Multiple Choice (2 points each)
1. Which of the following statements represents a similarity between financial and managerial accounting? A. Both are useful in providing information for external users. B. Both are governed by GAAP. C. Both draw upon data from an organization’s accounting system. D. Both rely heavily on published financial statements. E. Both are solely concerned with historical transactions.
2. Which of the following characteristic(s) relate(s) more to managerial accounting than to financial accounting? A. A focus on reporting to personnel within an organization. B. A focus on reporting to external parties. C. An area of accounting that is heavily regulated. D. A focus on providing information that is relevant for planning, decision making, directing, and control. E. A focus on reporting to personnel within an organization and a focus on providing information that is relevant for planning, decision making, directing, and control.
3. Financial accounting focuses primarily on reporting: A. to parties outside of an organization. B. to parties within an organization. C. to an organization’s board of directors. D. to financial institutions. E. for financial institutions.
4. Research and development costs are classified as:
A. product costs. B. period costs. C. inventoriable costs. D. cost of goods sold. E. labor costs.
5. Which of the following is a product cost? A. Circuitry used in producing hard drives. B. Monthly advertising in the newspaper. C. The salary of the vice president-finance. D. Sales commissions. E. Research costs for new router development.
6. Which of the following would not be classified as a product cost? A. Direct materials. B. Direct labor. C. Indirect materials. D. Insurance on a manufacturing plant. E. Sales bonuses for meeting quota sales.
7. The accounting records of Dixon Company revealed the following costs: direct materials used, $250,000; direct labor, $425,000; manufacturing overhead, $375,000; and selling and administrative expenses, $220,000. Dixon’s product costs total: A. $1,050,000. B. $830,000. C. $895,000. D. $1,270,000. E. None of the answers is correct.
8. Which of the following entities would most likely have raw materials, work in process, and finished goods? A. A petroleum refiner.
B. A national department store. C. A fast food restaurant. D. A regional airline. E. A state university.
9. Selling and administrative expenses would likely appear on the balance sheet of: A. A clothing store. B. A computer manufacturer. C. A television network. D. All of these firms. E. None of these firms.
10. Which of the following inventories would a company ordinarily hold for sale? A. Raw materials. B. Work in process. C. Finished goods. D. Raw materials and finished goods. E. Work in process and finished goods.
11. Which type of production process is likely used for custom yachts?
A. Batch. B. Continuous Flow. C. Job. D. Assembly. E. Direct assembly.
12. Which type of production process is likely used by a paint manufacturer to produce paint?
A. Batch. B. Process Costing. C. Job Shop. D. Assembly. E. Direct assembly.
13. Which of the following would not be classified as direct materials by a company that makes automobiles?
A. Wheel lubricant. B. Tires. C. Interior leather. D. CD player. E. Sheet metal used in the automobile’s body.
14. Which of the following employees would not be classified as indirect labor?
A. Plant Custodian. B. Salesperson. C. An employee that packs products for shipment. D. Plant security guard. E. A line employee that produces parts for chairs using a saw and template.
15. Depreciation of factory equipment would be classified as: A. operating cost. B. “other” cost. C. manufacturing overhead. D. period cost. E. administrative cost.
16. As production takes place, all manufacturing costs are added to the: A. Work-in-Process Inventory account. B. Manufacturing-Overhead Inventory account. C. Cost-of-Goods-Sold account. D. Finished-Goods Inventory account. E. Production Labor account.
17. The final step in recognizing the completion of production requires a company to: A. debit Finished-Goods Inventory and credit Work-in-Process Inventory. B. debit Work-in-Process Inventory and credit Finished-Goods Inventory. C. add direct labor to Work-in-Process Inventory. D. add direct materials, direct labor, and manufacturing overhead to Work-in-Process Inventory. E. add direct materials to Finished-Goods Inventory.
18. Morgan Manufacturing recently sold goods that cost $35,000 for $45,000 cash. The journal entries to record this transaction would include: A. a credit to Work-in-Process Inventory for $35,000. B. a debit to Sales Revenue for $45,000. C. a credit to Profit on Sale for $10,000. D. a debit to Finished-Goods Inventory for $35,000. E. a credit to Sales Revenue for $45,000.
19. A manufacturing firm produces goods in accordance with customer specifications, commencing production upon receipt of a purchase order. To accumulate the cost of each order, the company would use a: A. job-cost record. B. cost allocation matrix. C. production log. D. overhead sheet. E. manufacturing cost record.
20. Manufacturing overhead: A. includes direct materials, indirect materials, indirect labor, and factory depreciation. B. is easily traced to jobs. C. includes all selling costs. D. should not be assigned to individual jobs because it bears no obvious relationship to them. E. is a pool of indirect production costs that must somehow be attached to each unit manufactured.
Identification/Problems (Points as Noted)
Consider the following items: A. Tomatoes used in the manufacture of ketchup B. Administrative salaries of executives employed by a regional airline C. Wages of assembly-line workers at an automobile manufacturing plant D. Marketing expenditures of the major league baseball club E. Commissions paid to the salespeople working for a soft drink company F. Straight-line depreciation on manufacturing equipment owned by a computer manufacturer G. Shipping charges incurred by office supplies retailer on out-going orders H. Speakers used in a consumer electronics company’s home-theater systems I. Insurance costs related to a cosmetics manufacturing plant
Required: Complete the table that follows and classify each of the costs listed as (1) a product or period cost and (2) a variable or fixed cost by placing an “X” in the appropriate column. (18 points)
|Product or Period Cost||Variable or Fixed Cost|
Consider the following cost items: 1. Sales commissions earned by a company’s sales force. 2. Raw materials purchased during the period. 3. Current year’s depreciation on a firm’s manufacturing facilities. 4. Year-end completed production of a carpet manufacturer. 5. The cost of products sold to customers of an apparel store. 6. Wages earned by machine operators in a manufacturing plant. 7. Income taxes incurred by an airline. 8. Marketing costs of an electronics manufacturer. 9. Indirect labor costs incurred by a manufacturer of office equipment. Required: Evaluate the costs just cited and determine whether the associated dollar amounts would appear on the firm’s balance sheet, income statement, or schedule of cost of goods manufactured. (9 points)
Opal Inc. used $213,000 of direct materials and incurred $111,000 of direct labor costs during 2015. Indirect labor amounted to $8,100 while indirect materials used totaled $4,800. Other operating costs pertaining to the factory which are all considered manufacturing overhead included factory utilities of $9,300; factory maintenance of $13,500; factory repairs of $5,400; depreciation on factory equipment of $23,700; and, property taxes on the factory of $7,800. There was no beginning or ending finished goods inventory. The Work-in-Process Inventory account reflected a balance of $16,500 at the beginning of the period and $22,500 at the end of the period.
Required: Prepare a schedule of cost of goods manufactured for Opal Inc. (23 points)
The phone bill for a company consists of both fixed and variable costs. Given the data below for four months apply the high-low method to calculate the total fixed costs and variable cost per unit. (10 points)