $4.00
15. The operations of the Kerry Company resulted in underapplied overhead of $5,000.
The entry to close out this balance to Cost of Goods Sold and the effect of the
underapplied overhead on Cost of Goods Sold would be:
Entry Effect on Cost of Goods Sold
A) Manufacturing Overhead 5,000 Deduct $5,000
Cost of Goods Sold 5,000
B) Cost of Goods Sold 5,000 Deduct $5,000
Manufacturing Overhead 5,000
C) Cost of Goods Sold 5,000 Add $5,000
Manufacturing Overhead 5,000
D) Manufacturing Overhead 5,000 Add $5,000
Cost of Goods Sold 5,000
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16. The following debits (credits) appeared in Axe Company's Work in Process inventory
account for the month of March:
March Description Amount
1 Balance $ 2,000
31 Direct materials 12,000
31 Direct labor 8,000
31 Manufacturing overhead 6,400
31 To Finished Goods (24,000)
Axe applies overhead to jobs at a predetermined rate of 80% of direct labor cost. Job
No. 9, the only job still in process at the end of March, has been charged with direct
labor of $1,000. The amount of direct materials charged to Job No. 9 was:
A) $12,000.
B) $ 4,400.
C) $ 2,600.
D) $ 1,500.
17. Compute the amount of direct materials used during August if $25,000 of raw
materials were purchased during the month and the inventories were as follows:
Balance Balance
Inventories August 1 August 31
Raw materials $ 5,000 $ 3,000
Work in process 13,000 16,000
Finished goods 25,000 27,000
A) $16,000
B) $19,000
C) $23,000
D) $27,000
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Use the following to answer question 18:
The following partially completed T-accounts summarize last year's transactions for Kelshaw
Company.
Raw Materials
Beg Bal 4,000 20,000 (2)
(1) 18,000
Work in Process
Beg Bal 8,000 50,000 (7)
(2) 12,000
(4) 15,000
(6) 28,000
Manufacturing Overhead
(2) 8,000 28,000 (6)
(3) 12,000
(4) 5,000
(5) 4,000
Cost of Goods Sold
Accounts Payable
18,000 (1)
4,000 (5)
Finished Goods
Beg Bal 17,000
(7) 50,000
End Bal 12,000
Wages & Salaries Payable
6,000 Beg Bal
30,000 (4)
Sales Salaries Expense
(4) 10,000
Accumulated Depreciation (Factory)
90,000 Beg Bal
12,000 (3)
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At the end of the year, the company closes out the balance in the Manufacturing Overhead
account to Cost of Goods Sold.
18. The cost of direct materials used is:
A) $20,000.
B) $11,000.
C) $12,000.
D) $15,000.
Use the following to answer question 19:
The Garnet Company uses a job-order cost system. The following
data were recorded for February:
February 1 Added During February
Work in Process Direct Direct
Job Number Inventory Materials Labor
1 $1,500 $ 400 $ 300
2 $2,000 $ 600 $ 750
3 $ 500 $1,000 $1,500
4 $ 250 $1,300 $2,400
Overhead is charged to jobs at the rate of 140% of direct labor cost. Jobs 1, 2, and 3 were
completed during February and transferred to finished goods. Job 3 has been delivered to the
customer.
19. The work in process inventory on February 28 was:
A) $7,310.
B) $9,500.
C) $3,950.
D) $7,060.
20. There are two acceptable methods for closing out any balance of under- or overapplied
overhead. One method involves allocation, whereas the other closes any balance directly
to:
A) Finished Goods inventory.
B) Cost of Goods Sold.
C) Cost of Goods Manufactured.
D) Work in Process inventory.
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21. The Collins Company uses a predetermined overhead rates to apply manufacturing
overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A
and on machine hours in Dept. B. At the beginning of the year, the company made the
following estimates:
Dept A Dept B
Direct labor cost $65,000 $42,000
Manufacturing overhead 91,000 48,000
Direct labor hours 8,000 10,000
Machine hours 3,000 12,000
What predetermined overhead rates would be used in Dept A and Dept B, respectively?
A) 71% and $4.00
B) 140% and $4.00
C) 140% and $4.80
D) 71% and $4.80
22. After careful planning, Jammu Manufacturing Corporation has decided to switch to a
just-in-time inventory system. At the beginning of this switch, Jammu has 30 units of
product in inventory. Jammu has 2,000 labor hours available in the first month of this
switch. These hours could produce 500 units of product. Customer demand for this first
month is 400 units. If just-in-time principles are correctly followed, how many units
should Jammu plan to produce in the first month of the switch?
A) 370
B) 400
C) 430
D) 470
23. Process Reengineering includes all of the following steps except:
A) constructing a diagram flowcharting the current process.
B) redesigning the process.
C) elimination of non-value-added activities.
D) elimination of all constraints.
24. The delegation of decision making to lower levels in an organization is known as:
A) the planning and control cycle.
B) controlling.
C) decentralization.
D) none of these.
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25. Product costs appear on the balance sheet:
A) only if goods are partially completed at the end of the period.
B) only if goods are unsold at the end of a period.
C) only if goods are partially completed or are unsold at the end of a period.
D) only in merchandising firms.
26. The costs of staffing and operating the accounting department at Central Hospital would
be considered by the Department of Surgery to be:
A) direct costs.
B) indirect costs.
C) incremental costs.
D) opportunity costs.
Use the following to answer question 27:
Servix, Inc., produces water pumps. Each water pump contains a small valve that costs $5.
During May, 600 valves were drawn from the supply room and installed in water pumps in the
production process. Eighty percent of these units were completed and transferred into finished
goods warehouses. Of the units completed, thirty percent were still unsold at the end of the
month. There were no beginning inventories.
27. The cost of valves in work in process at the end of May would be:
A) $2,400
B) $3,000
C) $600
D) $720
Use the following to answer question 28:
The manufacturing operations of Jones Company had the following inventory balances for the
month of March:
Inventories March 1 March 31
Raw materials.................... $12,000 $14,000
Work in process ................ $8,000 $9,000
Finished goods .................. $32,000 $25,000
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28. If the company transferred $40,000 of completed goods from work in process to
finished goods during March, what was the amount of the cost of goods sold?
A) $47,000
B) $40,000
C) $33,000
D) $44,000
Use the following to answer question 29:
Loraine Company applies manufacturing overhead to jobs using a predetermined overhead rate
of 70% of direct labor cost. Any under- or overapplied overhead cost is closed to Cost of Goods
Sold at the end of the month. During August, the following transactions were recorded by the
company:
Raw materials (all direct materials):
Purchased during the month $30,000
Used in production $31,000
Labor:
Direct labor hours worked during the month 3,000
Direct labor cost incurred $27,000
Indirect labor cost incurred $6,000
Manufacturing overhead costs incurred (total) $19,000
Inventories:
Raw materials (all direct) August 31 $8,000
Work in process, August 1 $7,600
Work in process, August 31 $15,000*
*contains $6,000 of direct labor cost
29. The Cost of Goods Manufactured for August was:
A) $69,600.
B) $69,500.
C) $76,900.
D) $84,500.
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30. Inventoriable costs are also known as:
A) variable costs.
B) conversion costs.
C) product costs.
D) fixed costs.
31. The organization chart
A) shows lines of authority within an organization.
B) shows whether or not the organization is decentralized.
C) shows both formal and informal channels of communication between managers.
D) none of these.
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Answer Key
1. D
2. A
3. D
4. C
5. C
6. C
7. D
8. B
9. B
10. A
11. B
12. C
13. A
14. A
15. C
16. C
17. D
18. C
19. A
20. B
21. B
22. A
23. D
24. C
25. C
26. B
27. C
28. A
29. B
30. C
31. A