Question 1

Carolina Company placed $26,500 of raw materials into production. The recognition of this event will:

Accepted Answer

A) decrease net income. 
B) not effect total assets. 
C) increase revenue. 
D) decrease cash flow from investing activities. 
A) decrease net income. 
B) not effect total assets. 
C) increase revenue. 
D) decrease cash flow from investing activities.

Question 2

Why does a service company need cost information about the services it provides?

Accepted Answer

Answers will vary
A service company woul

Question 3

Burke Company produced 8,000 units of inventory and sold 6,000 of them. The company incurred the following production costs: Variable manufacturing cost: $6.00 per unit
Fixed manufacturing overhead cost: $24,000
Assuming the company sells its product at a price of $15 per unit, and incurred $10,000 in selling and administrative costs, what is the amount of net income under absorption costing?

Accepted Answer

A) $38,000 
B) $14,000 
C) $24,000 
D) $26,000 
A) $38,000 
B) $14,000 
C) $24,000 
D) $26,000

Question 4

Service companies accumulate information about the cost of services provided, and they report those costs in an inventory account.

Accepted Answer

A) True 
 B)False

Question 5

All of the following costs are accumulated in the Work in Process Inventory account except:

Accepted Answer

A) depreciation on factory equipment. 
B) direct labor costs. 
C) manufacturing overhead costs. 
D) direct material costs. 
A) depreciation on factory equipment. 
B) direct labor costs. 
C) manufacturing overhead costs. 
D) direct material costs.

Question 6

Describe how firms use service and product cost information.

Accepted Answer

Answers will vary
Product and service co

Question 7

Orlando Company placed $142 of raw materials into production. How would this transaction affect the company's financial statements? $$\begin{array} { | c | c | c | c | c | c | c | c | c | c | } 
\hline { \text { Assets } } & = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \
\hline \begin{array} { c } 
\text { Raw } \
\text { Matls. } \
\text { Inv. }
\end{array} & + & \text { WIP Inv. } & & & & & &  \
\hline
\end{array}$$

Accepted Answer

A)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline ( 142 ) & + & 142 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline 142 & + & ( 142 ) & = & \mathrm { NA } & + & \mathrm { NA } & \mathrm { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline ( 142 ) & + & \text { NA } & = & \text { NA } & + & ( 142 ) & \text { NA } & - & 142 & = & ( 142 ) \
\hline
\end{array}$$ 
D)  $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}
\hline(142) & + & (142) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$ 
A)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline ( 142 ) & + & 142 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline 142 & + & ( 142 ) & = & \mathrm { NA } & + & \mathrm { NA } & \mathrm { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline ( 142 ) & + & \text { NA } & = & \text { NA } & + & ( 142 ) & \text { NA } & - & 142 & = & ( 142 ) \
\hline
\end{array}$$ 
D)  $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}
\hline(142) & + & (142) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$

Question 8

Which of the following statements is true for a company that uses variable costing?

Accepted Answer

A) The manufacturing cost per unit decreases when the volume of production increases. 
B) Net income is not affected by fluctuations in production. 
C) Fixed manufacturing overhead is treated like a product cost. 
D) Fixed manufacturing overhead costs incurred in the current period may be recognized as expense in a later period. 
A) The manufacturing cost per unit decreases when the volume of production increases. 
B) Net income is not affected by fluctuations in production. 
C) Fixed manufacturing overhead is treated like a product cost. 
D) Fixed manufacturing overhead costs incurred in the current period may be recognized as expense in a later period.

Question 9

Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year. At the end of the year, manufacturing overhead had been underapplied by $5,310. As a result:

Accepted Answer

A) cost of goods sold increases. 
B) manufacturing overhead increases. 
C) cost of goods sold decreases. 
D) none of these. 
A) cost of goods sold increases. 
B) manufacturing overhead increases. 
C) cost of goods sold decreases. 
D) none of these.

Question 10

Use of absorption costing allows a company to increase its profits by increasing the level of production of its products.

Accepted Answer

A) True 
 B)False

Question 11

A credit to the Raw Materials Inventory account represents:

Accepted Answer

A) raw materials added to production. 
B) raw materials purchased. 
C) raw materials available for use. 
D) none of these. 
A) raw materials added to production. 
B) raw materials purchased. 
C) raw materials available for use. 
D) none of these.

Question 12

Which of the following is a valid reason for using variable costing?

Accepted Answer

A) Fixed production cost should be ignored when costing units of inventory since it is not essential to the production process. 
B) Absorption costing recognizes fixed costs as expense regardless of volume of production. 
C) Absorption costing may motivate managers to overproduce in order to increase profits. 
D) Under variable costing managers can increase profitability by increasing the volume of production. 
A) Fixed production cost should be ignored when costing units of inventory since it is not essential to the production process. 
B) Absorption costing recognizes fixed costs as expense regardless of volume of production. 
C) Absorption costing may motivate managers to overproduce in order to increase profits. 
D) Under variable costing managers can increase profitability by increasing the volume of production.

Question 13

Product costs are expensed as cost of goods sold:

Accepted Answer

A) when production is complete. 
B) at the start of production. 
C) when the related products are sold. 
D) when the related revenue is collected. 
A) when production is complete. 
B) at the start of production. 
C) when the related products are sold. 
D) when the related revenue is collected.

Question 14

The cost of goods completed during a period is transferred from the Finished Goods Inventory account to Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 15

Warren Company applies overhead based on direct labor cost. Warren Company estimated that it would incur $180,000 in manufacturing overhead costs and $120,000 of direct labor costs during the current year. Actual manufacturing overhead cost totaled $150,000 and actual direct labor costs totaled $110,000 during the current year. If total manufacturing costs were $320,000, what amount of direct materials was used during the year?

Accepted Answer

A) $60,000 
B) $30,000 
C) $45,000 
D) None of these. 
A) $60,000 
B) $30,000 
C) $45,000 
D) None of these.

Question 16

What is a volume variance, and what is its cause? Under what circumstances is the volume variance unfavorable?

Accepted Answer

Answers will vary
A volume variance occu

Question 17

Select the response that best illustrates the point that product cost flows are cyclical and occur in a specific sequence.

Accepted Answer

A) Acquire raw materials, convert raw materials, sell finished goods, collect cash 
B) Acquire finished goods, acquire raw materials, convert raw materials, collect cash 
C) Sell finished goods, collect cash, acquire raw materials 
D) Collect cash, acquire raw materials, sell finished goods 
A) Acquire raw materials, convert raw materials, sell finished goods, collect cash 
B) Acquire finished goods, acquire raw materials, convert raw materials, collect cash 
C) Sell finished goods, collect cash, acquire raw materials 
D) Collect cash, acquire raw materials, sell finished goods

Question 18

Product costs flow through the manufacturer's inventory accounts in the following order: raw materials, finished goods, and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 19

Ferguson Company recognized $400 of estimated manufacturing overhead costs at the end of the month. How does this transaction affect the financial statements? $\begin{array}{|c|c|c|c|c|c|c|c|c|c|c|c|}
\hline&{\text { Assets }} && = & \text { Liab. } & + & \text { Equity } & \text { Rev. } & - & \text { Exp. } & = & \text { Net Inc. } \
\hline \begin{array}{c}
\text { Mfg. } \
\text { OH }
\end{array} & + & \text { WIP Inv. } & & & & & & & & & \
\hline
\end{array}$

Accepted Answer

A)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline ( 400 ) & + & \text { NA } & = & \text { NA } & + & ( 400 ) & \text { NA } & - & 400 & = & ( 400 ) \
\hline
\end{array}$$ 
B)  $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}
\hline \mathbf{( 4 0 0 )} & + & \text { NA } & = & \mathbf{( 4 0 0 )} & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$ 
C)  $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}
\hline(400) & + & 400 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$ 
D)  $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}
\hline 400 & + & (400) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$ 
A)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline ( 400 ) & + & \text { NA } & = & \text { NA } & + & ( 400 ) & \text { NA } & - & 400 & = & ( 400 ) \
\hline
\end{array}$$ 
B)  $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}
\hline \mathbf{( 4 0 0 )} & + & \text { NA } & = & \mathbf{( 4 0 0 )} & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$ 
C)  $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}
\hline(400) & + & 400 & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$ 
D)  $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|}
\hline 400 & + & (400) & = & \text { NA } & + & \text { NA } & \text { NA } & - & \text { NA } & = & \text { NA } \
\hline
\end{array}$

Question 20

Which of the following statement(s) is/are correct? I. A predetermined overhead rate is used to assign estimated overhead costs to work in process.II. The predetermined overhead rate is calculated by dividing estimated overhead cost by the estimated volume or level of activity.III. The most common means of allocating overhead costs is to calculate a predetermined overhead rate at the end of the period.

Accepted Answer

A) I 
B) I and III 
C) II 
D) I and II 
A) I 
B) I and III 
C) II 
D) I and II

Carolina Company placed $26,500 of raw materials into production. The recognition of this event will:

Why does a service company need cost information about the services it provides?

Service companies accumulate information about the cost of services provided, and they report those costs in an inventory account.

All of the following costs are accumulated in the Work in Process Inventory account except:

Describe how firms use service and product cost information.

Orlando Company placed $142 of raw materials into production. How would this transaction affect the company's financial statements? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Raw Matls. Inv. + WIP Inv.

Which of the following statements is true for a company that uses variable costing?

Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year. At the end of the year, manufacturing overhead had been underapplied by $5,310. As a result:

Use of absorption costing allows a company to increase its profits by increasing the level of production of its products.

A credit to the Raw Materials Inventory account represents:

Which of the following is a valid reason for using variable costing?

Product costs are expensed as cost of goods sold:

The cost of goods completed during a period is transferred from the Finished Goods Inventory account to Cost of Goods Sold.

What is a volume variance, and what is its cause? Under what circumstances is the volume variance unfavorable?

Select the response that best illustrates the point that product cost flows are cyclical and occur in a specific sequence.

Product costs flow through the manufacturer's inventory accounts in the following order: raw materials, finished goods, and cost of goods sold.

Ferguson Company recognized $400 of estimated manufacturing overhead costs at the end of the month. How does this transaction affect the financial statements? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Mfg. OH + WIP Inv.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost, Volume, and Pricing to Increase Profitability

Cost Accumulation, Tracing, and Allocation

Cost Management in an Automated Business Environment: Abc, Abm, and Tqm

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 11: Product Costing in Service and Manufacturing Entities

Carolina Company placed $26,500 of raw materials into production. The recognition of this event will:

Why does a service company need cost information about the services it provides?

Service companies accumulate information about the cost of services provided, and they report those costs in an inventory account.

All of the following costs are accumulated in the Work in Process Inventory account except:

Describe how firms use service and product cost information.

Orlando Company placed $142 of raw materials into production. How would this transaction affect the company's financial statements? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Raw Matls. Inv. + WIP Inv.

Which of the following statements is true for a company that uses variable costing?

Kelly Company's manufacturing overhead costs totaled $2,871,400 during the year. At the end of the year, manufacturing overhead had been underapplied by $5,310. As a result:

Use of absorption costing allows a company to increase its profits by increasing the level of production of its products.

A credit to the Raw Materials Inventory account represents:

Which of the following is a valid reason for using variable costing?

Product costs are expensed as cost of goods sold:

The cost of goods completed during a period is transferred from the Finished Goods Inventory account to Cost of Goods Sold.

What is a volume variance, and what is its cause? Under what circumstances is the volume variance unfavorable?

Select the response that best illustrates the point that product cost flows are cyclical and occur in a specific sequence.

Product costs flow through the manufacturer's inventory accounts in the following order: raw materials, finished goods, and cost of goods sold.

Ferguson Company recognized $400 of estimated manufacturing overhead costs at the end of the month. How does this transaction affect the financial statements? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Mfg. OH + WIP Inv.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost, Volume, and Pricing to Increase Profitability

Cost Accumulation, Tracing, and Allocation

Cost Management in an Automated Business Environment: Abc, Abm, and Tqm

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters