Principles of Accounting II Exam 1 -2010 Version

1-16. Decentralization refers to:

A. reporting for te compan! as a "ole.
#. focusing reporting on parts of te compan!.
C. te $elegation of $ecision-ma%ing autorit! trougout an organization.
D. $ifferences in organizations.
2-21. Dorra &orporation manufactures la"nmo"ers in fi'e "or% stations. Dorra(s "ee%l!
$eman$ is )*000 mo"ers +ut Dorra can onl! pro$uce ,*200. Accor$ing to te teor! of
constraints* to increase pro$uction output Dorra "oul$ +enefit te most +! concentrating
impro'ement efforts on te:
A. first "or% station.
#. last "or% station.
&. largest "or% station.
D. fastest "or% station.
E. slo"est "or% station.
--2-. .ne of te steps in te lean tin%ing mo$el is to organize "or% arrangements aroun$ te
flo" of te +usiness process. /is is often accomplise$ +!:
A. automating te +usiness process.
#. implementing an enterprise s!stem.
&. instituting a six sigma program.
D. creating a manufacturing cell.
,-10. 1anagerial accounting:
A. as its primar! empasis on te future.
#. is re2uire$ +! regulator! +o$ies suc as te 3E&.
&. focuses on te organization as a "ole* rater tan on te organization(s segments.
D. 4esponses a* +* an$ c are all correct.
)-20. 5ic of te follo"ing I3 a caracteristic of financial accounting6
A. not man$ator!
B. must follo" 7AAP
&. empasis on rele'ance of $ata* rater tan precision
D. +ot A an$ & a+o'e
6-21. /e corporate controller(s salar! "oul$ +e consi$ere$ a8n9:
A. manufacturing cost.
#. pro$uct cost.
C. a$ministrati'e cost.
D. selling expense.
:-22. /e costs of $irect materials are classifie$ as:

A. &oice A
#. &oice #
&. &oice &
D. &oice D
0-2,. /e tree +asic elements of manufacturing cost are $irect materials* $irect la+or* an$:
A. cost of goo$s manufacture$.
#. cost of goo$s sol$.
&. "or% in process.
D. manufacturing o'erea$.
;-26. 5ic terms +elo" correctl! $escri+e te cost of te +lac% paint use$ to paint te $ots on
a pair of $ice6

A. &oice A
B. &oice #
&. &oice &
D. &oice D
10-2:. /e cost of fire insurance for a manufacturing plant is generall! consi$ere$ to +e a:
A. pro$uct cost.
#. perio$ cost.
&. 'aria+le cost.
D. all of tese.
11-2;. /ransportation costs incurre$ +! a manufacturing compan! to sip its pro$uct to its
customers "oul$ +e classifie$ as "ic of te follo"ing6
A. Pro$uct cost
#. 1anufacturing o'erea$
C. Perio$ cost
D. A$ministrati'e cost
12--0. 1icro &omputer &ompan! as set up a toll-free telepone line for customer in2uiries
regar$ing computer ar$"are pro$uce$ +! te compan!. /e cost of tis toll-free line "oul$ +e
classifie$ as "ic of te follo"ing6
A. Pro$uct cost
#. 1anufacturing o'erea$
&. Direct la+or
D. Perio$ cost
1----. 5ic t"o terms +elo" $escri+e te "ages pai$ to securit! guar$s tat monitor a factor!
2, ours a $a!6
A. 'aria+le cost an$ $irect cost
#. fixe$ cost an$ $irect cost
&. 'aria+le cost an$ in$irect cost
D. fixe$ cost an$ in$irect cost
1,--,. 5itin te rele'ant range* te $ifference +et"een 'aria+le costs an$ fixe$ costs is:
A. 'aria+le costs per unit fluctuate an$ fixe$ costs per unit remain constant.
B. 'aria+le costs per unit are constant an$ fixe$ costs per unit fluctuate.
&. +ot total 'aria+le costs an$ total fixe$ costs are constant.
D. +ot total 'aria+le costs an$ total fixe$ costs fluctuate.
1)--6. A la"nmo"er manufacturer compute$ a cost per unit of <)- +! a$$ing togeter last
mont(s $irect la+or* $irect materials* an$ manufacturing o'erea$ an$ $i'i$ing tat total +! te
10*000 units pro$uce$ last mont. 8/ere "ere no +eginning or en$ing in'entories.9 If ;*000
units are going to +e manufacture$ tis mont* "e "oul$ expect tat te:
A. cost per unit "ill remain te same.
#. cost per unit "ill $ecrease.
&. $irection of cange in unit costs cannot +e $etermine$.
D. cost per unit "ill increase.
16-,0. /e follo"ing costs "ere incurre$ in August:

&on'ersion costs $uring te mont totale$:
A. <12:*000
#. <)1*000
C. <)2*000
D. <:)*000
1:-,-. In August $irect la+or "as 60= of con'ersion cost. If te manufacturing o'erea$ for te
mont "as <),*000 an$ te $irect materials cost "as <-,*000* te $irect la+or cost "as:
A. <-6*000
#. <22*66:
&. <)1*000
D. <01*000
10-,). 7reen &ompan!(s costs for te mont of August "ere as follo"s: $irect materials*
<2:*000> $irect la+or* <-,*000> selling* <1,*000> a$ministrati'e* <12*000> an$ manufacturing
o'erea$* <,,*000. /e +eginning "or% in process in'entor! "as <16*000 an$ te en$ing "or%
in process in'entor! "as <;*000. 5at "as te cost of goo$s manufacture$ for te mont6
A. <10)*000
#. <1-2*000
&. <1-0*000
D. <112*000
1;-,6. &onsi$er te follo"ing costs incurre$ in a recent perio$:

5at "as te total amount of te perio$ costs liste$ a+o'e for te perio$6
A. <:0*000
#. <:1*000
&. <,6*000
D. <-:*000
20-,:. /e ?!ons &ompan!(s cost of goo$s manufacture$ "as <120*000 "en its sales "ere
<-60*000 an$ its gross margin "as <220*000. If te en$ing in'entor! of finise$ goo$s "as
<-0*000* te +eginning in'entor! of finise$ goo$s must a'e +een:
A. <20*000
B. <)0*000
&. <110*000
D. <1)0*000
21-,0. ?ast mont a manufacturing compan! a$ te follo"ing operating results:

5at "as te cost of goo$s manufacture$ for te mont6
A. <-)0*000
#. <-0)*000
&. <-::*000
D. <-2-*000
22-),. @sing te follo"ing $ata for August* calculate te cost of goo$s manufacture$:

/e cost of goo$s manufacture$ "as:
A. <106*000
#. <;2*000
&. <;)*000
D. <0;*000
2--1:. 5ic of te follo"ing companies "oul$ +e most li%el! to use a Ao+-or$er costing s!stem
rater tan a process costing s!stem6
A. fast foo$ restaurant
B. sip+uil$ing
&. cru$e oil refining
D. can$! ma%ing
2,-10. &omputing unit pro$uct costs in'ol'es a'eraging in:

A. &oice A
B. &oice #
&. &oice &
D. &oice D
2)-1;. Bor "ic situation8s9 +elo" "oul$ an organization +e more li%el! to use a Ao+-or$er
costing s!stem of accumulating pro$uct costs rater tan a process costing s!stem6
A. a steel factor! tat processes iron ore into steel +ars
#. a factor! tat processes sugar an$ oter ingre$ients into +lac% licorice
C. a costume ma%er tat ma%es specialt! costumes for figure s%aters
D. all of tese
26-20. In Ao+-or$er costing* all of te follo"ing statements are correct "it respect to la+or time
an$ cost except:
A. time tic%ets are %ept +! emplo!ees so"ing te amount of "or% on specific Ao+s.
#. te Ao+ cost seet for a Ao+ "ill contain all $irect la+or carges to tat particular Ao+.
&. la+or cost tat can +e trace$ to a Ao+ onl! "it a great $eal of effort is treate$ as part of
manufacturing o'erea$.
D. a macine operator performing routine annual maintenance "or% on a piece of e2uipment
"oul$ carge te maintenance time to a specific Ao+.
2:-2-. In a Ao+-or$er costing s!stem* te Aournal entr! to recor$ te application of o'erea$ cost
to Ao+s "oul$ inclu$e:
A. a cre$it to te 1anufacturing .'erea$ account.
#. a cre$it to te 5or% in Process in'entor! account.
&. a $e+it to &ost of 7oo$s 3ol$.
D. a $e+it to te 1anufacturing .'erea$ account.
20-2,. I'or! &ompan! uses a Ao+-or$er costing s!stem. 5at !ear-en$ Aournal entr! coul$ I'or!
ma%e to $ispose of 8close out9 <,*1)0 of o'erapplie$ manufacturing o'erea$ cost6
A.
#.
&.
D.
2;-2). In a Ao+-or$er costing s!stem* te use of in$irect materials "oul$ usuall! +e recor$e$ as
a $e+it to:
A. 4a" 1aterials.
#. 5or% in Process.
C. 1anufacturing .'erea$.
D. Binise$ 7oo$s.
-0-26. In a Ao+-or$er costing s!stem* $irect la+or costs usuall! are recor$e$ initiall! "it a $e+it
to:
A. 1anufacturing .'erea$.
#. Binise$ 7oo$s in'entor!.
&. Direct ?a+or Expense.
D. 5or% in Process.
-1--,. /e 5or% in Process in'entor! account of a manufacturing compan! so"s a +alance of
<2*,00 at te en$ of an accounting perio$. /e Ao+ cost seets of te t"o uncomplete$ Ao+s
so" carges of <,00 an$ <200 for $irect materials* an$ carges of <-00 an$ <)00 for $irect
la+or. Brom tis information* it appears tat te compan! is using a pre$etermine$ o'erea$
rate* as a percentage of $irect la+or costs* of:
A. 00=
B. 12)=
&. -00=
D. 2,0=
-2--). Co+ 60: "as recentl! complete$. /e follo"ing $ata a'e +een recor$e$ on its Ao+ cost
seet:

/e compan! applies manufacturing o'erea$ on te +asis of macine-ours. /e
pre$etermine$ o'erea$ rate is <1, per macine-our. /e total cost tat "oul$ +e recor$e$ on
te Ao+ cost seet for Co+ 60: "oul$ +e:
A. <,*10:
B. <6*-1;
&. <-*,-2
D. <,*06-
----6. /e follo"ing $ata a'e +een recor$e$ for recentl! complete$ Co+ )01 on its Ao+ cost
seet. Direct materials cost "as <-*06:. A total of -0 $irect la+or-ours an$ 10, macine-ours
"ere "or%e$ on te Ao+. /e $irect la+or "age rate is <12 per la+or-our. /e compan! applies
manufacturing o'erea$ on te +asis of macine-ours. /e pre$etermine$ o'erea$ rate is
<11 per macine-our. /e total cost for te Ao+ on its Ao+ cost seet "oul$ +e:
A. <,*):1
#. <-*:):
&. <-*0;0
D. <-*,2:
-,--0. Darrell &ompan! uses a pre$etermine$ o'erea$ rate +ase$ on $irect la+or-ours to
appl! manufacturing o'erea$ to Ao+s. At te +eginning of te !ear te compan! estimate$ its
total manufacturing o'erea$ cost at <,00*000 an$ its $irect la+or-ours at 100*000 ours. /e
actual o'erea$ cost incurre$ $uring te !ear "as <-)0*000 an$ te actual $irect la+or-ours
incurre$ on Ao+s $uring te !ear "as ;0*000 ours. /e manufacturing o'erea$ for te !ear
"oul$ +e:
A. <10*000 un$erapplie$
B. <10*000 o'erapplie$
&. <)0*000 un$erapplie$
D. <)0*000 o'erapplie$
-)-,1. #ra+o &orporation uses $irect la+or-ours in its pre$etermine$ o'erea$ rate. At te
+eginning of te !ear* te estimate$ $irect la+or-ours "ere 1)*:00 ours. At te en$ of te
!ear* actual $irect la+or-ours for te !ear "ere 16*:00 ours* te actual manufacturing
o'erea$ for te !ear "as <-)2*;60* an$ manufacturing o'erea$ for te !ear "as o'erapplie$
+! <2:*000. /e estimate$ manufacturing o'erea$ at te +eginning of te !ear use$ in te
pre$etermine$ o'erea$ rate must a'e +een:
A. <-2:*12,
B. <-):*;60
&. <-00*:60
D. <-,:*;60
-6-,-. Dagnon &orporation uses $irect la+or-ours in its pre$etermine$ o'erea$ rate. At te
+eginning of te !ear* te total estimate$ manufacturing o'erea$ "as <2;;*1-0. At te en$ of
te !ear* actual $irect la+or-ours for te !ear "ere 1:*,00 ours* manufacturing o'erea$ for
te !ear "as o'erapplie$ +! <1-*0)0* an$ te actual manufacturing o'erea$ "as <2;,*1-0.
/e pre$etermine$ o'erea$ rate for te !ear must a'e +een closest to:
A. <1:.:0
#. <1:.1;
&. <10.22
D. <16.;0
-:-,,. /e 5atts &ompan! uses pre$etermine$ o'erea$ rates to appl! manufacturing
o'erea$ to Ao+s. /e pre$etermine$ o'erea$ rate is +ase$ on la+or cost in Dept. A an$ on
macine-ours in Dept. #. At te +eginning of te !ear* te compan! ma$e te follo"ing
estimates:

5at pre$etermine$ o'erea$ rates "oul$ +e use$ in Dept A an$ Dept #* respecti'el!6
A. )0= an$ <0.00
#. )0= an$ <).00
&. <1) an$ 110=
D. 200= an$ <).00
-0-,). 3implex &ompan! as te follo"ing estimate$ costs for next !ear:

3implex estimates tat 10*000 $irect la+or an$ 16*000 macine-ours "ill +e "or%e$ $uring te
!ear. If o'erea$ is applie$ on te +asis of macine-ours* te o'erea$ rate per our "ill +e:
A. <0.)6
#. <:.6-
&. <6.;,
D. <-.)0
-;-6-. #ea'er &ompan! use$ a pre$etermine$ o'erea$ rate last !ear of <2 per $irect la+or-
our* +ase$ on an estimate of 2)*000 $irect la+or-ours to +e "or%e$ $uring te !ear. Actual
costs an$ acti'it! $uring te !ear "ere:

/e un$erapplie$ or o'erapplie$ o'erea$ last !ear "as:
A. <1*000 un$erapplie$
B. <1*000 o'erapplie$
&. <-*000 o'erapplie$
D. <2*000 un$erapplie$
,0-:. Process costing "oul$ +e appropriate for eac of te follo"ing except:
A. custom furniture manufacturing.
#. oil refining.
&. grain milling.
D. ne"sprint pro$uction.
,1-;. Assume tere is no +eginning "or% in process in'entor! an$ te en$ing "or% in process
in'entor! is 100= complete "it respect to materials costs. /e num+er of e2ui'alent units "it
respect to materials costs un$er te "eigte$-a'erage meto$ is:
A. te same as te num+er of units put into pro$uction.
#. less tan te num+er of units put into pro$uction.
&. te same as te num+er of units complete$.
D. less tan te num+er of units complete$.
,2-11. /e Assem+l! Department starte$ te mont "it );*000 units in its +eginning "or% in
process in'entor!. An a$$itional 2:,*000 units "ere transferre$ in from te prior $epartment
$uring te mont to +egin processing in te Assem+l! Department. /ere "ere 21*000 units in
te en$ing "or% in process in'entor! of te Assem+l! Department.
Do" man! units "ere transferre$ to te next processing $epartment $uring te mont6
A. ---*000
#. 2-6*000
&. -),*000
D. -12*000
,--12. ?ucas &ompan! uses te "eigte$-a'erage meto$ in its process costing s!stem. /e
compan! a$$s materials at te +eginning of te process in te Borming Department* "ic is
te first of t"o stages in its pro$uction process. Information concerning operations in te
Borming Department in .cto+er follo"s:

5at "as te materials cost of "or% in process at .cto+er -16
A. <-*060
#. <)*)20
&. <6*000
D. <6*120
,,-1-. De"e! &ompan! uses te "eigte$-a'erage meto$ in its process costing s!stem. /e
first processing $epartment* te 5el$ing Department* starte$ te mont "it 1)*000 units in its
+eginning "or% in process in'entor! tat "ere 20= complete "it respect to con'ersion costs.
/e con'ersion cost in tis +eginning "or% in process in'entor! "as <1;*200. An a$$itional
06*000 units "ere starte$ into pro$uction $uring te mont. /ere "ere 1-*000 units in te
en$ing "or% in process in'entor! of te 5el$ing Department tat "ere 60= complete "it
respect to con'ersion costs. A total of <):)*-60 in con'ersion costs "ere incurre$ in te
$epartment $uring te mont.
/e cost per e2ui'alent unit for con'ersion costs is closest to:
A. <).012
B. <6.206
&. <6.,00
D. <6.6;0
,)-1,. ?uft &ompan! uses te "eigte$-a'erage meto$ in its process costing s!stem.
.perating $ata for te first processing $epartment for te mont of Cune appear +elo":

Accor$ing to te compan!(s recor$s* te con'ersion cost in +eginning "or% in process in'entor!
"as <:;*0;- at te +eginning of Cune. A$$itional con'ersion costs of <-,-*0-0 "ere incurre$ in
te $epartment $uring te mont.
5at "as te cost per e2ui'alent unit for con'ersion costs for te mont6 84oun$ off to tree
$ecimal places.9
A. <0.0:0
B. <:.0;1
&. <).;20
D. <,.)0,
,6-1). @nizat &orporation uses te "eigte$-a'erage meto$ in its process costing s!stem.
/e follo"ing information pertains to one of te compan!(s processing $epartments for a recent
mont:

All materials are a$$e$ at te +eginning of te process. /e cost per e2ui'alent unit for
materials is closest to:
A. <0.06
#. <0.;0
&. <1.10
D. <1.10
,:-1:. Par% &ompan! uses te "eigte$-a'erage meto$ in its process costing s!stem. /e
1ol$ing Department is te secon$ $epartment in its pro$uction process. /e $ata +elo"
summarize te $epartment(s operations in Canuar!.

/e accounting recor$s in$icate tat te con'ersion cost tat a$ +een assigne$ to +eginning
"or% in process in'entor! "as <,0*,0, an$ a total of <21-*0;0 in con'ersion costs "ere
incurre$ in te $epartment $uring Canuar!.
/e cost per e2ui'alent unit for con'ersion costs for Canuar! in te 1ol$ing Department is
closest to:
A. <,.02-
#. <,.106
&. <,.6)0
D. <,.);0
,0-21. Cam &ompan! uses te "eigte$-a'erage meto$ in its process costing s!stem.
.perating $ata for te Painting Department for te mont of April appear +elo":

5at "ere te e2ui'alent units for con'ersion costs in te Painting Department for April6
A. :0*600
#. ::*)00
&. :2*-00
D. 01*200
,;-20. 4aulot &orporation uses te "eigte$-a'erage meto$ in its process costing s!stem.
/e 1ol$ing Department is te secon$ $epartment in its pro$uction process. /e $ata +elo"
summarize te $epartment(s operations in Canuar!.

/e 1ol$ing Department(s cost per e2ui'alent unit for con'ersion cost for Canuar! "as <1.:2.
Do" muc con'ersion cost "as assigne$ to te en$ing "or% in process in'entor! in te 1ol$ing
Department for Canuar!6
A. <)*--2.00
#. <2*)20.,0
C. <-*1;;.20
D. <2*1-2.00
3umter &ompan! uses te "eigte$-a'erage meto$ in its process costing s!stem. /e
follo"ing $ata pertain to operations in te first processing $epartment for a recent mont:


)0--2. Do" man! units "ere starte$ into pro$uction $uring te mont6
A. 60*000 units
#. 0,*000 units
C. :2*000 units
D. )6*000 units