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. $i&erences in organizations.
2-21. Dorra 'orporation manufactures la"nmo"ers in ()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$uction output Dorra "oul$ -ene(t te
most -! concentrating impro)ement e&orts on te:
A. (rst "or% station.
#. last "or% station.
'. largest "or% station.
D. fastest "or% station.
E. slo"est "or% station.
/-2/. 0ne of te steps in te lean tin%ing mo$el is to organize "or% arrangements
aroun$ te 1o" of te -usiness process. 2is is often accomplise$ -!:
A. automating te -usiness process.
#. implementing an enterprise s!stem.
'. instituting a six sigma program.
D. creating a manufacturing cell.
.-13. 4anagerial accounting:
A. as its primar! empasis on te future.
#. is re5uire$ -! regulator! -o$ies suc as te 6E'.
'. focuses on te organization as a "ole, rater tan on te organization*s
segments.
D. 7esponses a, -, an$ c are all correct.
+-20. 8ic of te follo"ing I6 a caracteristic of (nancial accounting9
A. not man$ator!
B. must follo" :AAP
'. empasis on rele)ance of $ata, rater tan precision
D. -ot A an$ ' a-o)e
6-21. 2e corporate controller*s salar! "oul$ -e consi$ere$ a;n<:
A. manufacturing cost.
#. pro$uct cost.
C. a$ministrati)e cost.
D. selling expense.
=-22. 2e costs of $irect materials are classi(e$ as:

A. 'oice A
#. 'oice #
'. 'oice '
D. 'oice D
3-2.. 2e 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. 8ic terms -elo" correctl! $escri-e te cost of te -lac% paint use$ to paint
te $ots on a pair of $ice9

A. 'oice A
B. 'oice #
'. 'oice '
D. 'oice D
10-2=. 2e cost of (re 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>. 2ransportation costs incurre$ -! a manufacturing compan! to sip its
pro$uct to its customers "oul$ -e classi(e$ as "ic of te follo"ing9
A. Pro$uct cost
#. 4anufacturing o)erea$
C. Perio$ cost
D. A$ministrati)e cost
12-/0. 4icro 'omputer 'ompan! as set up a toll-free telepone line for customer
in5uiries regar$ing computer ar$"are pro$uce$ -! te compan!. 2e cost of tis
toll-free line "oul$ -e classi(e$ as "ic of te follo"ing9
A. Pro$uct cost
#. 4anufacturing o)erea$
'. Direct la-or
D. Perio$ cost
1/-//. 8ic t"o terms -elo" $escri-e te "ages pai$ to securit! guar$s tat
monitor a factor! 2. ours a $a!9
A. )aria-le cost an$ $irect cost
#. (xe$ cost an$ $irect cost
'. )aria-le cost an$ in$irect cost
D. (xe$ cost an$ in$irect cost
1.-/.. 8itin te rele)ant range, te $i&erence -et"een )aria-le costs an$ (xe$
costs is:
A. )aria-le costs per unit 1uctuate an$ (xe$ costs per unit remain constant.
B. )aria-le costs per unit are constant an$ (xe$ costs per unit 1uctuate.
'. -ot total )aria-le costs an$ total (xe$ costs are constant.
D. -ot total )aria-le costs an$ total (xe$ costs 1uctuate.
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. ;2ere "ere no
-eginning or en$ing in)entories.< If >,000 units are going to -e manufacture$ 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. 2e 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. ?31,000
13-.+. :reen 'ompan!*s costs for te mont of August "ere as follo"s: $irect
materials, ?2=,000A $irect la-or, ?/.,000A selling, ?1.,000A a$ministrati)e, ?12,000A
an$ manufacturing o)erea$, ?..,000. 2e -eginning "or% in process in)entor!
"as ?16,000 an$ te en$ing "or% in process in)entor! "as ?>,000. 8at "as te
cost of goo$s manufacture$ for te mont9
A. ?10+,000
#. ?1/2,000
'. ?1/3,000
D. ?112,000
1>-.6. 'onsi$er te follo"ing costs incurre$ in a recent perio$:

8at "as te total amount of te perio$ costs liste$ a-o)e for te perio$9
A. ?=3,000
#. ?=1,000
'. ?.6,000
D. ?/=,000
20-.=. 2e B!ons 'ompan!*s cost of goo$s manufacture$ "as ?120,000 "en its
sales "ere ?/60,000 an$ its gross margin "as ?220,000. If te en$ing in)entor! of
(nise$ goo$s "as ?/0,000, te -eginning in)entor! of (nise$ goo$s must a)e
-een:
A. ?20,000
B. ?+0,000
'. ?110,000
D. ?1+0,000
21-.3. Bast mont a manufacturing compan! a$ te follo"ing operating results:

8at "as te cost of goo$s manufacture$ for te mont9
A. ?/+0,000
#. ?/3+,000
'. ?/==,000
D. ?/2/,000
22-+.. Csing te follo"ing $ata for August, calculate te cost of goo$s
manufacture$:

2e cost of goo$s manufacture$ "as:
A. ?106,000
#. ?>2,000
'. ?>+,000
D. ?3>,000
2/-1=. 8ic of te follo"ing companies "oul$ -e most li%el! to use a Do--or$er
costing s!stem rater tan a process costing s!stem9
A. fast foo$ restaurant
B. sip-uil$ing
'. cru$e oil re(ning
D. can$! ma%ing
2.-13. 'omputing unit pro$uct costs in)ol)es a)eraging in:

A. 'oice A
B. 'oice #
'. 'oice '
D. 'oice D
2+-1>. Eor "ic situation;s< -elo" "oul$ an organization -e more li%el! to use a
Do--or$er costing s!stem of accumulating pro$uct costs rater tan a process
costing s!stem9
A. a steel factor! tat processes iron ore into steel -ars
#. a factor! tat processes sugar an$ oter ingre$ients into -lac% licorice
C. a costume ma%er tat ma%es specialt! costumes for (gure s%aters
D. all of tese
26-20. In Do--or$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 speci(c Do-s.
#. te Do- cost seet for a Do- "ill contain all $irect la-or carges to tat particular
Do-.
'. la-or cost tat can -e trace$ to a Do- onl! "it a great $eal of e&ort is treate$ as
part of manufacturing o)erea$.
D. a macine operator performing routine annual maintenance "or% on a piece of
e5uipment "oul$ carge te maintenance time to a speci(c Do-.
2=-2/. In a Do--or$er costing s!stem, te Dournal entr! to recor$ te application of
o)erea$ cost to Do-s "oul$ inclu$e:
A. a cre$it to te 4anufacturing 0)erea$ account.
#. a cre$it to te 8or% in Process in)entor! account.
'. a $e-it to 'ost of :oo$s 6ol$.
D. a $e-it to te 4anufacturing 0)erea$ account.
23-2.. I)or! 'ompan! uses a Do--or$er costing s!stem. 8at !ear-en$ Dournal entr!
coul$ I)or! ma%e to $ispose of ;close out< ?.,1+0 of o)erapplie$ manufacturing
o)erea$ cost9
A.
#.
'.
D.
2>-2+. In a Do--or$er costing s!stem, te use of in$irect materials "oul$ usuall! -e
recor$e$ as a $e-it to:
A. 7a" 4aterials.
#. 8or% in Process.
C. 4anufacturing 0)erea$.
D. Einise$ :oo$s.
/0-26. In a Do--or$er costing s!stem, $irect la-or costs usuall! are recor$e$ initiall!
"it a $e-it to:
A. 4anufacturing 0)erea$.
#. Einise$ :oo$s in)entor!.
'. Direct Ba-or Expense.
D. 8or% in Process.
/1-/.. 2e 8or% in Process in)entor! account of a manufacturing compan! so"s a
-alance of ?2,.00 at te en$ of an accounting perio$. 2e Do- cost seets of te t"o
uncomplete$ Do-s so" carges of ?.00 an$ ?200 for $irect materials, an$ carges
of ?/00 an$ ?+00 for $irect la-or. Erom tis information, it appears tat te
compan! is using a pre$etermine$ o)erea$ rate, as a percentage of $irect la-or
costs, of:
A. 30@
B. 12+@
'. /00@
D. 2.0@
/2-/+. Fo- 60= "as recentl! complete$. 2e follo"ing $ata a)e -een recor$e$ on
its Do- cost seet:

2e compan! applies manufacturing o)erea$ on te -asis of macine-ours. 2e
pre$etermine$ o)erea$ rate is ?1. per macine-our. 2e total cost tat "oul$ -e
recor$e$ on te Do- cost seet for Fo- 60= "oul$ -e:
A. ?.,10=
B. ?6,/1>
'. ?/,./2
D. ?.,36/
//-/6. 2e follo"ing $ata a)e -een recor$e$ for recentl! complete$ Fo- +01 on its
Do- cost seet. Direct materials cost "as ?/,06=. A total of /0 $irect la-or-ours an$
10. macine-ours "ere "or%e$ on te Do-. 2e $irect la-or "age rate is ?12 per
la-or-our. 2e compan! applies manufacturing o)erea$ on te -asis of macine-
ours. 2e pre$etermine$ o)erea$ rate is ?11 per macine-our. 2e total cost for
te Do- on its Do- cost seet "oul$ -e:
A. ?.,+=1
#. ?/,=+=
'. ?/,0>0
D. ?/,.2=
/.-/3. Garrell 'ompan! uses a pre$etermine$ o)erea$ rate -ase$ on $irect la-or-
ours to appl! manufacturing o)erea$ to Do-s. At te -eginning of te !ear te
compan! estimate$ its total manufacturing o)erea$ cost at ?.00,000 an$ its $irect
la-or-ours at 100,000 ours. 2e actual o)erea$ cost incurre$ $uring te !ear
"as ?/+0,000 an$ te actual $irect la-or-ours incurre$ on Do-s $uring te !ear "as
>0,000 ours. 2e manufacturing o)erea$ 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=,300. 2e 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
'. ?/30,=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/,3+0, an$ te
actual manufacturing o)erea$ "as ?2>.,1/0. 2e pre$etermine$ o)erea$ rate for
te !ear must a)e -een closest to:
A. ?1=.=0
#. ?1=.1>
'. ?13.22
D. ?16.>0
/=-... 2e 8atts 'ompan! uses pre$etermine$ o)erea$ rates to appl!
manufacturing o)erea$ to Do-s. 2e 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:

8at pre$etermine$ o)erea$ rates "oul$ -e use$ in Dept A an$ Dept #,
respecti)el!9
A. +0@ an$ ?3.00
#. +0@ an$ ?+.00
'. ?1+ an$ 110@
D. 200@ an$ ?+.00
/3-.+. 6implex 'ompan! as te follo"ing estimate$ costs for next !ear:

6implex 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. ?3.+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:

2e 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 re(ning.
'. grain milling.
D. ne"sprint pro$uction.
.1->. Assume tere is no -eginning "or% in process in)entor! an$ te en$ing "or%
in process in)entor! is 100@ complete "it respect to materials costs. 2e num-er
of e5ui)alent units "it respect to materials costs un$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. 2e Assem-l! Department starte$ te mont "it +>,000 units in its
-eginning "or% in process in)entor!. An a$$itional 2=.,000 units "ere transferre$ in
from te prior $epartment $uring te mont to -egin processing in te Assem-l!
Department. 2ere "ere 21,000 units in te en$ing "or% in process in)entor! of te
Assem-l! Department.
Go" man! units "ere transferre$ to te next processing $epartment $uring te
mont9
A. ///,000
#. 2/6,000
'. /+.,000
D. /12,000
./-12. Bucas 'ompan! uses te "eigte$-a)erage meto$ in its process costing
s!stem. 2e compan! a$$s materials at te -eginning of te process in te Eorming
Department, "ic is te (rst of t"o stages in its pro$uction process. Information
concerning operations in te Eorming Department in 0cto-er follo"s:

8at "as te materials cost of "or% in process at 0cto-er /19
A. ?/,060
#. ?+,+20
'. ?6,000
D. ?6,120
..-1/. De"e! 'ompan! uses te "eigte$-a)erage meto$ in its process costing
s!stem. 2e (rst processing $epartment, te 8el$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. 2e con)ersion cost in tis -eginning
"or% in process in)entor! "as ?1>,200. An a$$itional 36,000 units "ere starte$ into
pro$uction $uring te mont. 2ere "ere 1/,000 units in te en$ing "or% in process
in)entor! of te 8el$ing Department tat "ere 60@ complete "it respect to
con)ersion costs. A total of ?+=+,/60 in con)ersion costs "ere incurre$ in te
$epartment $uring te mont.
2e cost per e5ui)alent unit for con)ersion costs is closest to:
A. ?+.312
B. ?6.206
'. ?6..00
D. ?6.6>0
.+-1.. Buft 'ompan! uses te "eigte$-a)erage meto$ in its process costing
s!stem. 0perating $ata for te (rst processing $epartment for te mont of Fune
appear -elo":

Accor$ing to te compan!*s recor$s, te con)ersion cost in -eginning "or% in
process in)entor! "as ?=>,3>/ at te -eginning of Fune. A$$itional con)ersion costs
of ?/./,3/0 "ere incurre$ in te $epartment $uring te mont.
8at "as te cost per e5ui)alent unit for con)ersion costs for te mont9 ;7oun$
o& to tree $ecimal places.<
A. ?3.0=0
B. ?=.3>1
'. ?+.>23
D. ?..+3.
.6-1+. Cnizat 'orporation uses te "eigte$-a)erage meto$ in its process costing
s!stem. 2e 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. 2e cost per e5ui)alent unit
for materials is closest to:
A. ?0.36
#. ?0.>0
'. ?1.10
D. ?1.13
.=-1=. Par% 'ompan! uses te "eigte$-a)erage meto$ in its process costing
s!stem. 2e 4ol$ing Department is te secon$ $epartment in its pro$uction
process. 2e $ata -elo" summarize te $epartment*s operations in Fanuar!.

2e accounting recor$s in$icate tat te con)ersion cost tat a$ -een assigne$ to
-eginning "or% in process in)entor! "as ?.0,.3. an$ a total of ?21/,3>0 in
con)ersion costs "ere incurre$ in te $epartment $uring Fanuar!.
2e cost per e5ui)alent unit for con)ersion costs for Fanuar! in te 4ol$ing
Department is closest to:
A. ?..32/
#. ?..136
'. ?..6+0
D. ?..+>0
.3-21. Fam 'ompan! uses te "eigte$-a)erage meto$ in its process costing
s!stem. 0perating $ata for te Painting Department for te mont of April appear
-elo":

8at "ere te e5ui)alent units for con)ersion costs in te Painting Department for
April9
A. =3,630
#. ==,+00
'. =2,/00
D. 31,230
.>-23. 7aulot 'orporation uses te "eigte$-a)erage meto$ in its process costing
s!stem. 2e 4ol$ing Department is te secon$ $epartment in its pro$uction
process. 2e $ata -elo" summarize te $epartment*s operations in Fanuar!.

2e 4ol$ing Department*s cost per e5ui)alent unit for con)ersion cost for Fanuar!
"as ?1.=2.
Go" muc con)ersion cost "as assigne$ to te en$ing "or% in process in)entor! in
te 4ol$ing Department for Fanuar!9
A. ?+,//2.00
#. ?2,+23..0
C. ?/,1>>.20
D. ?2,1/2.30
6umter 'ompan! uses te "eigte$-a)erage meto$ in its process costing s!stem.
2e follo"ing $ata pertain to operations in te (rst processing $epartment for a
recent mont:


+0-/2. Go" man! units "ere starte$ into pro$uction $uring te mont9
A. 63,000 units
#. 3.,000 units
C. =2,000 units
D. +6,000 units