REVISION PROPOSAL – MANAGERIAL ACCOUNTING 2

CHAPTER 1:
Which of the following organizations would be most likely to use a job order costing
system?
A. the loan department of a bank
B. the check clearing department of a bank
C. a manufacturer of processed cheese food
D. a manufacturer of video cassette tapes

When job order costing is used, the primary focal point of cost accumulation is the
A. department.
B. supervisor.
C. item.
D. job.
In a job order costing system,
A. standards cannot be used.
B. an average cost per unit within a job cannot be computed.
C. costs are accumulated by departments and averaged among all jobs.
D. overhead is typically assigned to jobs on the basis of some cost driver.

What is the best cost accumulation procedure to use when many batches, each differing
as to product specifications, are produced?
A. job order
B. process
C. actual
D. standard

Which of the following could not be used in job order costing?

A. standards
B. an average cost per unit for all jobs
C. normal costing
D. overhead allocation based on the job's direct labor hours

In a normal cost system, a debit to Work in Process Inventory would not be made for
A. actual overhead.
B. applied overhead.
C. actual direct material.
D. actual direct labor.

In a job order costing system, the dollar amount of the entry that debits Finished Goods
Inventory and credits Work in Process Inventory is the sum of the costs charged to all
jobs
A. started in process during the period.
B. in process during the period.
C. completed and sold during the period.
D. completed during the period.

Total manufacturing costs for the year plus beginning Work in Process Inventory cost
equals
A. cost of goods manufactured in the year.
B. ending Work in Process Inventory.
C. total manufacturing costs to account for.
D. cost of goods available for sale.

A journal entry includes a debit to Work in Process Inventory and a credit to Raw
Material Inventory. The explanation for this would be that
A. indirect material was placed into production.
B. raw material was purchased on account.
C. direct material was placed into production.
D. direct labor was used for production.

The source document that records the amount of raw material that has been requested by
production is the
A. job order cost sheet.
B. bill of lading.
C. interoffice memo.
D. material requisition.

A material requisition form should show all of the following information except
A. job number.
B. quantity required.
C. unit cost.
D. purchase order number.

CHAPTER 2
Which cost accumulation procedure is most applicable in continuous mass-production
manufacturing environments?
A. standard
B. actual
C. process
D. job order

A producer of ________ would not use a process costing system.

A. gasoline
B. potato chips
C. blank videotapes
D. stained glass windows

A process costing system is used by a company that

A. produces heterogeneous products.
B. produces items by special request of customers.
C. produces homogeneous products.
D. accumulates costs by job.
Which is the best cost accumulation procedure to use for continuous mass production of
like units?
A. actual
B. standard
C. job order
D. process

Equivalent units of production are equal to the

A. units completed by a production department in the period.
B. number of units worked on during the period by a production department.
C. number of whole units that could have been completed if all work of the period had
been used to produce whole units.
D. identifiable units existing at the end of the period in a production department.

In a FIFO process costing system, which of the following are assumed to be completed
first in the current period?
A. units started this period
B. units started last period
C. units transferred out
D. units still in process

The FIFO method of process costing will produce the same cost of goods transferred out
amount as the weighted average method when
A. the goods produced are homogeneous.
B. there is no beginning Work in Process Inventory.
C. there is no ending Work in Process Inventory.
D. beginning and ending Work in Process Inventories are each 50 percent complete.

Transferred-in cost represents the cost from

A. the last department only.
B. the last production cycle.
C. all prior departments.
D. the current period only.

A process costing system

A. cannot use standard costs.
B. restates Work in Process Inventory in terms of completed units.
C. accumulates costs by job rather than by department.
D. assigns direct labor and manufacturing overhead costs separately to units of
production.

CHAPTER 3
Cost allocation bases in activity-based costing should be
A. cost drivers.
B. value-added activities.
C. activity centers.
D. processes.

In activity-based costing, cost reduction efforts are directed at specific

A. cost categories.
B. cost pools.
C. processes.
D. cost drivers.

In allocating variable costs to products,

A. direct labor hours should always be used as the allocation base.
B. a volume-based cost driver should be used.
C. a company should use the same allocation base that it uses for fixed costs.
D. a company should never use more than one cost driver.

Relative to traditional product costing, activity-based costing differs in the way costs are
A. processed.
B. allocated.
C. benchmarked.
D. incurred.

In activity-based costing, final cost allocations assign costs to

A. departments.
B. processes.
C. products.
D. activities.

In activity-based costing, preliminary cost allocations assign costs to

A. departments.
B. processes.
C. products.
D. activities.

Global competition has forced American industry to

A. seek increased governmental regulation.
B. improve product quality and customer service.
C. narrow product lines.
D. decrease its social responsibility.

The amount of time between the development and the production of a product is
A. the product life cycle.
B. lead time.
C. production time.
D. value-added time.

Activity analysis allows managers to

A. classify activities so that processes can be eliminated.
B. devise ways to minimize or eliminate non-value-added activities.
C. evaluate process performance to gain competitive advantages.
D. increase selling price.
Which of the following statements is most accurate?
A. The single plantwide factory overhead rate method will usually provide management
with accurate product costs.
B. Activity-based costing can be used by management to determine accurate profitability
for each product.
C. The multiple production department factory overhead rate method will usually result
in more product cost distortion than the single plantwide factory overhead rate method.
D. Generally accepted accounting principles require activity-based costing methods for
inventory valuation.

Which of the following activity bases would best be used to allocate setup activity
to products?
A. Number of inspections
B. Direct labor hours
C. Direct machine hours
D. Number of production runs

CHAPTER 4
Which of the following is not a characteristic of relevant costing information? It is
A. associated with the decision under consideration.
B. significant to the decision maker.
C. readily quantifiable.
D. related to a future endeavor.

Relevant costs are

A. all fixed and variable costs.
B. all costs that would be incurred within the relevant range of production.
C. past costs that are expected to be different in the future.
D. anticipated future costs that will differ among various alternatives.

If a cost is irrelevant to a decision, the cost could not be

A. a sunk cost.
B. a variable cost.
C. an incremental cost.
D. a future cost.

A cost is sunk if it
A. is not an incremental cost.
B. is unavoidable.
C. has already been incurred.
D. is irrelevant to the decision at hand.

Most___________ are relevant to decisions to acquire capacity, but not to short-run

decisions involving the use of that capacity.
A. sunk costs
B. incremental costs
C. fixed costs
D. prime costs

In a make-or-buy decision, the opportunity cost of capacity could

A. be considered to decrease the price of units purchased from suppliers.
B. be considered to decrease the cost of units manufactured by the company.
C. be considered to increase the price of units purchased from suppliers.
D. not be considered since opportunity costs are not part of the accounting records.

In a make-or-buy decision, the reliability of a potential supplier is

A. an irrelevant decision factor.
B. relevant information if it can be quantified.
C. an opportunity cost of continued production.
D. a qualitative decision factor.

Which of the following qualitative factors favors the buy choice in a make or buy decision
for a part?
A. maintaining a long-term relationship with suppliers
B. quality control is critical
C. utilization of idle capacity
D. part is critical to the product

Fixed costs are ignored in allocating scarce resources because

A. they are sunk.
B. they are unaffected by the allocation of scarce resources.
C. there are no fixed costs associated with scarce resources.
D. fixed costs only apply to long-run decisions.

CHAPTER 5
Methods of evaluating capital investment proposals that ignore present value include:
A. average rate of return.
B. cash payback.
C. both are correct
D. none are correct

The expected period of time that will elapse between the date of capital investment and the
complete recovery of the amount of cash invested is called the:
A. average rate of return period
B. cash payback period
C. net present value period.
D. internal rate of return period
CHAPTER 1: JOB ORDER COSTING
Journalize the entry: DM, DL, FOH, COGS, overapply, underapply FOH
Job cost sheet, determine total cost, determine cost of goods sold, predetermined FOH
CHAPTER 2: PROCESS COST SYSTEMS
Determine:
- started and completed unit,
- ending unit,
- Units transferred out and partially completed units
- direct materials and conversion cost per equivalent unit
- Total cost of equivalent per unit
Step by step to prepare the production report
CHAPTER 3: ACTIVITY-BASED COSTING
Determine the rate of:
- Single Plant-wide factory
- Multiple production department
- Activity
Determine the direct labor hours, the factory overhead cost, per-unit cost
CHAPTER 4: DIFFERENTIAL ANALYSIS AND PRODUCT PRICING
Differential analysis
- Lease and Sell
- Discontinue a Segment or Product
- Make or buy
- Replace Equipment
- Process or Sell
- Accept Business at a Special Price
PRODUCT PRICING
- Product cost method
- Total cost method
- Variable cost method
CHAPTER 5: CAPITAL INVESTMENT ANALYSIS
Methods Not using present values
 - Average rate of return method
- Cash Payback method
Method using Present values
- Present Value concepts
- Net present value method
- Internal Rate on Return method