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Chapter 10
42. Activity-based costing is a method of accumulating and allocating costs by department.
a.
True
b.
False
43. Which of the following statements is true of managerial accounting?
a.
Reporting under managerial accounting is constrained by rules such as generally accepted accounting
principles.
b.
Managerial accounting is required to be reported annually, also may be reported monthly or quarterly.
c.
Managerial accounting provides information to the external stakeholders of the company.
d.
Managerial accounting is primarily concerned with generating information for use by managers.
Chapter 10
44. Which of the following statements is a difference between financial accounting and managerial accounting?
a.
Under financial accounting, reports are prepared using GAAP, whereas under managerial accounting,
information that is useful to management for its decision making is not recorded using GAAP.
b.
Financial accounting focuses on providing information for internal use, whereas managerial accounting
focuses on providing information for external use.
c.
Under financial accounting, reports are prepared as and when management needs them, whereas under
managerial accounting, reports are prepared on a monthly basis.
d.
Financial accounting has a subjective approach, whereas managerial accounting has an objective approach.
45. Costs are often classified by their relationship to a segment of operations, called a _____.
a.
prime cost
b.
controlling account
c.
cost object
d.
cost sheet
Chapter 10
46. Which of the following is true of a direct materials cost?
a.
A direct materials cost is included in factory overhead.
b.
It is sometimes called factory burden.
c.
It is not a significant portion of the total product cost.
d.
It is the cost of any material that is an integral part of the finished product.
47. Which of the following is an example of direct materials cost for an automobile manufacturer?
a.
Cost of oil lubricants for factory machinery
b.
Cost of wages of assembly worker
Chapter 10
c.
Varnish for coating
d.
Cost of interior upholstery
48. If the cost of direct materials is not a significant portion of the total product cost, it may be classified as:
a.
direct labor costs.
b.
selling and administrative costs.
c.
miscellaneous costs.
d.
factory overhead costs.
Chapter 10
49. The cost of wages paid to employees directly involved in the manufacturing process of converting materials into
finished product is classified as:
a.
factory overhead cost.
b.
direct labor cost.
c.
wages expense.
d.
direct materials cost.
50. Which of the following would be classified as direct materials for an auto manufacturer?
a.
Factory light bulbs
b.
Material used for door panels
c.
Drill bits
d.
Steel
Chapter 10
51. Which of the following is an example of direct labor cost for an airplane manufacturer?
a.
Cost of wages of janitors
b.
Cost of wages of assembly worker
c.
Salary of plant supervisor
d.
Salary of the chairman
52. Depreciation on factory equipment is an example of a_____.
a.
period cost
b.
product cost
c.
selling cost
d.
prime cost
Chapter 10
53. Which of the following is considered a part of factory overhead cost?
a.
Sales commissions
b.
Depreciation of factory buildings
c.
Depreciation of office equipment
d.
Direct materials used
54. Which of the following is a product cost?
a.
Administrative cost
b.
Direct labor cost
c.
Selling cost
d.
Opportunity cost
Chapter 10
55. Which of the following is an example of a factory overhead cost?
a.
Repair and maintenance cost on the administrative building
b.
Factory heating and lighting cost
c.
Insurance premiums on salespersons' automobiles
d.
President's salary
56. Which of the following items would be classified as a part of prime cost?
a.
Direct labor cost
b.
Factory overhead cost
c.
Selling cost
d.
Administrative cost
Chapter 10
57. Compute factory overhead cost from the following costs:
Depreciation on factory buildings
$ 45,950
Depreciation on office equipment
32,980
Direct materials used
96,840
Indirect labor
6,580
a.
$73,000
b.
$52,530
c.
$96,840
d.
$78,930
58. Which of the following is a period cost?
a.
Power
Chapter 10
b.
Depreciation on factory equipment
c.
Sales commissions
d.
Wages of an assembly worker
59. Finished goods inventory includes _____.
a.
telephone charges
b.
advertising expenses
c.
factory overhead
d.
director's fees
Chapter 10
60. Which of the following is most likely to be a product cost?
a.
Salary of the vice president of sales
b.
Advertising for a particular product
c.
Drill bits for a drill press used in the plant assembly area
d.
Salary of the company receptionist
61. Which of the following costs appear on a balance sheet?
a.
Selling expenses
b.
Product Costs
c.
Period Costs
d.
Opportunity costs
Chapter 10
62. Direct materials, work-in-process, and finished goods inventory are most likely to be reported on the balance sheet of
a(n):
a.
financial consultant.
b.
apparel boutique.
c.
automobile company.
d.
insurance company.
63. Which of the following manufacturing costs is an indirect cost of producing a product?
a.
Oil lubricants used for factory machinery
b.
Commissions for sales personnel
c.
Hourly wages of an assembly worker
d.
Memory chips for a microcomputer manufacturer
Chapter 10
64. Which of the following would be a period costs for a textbooks printing company?
a.
Wages of a press operator
b.
Utility costs of the factory
c.
Advertising expenses
d.
Paper costs
65. Which of the following is most likely a period cost?
a.
Depreciation on factory lunchroom furniture
b.
Salary of telephone receptionist in the sales office
c.
Salary of a security guard for the factory parking lot
d.
Computer chips used by a computer manufacturer
Chapter 10
66. Which of the following are the two main types of cost accounting systems for manufacturing operations?
a.
Process cost and general accounting systems
b.
Job order cost and process cost systems
c.
Job order cost and general accounting systems
d.
Process cost and replacement cost systems
67. For which of the following businesses would the job order cost system be most appropriate?
a.
Custom cabinet manufacturer
b.
Automobile manufacturer
c.
Lumber mill
d.
Meat processor
Chapter 10
68. Which of the following businesses is most likely to use a job order costing system?
a.
A paper mill
b.
A swimming pool installer
c.
A company that manufactures chlorine for swimming pools
d.
An oil refinery
69. A(n) _____ provides product costs for each quantity of a product that is manufactured.
a.
process costing
b.
job order costing
c.
activity based costing
d.
DuPont costing
Chapter 10
70. Which of the following is true of job order cost systems?
a.
Examples of companies that use job order cost systems would be oil refineries, paper producers, chemical
processors, and food processors.
b.
Job order cost systems are not widely used.
c.
Job order cost systems are often used by companies that manufacture custom products for customers or
batches of similar products.
d.
Job order cost systems provide product costs for each manufacturing department or process.
71. Which of the following businesses is most likely to use process cost accounting system?
a.
Custom cabinet manufacturer
Chapter 10
b.
Dress designer
c.
Lumber mill
d.
Printing firm
72. Which of the following best explains a job order cost system?
a.
It provides product costs for each manufacturing department or process.
b.
It is often used by companies that manufacture custom products for customers or batches of similar products.
c.
It is often used by companies that manufacture units of a product that are indistinguishable from each other.
d.
It is used by companies that manufacture units of a product using a continuous production process.
Chapter 10
73. The document authorizing the issuance of materials from the storeroom for use in manufacturing is called:
a.
materials requisition.
b.
purchase requisition.
c.
receiving report.
d.
purchase order.
74. In a job order cost accounting system, the effect of the flow of direct materials into production will be:
a.
increase in Work-in-Process and decrease in Materials Inventory.
b.
increase in Materials Inventory and decrease in Work-in-Process.
c.
increase in Factory Overhead and decrease in Materials Inventory.
d.
increase in Work-in-Process and decrease in Supplies.
Chapter 10
75. A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the
materials from the Materials account to:
a.
Work-in-Process and Cost of Goods Sold.
b.
Work-in-Process and Factory Overhead.
c.
Finished Goods and Cost of Goods Sold.
d.
Work-in-Process and Finished Goods.
76. A _____ is prepared when materials that have been ordered are received and inspected.
a.
supplier’s invoice
b.
materials ledger
c.
receiving report
d.
materials requisition
Chapter 10
77. The amount of time spent by each employee and the labor costs incurred for each individual job or for factory
overhead are recorded on the:
a.
employees’ earnings records.
b.
in-and-out board.
c.
time tickets.
d.
receiving order
78. Dividing estimated total factory overhead costs by estimated activity base will give the _____.
a.
underabsorbed factory overhead rate
b.
predetermined factory overhead rate
c.
overabsorbed factory overhead rate
d.
actual factory overhead rate
