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Chapter 10
1. Managerial accounting reports information primarily for stakeholders that are external to the company.
a.
True
b.
False
2. Reporting under managerial accounting is not restricted by specific rules such as generally accepted accounting
principles (GAAP).
a.
True
b.
False
3. A manufacturing business converts materials into finished products through the use of machinery and labor.
Chapter 10
a.
True
b.
False
4. Inventories of finished products are reported as current assets on a manufacturer's balance sheet.
a.
True
b.
False
5. The cost of a manufactured product generally consists of direct materials cost, direct labor cost, and factory overhead
cost.
a.
True
Chapter 10
b.
False
6. The cost of materials entering directly into the manufacturing process is classified as factory overhead cost.
a.
True
b.
False
7. If the cost of employee wages is not a significant portion of the total product cost, the wages are classified as factory
overhead cost.
a.
True
b.
False
Chapter 10
8. For a construction contractor, the wages of carpenters would be classified as direct labor cost.
a.
True
b.
False
9. For an automotive repair shop, the wages of mechanics would be classified as direct labor cost.
a.
True
b.
False
Chapter 10
10. Sales commission is an example of factory overhead cost.
a.
True
b.
False
11. Conversion cost is the combination of direct labor cost and factory overhead cost.
a.
True
b.
False
Chapter 10
12. If the cost of materials is not a significant portion of the total product cost, the materials may be classified as a part of
factory overhead cost.
a.
True
b.
False
13. Product cost consists of factory overhead.
a.
True
b.
False
Chapter 10
14. Direct materials costs are included in the conversion costs of a product.
a.
True
b.
False
15. Period costs are costs that are incurred for the production requirements of a certain period.
a.
True
b.
False
Chapter 10
16. A manufacturing business reports three types of inventory on its balance sheet: direct materials, products in the
process of being manufactured, and finished products.
a.
True
b.
False
17. Non-manufacturing costs are generally classified into two categories: selling and administrative.
a.
True
b.
False
Chapter 10
18. As product costs are incurred in the manufacturing process, they are accounted for as assets and reported on the
balance sheet as inventory.
a.
True
b.
False
19. The current year's advertising costs are normally considered as product costs.
a.
True
b.
False
Chapter 10
20. The costs of materials and labor that do not enter directly into the finished product are classified as cost of goods sold.
a.
True
b.
False
21. Direct labor cost is an example of a product cost.
a.
True
b.
False
Chapter 10
22. Indirect labor is included in factory overhead.
a.
True
b.
False
23. A job order cost system accumulates costs for each of the departments or processes within the factory.
a.
True
b.
False
Chapter 10
24. A job order cost system provides for a separate record of the costs for each particular quantity of product that is
manufactured.
a.
True
b.
False
25. A company may use a job order cost system for some of its products and a process cost system for other products.
a.
True
b.
False
Chapter 10
26. In job order cost accounting system, perpetual inventory records are maintained in controlling accounts and subsidiary
ledgers for materials, work in process, and finished goods.
a.
True
b.
False
27. If the actual overhead incurred is less than the applied factory overhead, it is called overapplied factory overhead.
a.
True
b.
False
Chapter 10
28. After the goods are completed, their costs are transferred from Work in Process to Finished Goods.
a.
True
b.
False
29. In response to materials requisition, materials are transferred from the storeroom to the factory.
a.
True
b.
False
Chapter 10
30. The summary of the time tickets at the end of each month is the basis for recording the direct and indirect labor costs
incurred in production.
a.
True
b.
False
31. Materials inventory consists of the costs of direct and indirect materials that have not yet entered the manufacturing
process.
a.
True
b.
False
Chapter 10
32. Depreciation expense on factory equipment is part of factory overhead cost.
a.
True
b.
False
33. Job order cost systems can be used to compare unit costs of similar jobs to determine if costs are staying within
expected ranges.
a.
True
b.
False
Chapter 10
34. Factory overhead is applied to production using a predetermined overhead rate.
a.
True
b.
False
35. The underapplied factory overhead amount may be transferred to cost of goods sold at the end of the fiscal year.
a.
True
b.
False
Chapter 10
36. If factory overhead applied is less than the actual costs, the overhead is said to be underapplied.
a.
True
b.
False
37. The direct labor and overhead costs of providing services to clients are accumulated in a Work-in-Process account.
a.
True
b.
False
Chapter 10
38. Using the job order cost system, service business are able to bill clients on a weekly or monthly basis, even when the
job has not been completed.
a.
True
b.
False
39. In a job order cost system, materials and supply costs for a service business are normally included as part of overhead
cost.
a.
True
b.
False
Chapter 10
40. Manufacturers implement the philosophy of just-in-time processing to produce products with high quality, low cost,
and instant availability.
a.
True
b.
False
41. Service companies can effectively use activity-based costing to compute product (service) costs.
a.
True
b.
False
