Name:

6. The three categories of inventories commonly found in

Set A: many manufacturing companies are:
a. Direct materials, direct labor, and indirect
1. Tanner Co. management desires cost information manufacturing costs.
regarding their Rawhide brand. The Rawhide brand b. Purchased goods, period costs, and cost
is a(n) of goods sold.
a. cost object. c. Direct materials, work in process, and
b. cost driver. finished goods.
c. cost assignment. d. LIFO, FIFO, and weighted average.
d. actual cost.
7. Inventoriable costs are
2. The cost of replacement light bulbs on campus would a. only purchased goods for resale.
be a direct cost to a college but would need to be b. a category of costs used only for
allocated as an indirect cost to manufacturing companies.
a. departments. c. recorded as expenses when incurred and
b. buildings. later reclassified as assets.
c. schools. d. recorded as assets when incurred.
d. individual student instruction.
8. Period costs are
3. What is the total fixed cost of the shipping department a. all costs in the income statement other
of EZ-Mail Clothing Co. if it has the following than cost of goods sold.
information for 2002? b. defined as manufacturing costs incurred
Salaries $800,000 75% of employees this period on the schedule of cost of
on guaranteed contracts goods manufactured.
Packaging $400,000 depending on size of c. always recorded as assets when first
item(s) shipped incurred.
Postage $500,000 depending on weight of d. those costs that benefit future periods.
item(s) shipped
Rent of warehouse space $250,000 annual lease 9. The cost of a product can be measured as any of the
a. $850,000 following except as cost
b. $900,000 a. gathered from all areas of the value chain.
c. $1,050,000 b. identified as period cost.
d. $1,950,000 c. designated as manufacturing cost only.
d. explicitly defined by contract.
4. Morton Graphics successfully bid on a job printing
standard notebook covers during the year using 10. The primary focus of cost management is to
last year’s price of $0.27 per cover. This amount a. help managers make different decisions.
was calculated from prior year costs, noting that no b. calculate product costs.
changes in any costs had occurred from the past c. aid managers in budgeting.
year to the current year. At the end of the year, the d. distinguish between relevant and irrelevant
company manager was shocked to discover that information.
the company had suffered a loss. “How could this
be?” she exclaimed. “We had no increases in cost 11. A cost-allocation base may be any of the following
and our price was the same as last year. Last year except a
we had a healthy income.” What could explain the a. cost driver.
company’s loss in income this current year? b. cost pool.
a. Their costs were all variable costs and the c. way to link indirect costs to a cost object.
amount produced and sold increased. d. nonfinancial quantity.
b. Their costs were mostly fixed costs and
the amount produced this year was less 12. A company that manufactures dentures for use by local
than last year. dentists would use
c. They used a different cost object this year a. process costing.
than the previous year. b. personal costing.
d. Their costs last year were actual costs but c. operations costing.
they used budgeted costs to make their d. job costing.
bids.
13. The first step in the seven-step approach to job costing
5. Which type of company converts materials into finished is to
products? a. select the cost-allocation base to use in
a. Not-for-profit assigning indirect costs to the job.
b. Service b. identify the direct costs of the job.
c. Merchandising c. identify the job that is the chosen cost
d. Manufacturing object.
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 d. identify the indirect-cost pools associated approach, by what amount would the cost of Job
with the job. #640 change?
a. $560.00
14. Using normal costing rather than actual costing requires b. $281.25
that the allocating of indirect manufacturing costs to c. $22.50
work-in-process be d. $20.50
a. done on a more timely basis, such as
every two weeks rather than every month. 20. If each professional in a service company is paid on an
b. journalized only at year end when annual salary basis, why might the firm want to use
adjusting entries are normally made. a predetermined or budgeted rate for direct or
c. calculated by using the budgeted rate professional labor?
times actual quantity of allocation base. a. A predetermined or budgeted rate is easier
d. calculated by using the budgeted rate to justify to a client who might question a
times the budgeted quantity of allocation billing rate.
base. b. Professional staff persons do not keep
accurate records of the jobs on which they
15. Manufacturing Overhead Control work.
a. represents actual overhead costs incurred. c. Professional staff incurs more client costs,
b. has a normal debit balance. such as travel, lodging, and out-of-town
c. is a control account with a subsidiary meals, while working on a job.
ledger detailing the components of d. Year-end bonuses paid to the professional
manufacturing overhead. staff are difficult to trace to individual jobs.
d. All of the above
21. Which of the following should NOT be included as part
16. Which of the following accounts is not classified as an of manufacturing overhead at a company that makes
asset? office furniture?
a. Manufacturing Overhead Control A. Sheet steel in a file cabinet made by the company.
b. Materials Control B. Manufacturing equipment depreciation.
c. Work-in-Process Control C. Idle time for direct labor.
d. Finished Goods Control D. Taxes on a factory building.

17. The costs incurred on jobs that are currently in 22. The cost of leasing production equipment is classified
production but are not yet complete would appear as:
in the Prime Cost Product Cost
a. Materials Control account. A. No Yes
b. Finished Goods Control account. B. No No
c. Manufacturing Overhead Control account. C. Yes No
d. Work-in-Process Control account. D. Yes Yes

18. The Precision Widget Company had the following 23. The wages of factory maintenance personnel would
balances in their accounts at the end of the usually be considered to be:
accounting period:
Work-in-Process $ 5,000 Indirect Labor Mngfg. Overhead
Finished Goods 20,000
Cost of Goods Sold 200,000 A. No Yes
B. Yes No
If their manufacturing overhead was overallocated C. Yes Yes
by $8,000 and Precision Widget adjusts their D. No No
accounts using a proration based on total ending
balances, the revised ending balance for Cost of 24. Which of the following costs is an example of a period
Goods Sold would be rather than a product cost?
a. $192,880. A. Depreciation on production equipment.
b. $200,00. B. Wages of salespersons.
c. $207,120. C. Wages of production machine operators.
d. $208,000. D. Insurance on production equipment.

19. Liberty Box Company calculated an indirect-cost rate of 25. The salary of the president of a manufacturing company
$12.50 per labor hour for fringe benefits for use in would be classified as which of the following?
their normal costing system. At the end of the year, A. Product cost
the actual cost of fringe benefits was $980,000. The B. Period cost
total of labor hours worked for the year was the C. Manufacturing overhead
same amount as budgeted, 70,000 hours. If Job D. Direct labor
#640 required the use of 15 labor hours and the
company used the adjusted allocation rate
2
26. Last month, when 10,000 units of a product were 33. Which of the following methods of analyzing mixed
manufactured, the cost per unit was $60. At this level of costs can be used to estimate an equation for the mixed
activity, variable costs are 50% of total unit costs. If cost?
10,500 units are manufactured next month and cost High Low Least Squares
behavior patterns remain unchanged the: A. No Yes
A. total variable cost will remain unchanged. B. Yes No
B. fixed costs will increase in total. C. Yes Yes
C. variable cost per unit will increase. D. No No
D. total cost per unit will decrease.

27. Variable cost: 34. Faraz Corporation has provided the following production
A. increases on a per unit basis as the number of units and total cost data for two levels of monthly production
produced increases. volume. The company produces a single product.
B. remains constant on a per unit basis as the number
of units produced increases. Production Volume 5,000 units 6,000 units
C. remains the same in total as production increases. Direct Materials $70,500 $84,600
D. decreases on a per unit basis as the number of units Direct Labor $130,500 $156,600
produced increases. Manufacturing Overhead $802,000 $824,400
28. Within the relevant range, variable cost per unit will: The best estimate of the total cost to manufacture 5,300
A. increase as the level of activity increases. units is closest to:
B. remain constant. A. $1,002,230
C. decrease as the level of activity increases. B. $1,021,780
D. none of these. C. $1,063,180
D. $941,280
29. An example of a committed fixed cost is:
A. a training program for salespersons. 35. In computing its predetermined overhead rate, Marple
B. executive travel expenses. Company inadvertently left its indirect labor costs out of
C. property taxes on the factory building. the computation. This oversight will cause:
D. new product research and development. A. Manufacturing Overhead to be overapplied.
B. The Cost of Goods Manufactured to be understated.
30. The term differential cost refers to: C. The debits to the Manufacturing Overhead account
A. a difference in cost which results from selecting one to be understated.
alternative instead of another. D. The ending balance in Work in Process to be
B. the benefit forgone by selecting one alternative overstated.
instead of another.
C. a cost which does not involve any dollar outlay but 36. In a job-order costing system, direct labor cost is
which is relevant to the decision-making process. ordinarily debited to:
D. a cost which continues to be incurred even though A. Manufacturing Overhead.
there is no activity. B. Cost of Goods Sold.
C. Finished Goods.
31. Which of the following costs is often important in D. Work in Process.
decision making, but is omitted from conventional
accounting records? 37. The journal entry to record the incurrence of indirect
A. Fixed cost. labor costs is:
B. Sunk cost.
C. Opportunity cost. A. Wages Payable (dr); Mngfg. Overhead (cr)
D. Indirect cost. B. Work in Process (dr); Wages payable (cr)
C. Mngfg. Overhead (dr); Wages Payable (cr)
32. A manufacturing company prepays its insurance D. Wages Payable (dr); Work in Process (cr)
coverage for a three-year period. The premium for the
three years is $2,700 and is paid at the beginning of the 38. The balance in the Work in Process account equals: A.
first year. Eighty percent of the premium applies to the balance in the Finished Goods inventory account.
manufacturing operations and 20% applies to selling B. the balance in the Cost of Goods Sold account.
and administrative activities. What amounts should be C. the balances on the job cost sheets of uncompleted
considered product and period costs respectively for the jobs.
first year of coverage? D. the balance in the Manufacturing Overhead account.
Product Period
a. $2,700 $0 39. In a job-order costing system, indirect materials that
b. $2,160 $540 have been previously purchased and that are used in
c. $1,440 $360 production are recorded as a debit to:
d. $720 $180 A. Work in Process inventory.
B. Manufacturing Overhead.
3
 C. Finished Goods inventory. $6,000. The journal entry to record the requisition from
D. Raw Materials inventory. the storeroom would include a:
A. debit to Raw Materials of $74,000
40. . Which terms will make the following statement true? B. debit to Work in Process of $68,000
When manufacturing overhead is overapplied, the C. credit to Manufacturing Overhead of $6,000
Manufacturing Overhead account has a __________ D. debit to Work in Process of $74,000
balance and applied manufacturing overhead is greater
than __________ manufacturing overhead. 45. During February, Degan Inc. transferred $60,000 from
A. debit, actual Work in Process to Finished Goods and recorded a
B. credit, actual Cost of Goods Sold of $65,000. The journal entries to
C. debit, estimated record these transactions would include a:
D. credit, estimated A. debit to Finished Goods of $65,000
B. credit to Cost of Goods Sold of $65,000
41. Daguio Corporation uses direct labor-hours in its C. credit to Work in Process of $60,000
predetermined overhead rate. At the beginning of the D. credit to Finished Goods of $60,000
year, the total estimated manufacturing overhead was
$224,580. At the end of the year, actual direct labor- 46. Dale Company, which applies overhead at the rate of
hours for the year were 18,200 hours, manufacturing 190% of direct labor cost, began work on job no. 101
overhead for the year was underapplied by $12,100, during June. The job was completed in July and sold
and the actual manufacturing overhead was $219,580. during August, having accumulated direct material and
The predetermined overhead rate for the year must labor charges of ₱27,000 and ₱15,000, respectively.
have been closest to: On the basis of this information, the total overhead
A. $11.40 per machine-hour applied to job no. 101 amounted to:
B. $12.34 per machine-hour A. ₱0.
C. $12.06 per machine-hour B. ₱28,500.
D. $10.53 per machine-hour C. ₱51,300.
D. ₱70,500.
42. Wert Corporation uses a predetermined overhead rate
based on direct labor cost to apply manufacturing Use the following to answer the next three questions:
overhead to jobs. Last year, the company's estimated
manufacturing overhead was $1,200,000 and its The following were taken from the books of Marvin
estimated level of activity was 50,000 direct labor-hours. Company.
The company's direct labor wage rate is $12 per hour. January 1 March 31
Actual manufacturing overhead amounted to Raw materials ₱268,000 ₱167,000
$1,240,000, with actual direct labor cost of $650,000. Work in process 0 0
For the year, manufacturing overhead was: Finished goods ₱43,000 ?
A. overapplied by $60,000 (100 units) (200 units)
B. underapplied by $60,000 Materials purchased ₱1,946,700
C. overapplied by $40,000 Direct labor 2,125,800
D. underapplied by $44,000 Factory overhead
764,000 Sales (12,400 units at
43. Job 731 was recently completed. The following data ₱535)
have been recorded on its job cost sheet:
The company uses the FIFO method for costing
Direct Materials $2,391 inventories.
Direct Labor Hours 69 Labor Hours
Direct Labor Wage Rate $13 per Labor Hour 47. The number of units manufactured is:
Machine Hours 129 machine hours a. 11,900
b. 12,000
The company applies manufacturing overhead on the c. 12,500
basis of machine-hours. The predetermined overhead d. 15,200
rate is $14 per machine-hour. The total cost that would
be recorded on the job cost sheet for Job 731 would be: 48. The cost of goods manufactured per unit is:
A. $3,288 a. ₱300
B. $5,094 b. ₱350
C. $4,254 c. ₱395
D. $2,418 d. ₱420

44. During December at Ingrim Corporation, $74,000 of raw 49. The cost of goods sold is:
materials were requisitioned from the storeroom for use a. ₱4,091,500
in production. These raw materials included both direct b. ₱4,109,500
and indirect materials. The indirect materials totaled c. ₱4,901,500
d. ₱4,910,500
4
 Sales 3,600,000
50. Which of the following costs shall be considered Manufacturing overhead control 700,000
conversion costs but not prime costs? Manufacturing overhead applied 648,000
a. Acquisition price of the main material of the Carley Products’ pretax income for 2001 is
product. a. $608,000.
b. Depreciation of the administrative building b. $660,000.
c. Salary of Factory supervisor, factory janitor and c. $712,000.
factory security guard. d. undeterminable from the information given.
d. Employee benefits of the factory machine operator
55. The trend in job order costing is to
51. Which of the following statements is false? a. eliminate the data entry function for the accounting
a. While the use of standard costing is acceptable for system.
job order costing systems, actual cost records b. automate the data collection and data entry
should still be maintained. functions.
b. It is normally more time-consuming for a company c. use accounting software to change the focal point
to use standard costs in a job order costing system. of the job order system.
c. Standards can be used in a job order costing d. create an Intranet to share information between
system, if the company usually produces items that competitors.
are similar in nature.
d. Standard costs may be used for material, labor, or 56. As data input functions are automated, Intranet data
both material and labor in a job order costing becomes more
environment. a. complicated to access.
b. manufacturing, but not accounting, oriented.
52. C Co. uses a job order costing system. During April c. real-time accessible.
2001, the following costs appeared in the Work in d. expensive to install, but easier to use.
Process Inventory account:
Beginning balance $ 24,000 57. Software manufacturing modules are
Direct material used 70,000 a. available from major middle-market vendors.
Direct labor incurred 60,000 b. available only for companies using process
Applied overhead 48,000 costing systems.
Cost of goods manufactured 185,000 c. not commonly available for middle-market
production firms.
C Co. applies overhead on the basis of direct labor d. not commonly available for integration with
cost. There was only one job left in WIP Inventory at the traditional accounting systems.
end of April which contained $5,600 of overhead. What
amount of direct material was included in this job? 58.As product variety increases,
a. $4,400 a. job order costing becomes less useful.
b. $4,480 b. production lot sizes decrease.
c. $6,920 c. standard costs in job order costing systems cannot be
d. $8,000 used.
d. all of the above.
53. Q Co. is a print shop that produces jobs to customer
specifications. During January 2001, Job #1253 was 59. A job order costing system is likely to provide better
worked on and the following information is available: (1) inventory valuations for financial statements.
Direct material used $2,500 (2) control over inventory.
Direct labor hours worked 15 (3) information about ability to accept additional
Machine time used 6 production work.
Direct labor rate per hour $7
Overhead application rate a. Yes, No, Yes
per hour of machine time $18 b. No, Yes, Yes
c. No, No, No
What was the total cost of Job #1253 for January? d. Yes, Yes, Yes
a. $3,025
b. $2,812 60. During January, Ark employees worked on Job #479. At
c. $2,770 the end of the month, $714 of overhead had been
d. $2,713 applied to this job. Total Work in Process Inventory at
the end of the month was $6,800 and all other jobs had
54. Carley Products has no Work in Process or Finished a total cost of $3,981. What amount of direct material is
Goods inventories at the close of business on included in Job #479?
December 31, 2000. The balances of Carley’s accounts a. $677
as of December 31, 2001, are as follows: b. $1,391
Cost of goods sold $2,040,000 c. $2,142
Selling & administrative expenses 900,000 d. $4,658 _end here----
5