Chapter 04 Testbank Key
1. Product costing is the process of:
A. accumulating the costs of a production process.
B. assigning costs to a firm's products.
C. placing a value on fixed assets owned by a producer.
D. accumulating the costs of a production process AND assigning costs to a firm's products.
AACSB: Reflective
Difficulty: Easy
Learning Objective: 4.01 Explain the role of product costing systems
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2. Under Australian accounting standards, manufactured products are generally:
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A. valued at market value and expensed in the period made.
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B. valued at market value and expensed in the period sold.
C. valued at cost and expensed in the period made.
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D. valued at cost and expensed in the period sold.
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AACSB: Reflective
Difficulty: Easy
Learning Objective: 4.03 Outline the flow of costs through the manufacturing accounts used in product costing
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Learning Objective: 4.09 After studying the appendix, explain how inventories must be valued for external financial reporting
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3. Consider the following statements regarding product cost information.
i. Product cost information is necessary for planning, cost control and providing information for making decisions.
ii. Product cost information is not necessary to justify rate increases that are subject to the approval of government
authorities.
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iii. Product cost information is necessary to value inventory on the balance sheet.
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Which of the statement/s is/are correct?
A. i, ii and iii
B. i and ii
C. i and iii
D. iii
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AACSB: Reflective
Difficulty: Medium
Learning Objective: 4.02 Describe why managers need different measures of product costs for different purposes
4. Manufacturing costs consist of:
A. direct materials.
B. conversion costs.
C. downstream costs.
D. direct materials and conversion costs, but not downstream costs.
AACSB: Reflective
Difficulty: Easy
Learning Objective: 4.03 Outline the flow of costs through the manufacturing accounts used in product costing
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5. As production takes place, all manufacturing costs are debited to the:
A. work in process inventory account.
B. manufacturing overhead account.
C. cost of goods sold account.
D. finished goods account.
AACSB: Reflective
Difficulty: Easy
Learning Objective: 4.03 Outline the flow of costs through the manufacturing accounts used in product costing
6. When products are completed, their product costs are transferred from work in process inventory to the:
A. manufacturing overhead accounts.
B. finished goods account.
C. cost of goods sold account.
D. indirect labour account.
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AACSB: Reflective
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Difficulty: Easy
Learning Objective: 4.03 Outline the flow of costs through the manufacturing accounts used in product costing
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7. To transfer work in process inventory to finished goods inventory:
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A. debit finished goods and credit work in process.
B. debit work in process and credit finished goods.
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C. add direct labour to the work in process inventory.
D. add direct labour and direct materials to the finished goods inventory.
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AACSB: Reflective
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Difficulty: Easy
Learning Objective: 4.03 Outline the flow of costs through the manufacturing accounts used in product costing
8. Cost of goods sold is closed into the income summary account:
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A. at the end of the production cycle.
B. when the product is sold.
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C. at the end of the accounting period, along with other expenses and revenues of the period.
D. at no time.
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AACSB: Reflective
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Difficulty: Easy
Learning Objective: 4.03 Outline the flow of costs through the manufacturing accounts used in product costing
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9.
The following data apply to Stratford Ltd
Calculate the amount of direct materials used during the year.
A. $36 500
B. $42 500
C. $47 500
D. $53 500
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AACSB: Analytical
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Difficulty: Easy
Learning Objective: 4.03 Outline the flow of costs through the manufacturing accounts used in product costing
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10.
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The following data apply to Stratford Ltd
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Predetermined overhead rate—200 per cent of direct labour cost
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Calculate the amount of direct labour cost incurred during the year.
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A. $20 000
B. $18 000
C. $10 000
D. None of the given answers
AACSB: Analytical
Difficulty: Medium
Learning Objective: 4.04 Use basic techniques to allocate manufacturing overhead costs to products
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11.
The following data apply to Stratford Ltd
What was the actual manufacturing overhead incurred during the year?
A. $22 000
B. $20 000
C. $18 000
D. $16 000
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AACSB: Analytical
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Difficulty: Medium
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Learning Objective: 4.04 Use basic techniques to allocate manufacturing overhead costs to products
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12.
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The following data apply to Stratford Ltd
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Calculate the cost of goods manufactured during the year.
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A. $62 500
B. $67 500
C. $70 500
D. $72 500
AACSB: Analytical
Difficulty: Medium
Learning Objective: 4.07 Prepare a schedule of cost of goods manufactured and a schedule of cost of goods sold, and understand the relationship
between these reports and external accounting reports
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