Question 1

In the general ledger, the production costs are transferred through the work in process inventory accounts to

Accepted Answer

A)  production costs account. 
B)  costs of goods sold account. 
C)  finished goods inventory account. 
D)  work in process account. 
A)  production costs account. 
B)  costs of goods sold account. 
C)  finished goods inventory account. 
D)  work in process account.

Question 2

If a manufacturer underestimated the manufacturing overhead budget and overestimates the activity base for the year, what is the result?

Accepted Answer

A)  Overapplied factory overhead 
B)  Underapplied factory overhead 
C)  Overstated finished goods inventory 
D)  Understated work in process inventory 
A)  Overapplied factory overhead 
B)  Underapplied factory overhead 
C)  Overstated finished goods inventory 
D)  Understated work in process inventory

Question 3

Cost of Goods Manufactured = Beginning Work in Process + Total Manufacturing Costs - Ending Work in Process.

Accepted Answer

A) True 
 B)False

Question 4

To transfer work in process inventory to finished goods inventory:

Accepted Answer

A)  debit finished goods and credit work in process. 
B)  debit work in process and credit finished goods. 
C)  add direct labour to the work in process inventory. 
D)  add direct labour and direct materials to the finished goods inventory. 
A)  debit finished goods and credit work in process. 
B)  debit work in process and credit finished goods. 
C)  add direct labour to the work in process inventory. 
D)  add direct labour and direct materials to the finished goods inventory.

Question 5

The assignment of direct labour costs to individual jobs is based on

Accepted Answer

A)  actual total payroll costs divided equally among all the jobs in process. 
B)  estimated total payroll costs divided equally among all the jobs in process. 
C)  the actual time spent on each job multiplied by the wage rate. 
D)  the estimated time spent on each job multiplied by the wage rate. 
A)  actual total payroll costs divided equally among all the jobs in process. 
B)  estimated total payroll costs divided equally among all the jobs in process. 
C)  the actual time spent on each job multiplied by the wage rate. 
D)  the estimated time spent on each job multiplied by the wage rate.

Question 6

Which of the following is true regarding job costing?

Accepted Answer

A)  It is a type of product costing system used for small numbers of products produced in distinct batches. 
B)  It is used exclusively in manufacturing environments. 
C)  It is used for continuous mass production of products. 
D)  It is used exclusively for products of a similar nature. 
A)  It is a type of product costing system used for small numbers of products produced in distinct batches. 
B)  It is used exclusively in manufacturing environments. 
C)  It is used for continuous mass production of products. 
D)  It is used exclusively for products of a similar nature.

Question 7

Which of the following would appear on the debit side of the overhead account?

Accepted Answer

A)  Actual overhead cost incurred in the period 
B)  Overhead applied (charged) to production 
C)  Overapplied overhead for the period 
D)  Actual overhead cost incurred in the period AND overapplied overhead for the period 
A)  Actual overhead cost incurred in the period 
B)  Overhead applied (charged) to production 
C)  Overapplied overhead for the period 
D)  Actual overhead cost incurred in the period AND overapplied overhead for the period

Question 8

Product costing is the process of:

Accepted Answer

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. 
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.

Question 9

External accounting reports require inventory to be valued at the distribution cost.

Accepted Answer

A) True 
 B)False

Question 10

When underapplied or overapplied overhead is allocated among the three accounts work in process, finished goods and cost of goods sold, this process is called:

Accepted Answer

A)  proration. 
B)  just-in-time costing. 
C)  zero-based costing. 
D)  overhead application. 
A)  proration. 
B)  just-in-time costing. 
C)  zero-based costing. 
D)  overhead application.

Question 11

On completion of products under a job cost system, costs are transferred as follows:

Accepted Answer

A)  Debit finished goods inventory, credit work in process 
B)  Debit work in process, credit finished goods inventory 
C)  Debit cost of goods sold, credit work in process inventory 
D)  Debit work in process inventory, credit cost of goods sold 
A)  Debit finished goods inventory, credit work in process 
B)  Debit work in process, credit finished goods inventory 
C)  Debit cost of goods sold, credit work in process inventory 
D)  Debit work in process inventory, credit cost of goods sold

Question 12

Manufacturing overheads incurred are debited to the work-in-process inventory account.

Accepted Answer

A) True 
 B)False

Question 13

In calculating its predetermined overhead rate, a firm incorrectly called some items of indirect labour 'direct labour'. Since the firm uses direct labour costs as the basis for application of overhead costs, the effect of this error is to

Accepted Answer

A)  underestimate the overhead rate. 
B)  overestimate the overhead rate. 
C)  underestimate direct labour costs. 
D)  underestimate the denominator used for allocating overhead. 
A)  underestimate the overhead rate. 
B)  overestimate the overhead rate. 
C)  underestimate direct labour costs. 
D)  underestimate the denominator used for allocating overhead.

Question 14

Manufacturing costs include direct labour, direct materials and all company-operating costs.

Accepted Answer

A) True 
 B)False

Question 15

A firm's total overhead incurred for the year was $40 000, and at year-end the overhead component of WIP, FG and COGS were as follows:  
If underapplied or overapplied overhead is to be prorated, what is the amount (to the nearest dollar) that will be transferred to WIP because of the proration?

Accepted Answer

A)  Credit WIP with $945 
B)  Debit WIP with $945 
C)  Credit WIP with $974 
D)  Debit WIP with $974 
A)  Credit WIP with $945 
B)  Debit WIP with $945 
C)  Credit WIP with $974 
D)  Debit WIP with $974

Question 16

To accumulate costs under job costing

Accepted Answer

A)  the cost of direct labour is assigned to each production job. 
B)  the cost of direct material is assigned to each production job. 
C)  the cost of manufacturing overhead is allocated to each production job. 
D)  All of the given answers 
A)  the cost of direct labour is assigned to each production job. 
B)  the cost of direct material is assigned to each production job. 
C)  the cost of manufacturing overhead is allocated to each production job. 
D)  All of the given answers

Question 17

When recording inventory in the financial statements, the accounting standards prescribe that the companies use the lower of cost or net realisable value.

Accepted Answer

A) True 
 B)False

Question 18

Managers using costing data for making decisions will usually use the following data in product cost information.

Accepted Answer

A)  Manufacturing costs 
B)  Manufacturing and upstream costs 
C)  Manufacturing and downstream costs 
D)  Manufacturing, upstream and downstream costs 
A)  Manufacturing costs 
B)  Manufacturing and upstream costs 
C)  Manufacturing and downstream costs 
D)  Manufacturing, upstream and downstream costs

Question 19

Management can hold department managers responsible for costs incurred in their area by

Accepted Answer

A)  tracking production costs to production departments. 
B)  dividing total production costs by the number of production areas. 
C)  keeping work in process to a minimum in each area. 
D)  employing experienced production managers. 
A)  tracking production costs to production departments. 
B)  dividing total production costs by the number of production areas. 
C)  keeping work in process to a minimum in each area. 
D)  employing experienced production managers.

Question 20

Total manufacturing cost includes

Accepted Answer

A)  direct material and direct labour in a job costing system. 
B)  direct labour and manufacturing overhead in a process costing system. 
C)  direct material, direct labour and manufacturing overhead in both job costing and process costing. 
D)  direct labour and manufacturing overhead in both a job costing and a process costing system. 
A)  direct material and direct labour in a job costing system. 
B)  direct labour and manufacturing overhead in a process costing system. 
C)  direct material, direct labour and manufacturing overhead in both job costing and process costing. 
D)  direct labour and manufacturing overhead in both a job costing and a process costing system.

Exam 4: Product Costing Systems

In the general ledger, the production costs are transferred through the work in process inventory accounts to

If a manufacturer underestimated the manufacturing overhead budget and overestimates the activity base for the year, what is the result?

Cost of Goods Manufactured = Beginning Work in Process + Total Manufacturing Costs - Ending Work in Process.

To transfer work in process inventory to finished goods inventory:

The assignment of direct labour costs to individual jobs is based on

Which of the following is true regarding job costing?

Which of the following would appear on the debit side of the overhead account?

Product costing is the process of:

External accounting reports require inventory to be valued at the distribution cost.

When underapplied or overapplied overhead is allocated among the three accounts work in process, finished goods and cost of goods sold, this process is called:

On completion of products under a job cost system, costs are transferred as follows:

Manufacturing overheads incurred are debited to the work-in-process inventory account.

In calculating its predetermined overhead rate, a firm incorrectly called some items of indirect labour 'direct labour'. Since the firm uses direct labour costs as the basis for application of overhead costs, the effect of this error is to

Manufacturing costs include direct labour, direct materials and all company-operating costs.

A firm's total overhead incurred for the year was $40 000, and at year-end the overhead component of WIP, FG and COGS were as follows: If underapplied or overapplied overhead is to be prorated, what is the amount (to the nearest dollar) that will be transferred to WIP because of the proration?

To accumulate costs under job costing

When recording inventory in the financial statements, the accounting standards prescribe that the companies use the lower of cost or net realisable value.

Managers using costing data for making decisions will usually use the following data in product cost information.

Management can hold department managers responsible for costs incurred in their area by

Total manufacturing cost includes

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

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