Question 11 pts

If a segment of a business is expected to produce an annual contribution margin of $30,000 but is also expected to incur controllable fixed costs of about $40,000 annually, that segment should probably be discontinued.

True

False

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Question 21 pts

If a firm estimates that for the coming year it will have expected total direct labor costs of $60,000 and total manufacturing overhead costs of $36,000, its overhead application rate will be 60 percent.

True

False

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Question 31 pts

Responsibility accounting provides detailed data for each cost center and profit center so that management can determine how efficiently the individual segments are functioning.

True

False

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Question 41 pts

A department that has a positive contribution margin is contributing something toward the net income of the business.

True

False

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Question 51 pts

Standard cost accounting may be used with either a job order cost system or a process cost system.

True

False

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Question 61 pts

Information about depreciation, insurance, and property taxes for the factory building of a manufacturing business would be shown in the Operating Expenses section of the income statement.

True

False

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Question 71 pts

Reversing entries help save time and prevent errors in the period being closed.

True

False

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Question 81 pts

There is no need for a raw materials inventory account when a just-in-time inventory system is used.

True

False

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Question 91 pts

The balance of the Manufacturing Summary account is closed into the Income Summary account.

True

False

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Question 101 pts

Immediately before it is closed, the balance of the Manufacturing Summary account represents the cost of goods manufactured.

True

False

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Question 111 pts

In a process cost accounting system, a separate Work in Process Inventory account is maintained for each producing department.

True

False

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Question 121 pts

The Financial Accounting Standards Board prefers the indirect method of preparing the statement of cash flows.

True

False

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Question 131 pts

The first step in the decision-making process is to determine relevant cost and revenue data.

True

False

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Question 141 pts

When the average cost method is used, units in beginning inventory which are 40 percent complete are multiplied by 60 percent to compute equivalent units of production.

True

False

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Question 151 pts

For each of the following operating activities, indicate whether it is a source of cash, a use of cash, or neither under the indirect method.

increase in Accounts Receivable

[ Choose ] use source neither (non cash item)

increase in Prepaid Expense

[ Choose ] use source neither (non cash item)

increase in Inventory

[ Choose ] use source neither (non cash item)

increase in Accounts Payable

[ Choose ] use source neither (non cash item)

decrease in Supplies

[ Choose ] use source neither (non cash item)

bond discount amortization

[ Choose ] use source neither (non cash item)

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Question 161 pts

If the ending finished goods inventory is greater than the beginning finished goods inventory, the cost of goods sold will be higher than the cost of goods manufactured.

True

False

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Question 171 pts

The monthly total of the Overhead Applied section of all job order cost sheets should agree with the balance in the control account Manufacturing Overhead.

True

False

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Question 181 pts

The payment of cash dividends to stockholders would be classified as a cash outflow resulting from a financing activity.

True

False

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Question 191 pts

Opportunity costs are earnings or potential benefits foregone because a certain course of action is taken.

True

False

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Question 201 pts

Materials issued to production are recorded by debiting Raw Materials Inventory and crediting the departmental work in process accounts.

True

False

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Question 211 pts

The direct costing procedure is sometimes referred to as variable costing.

True

False

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Question 221 pts

Match the following definitions to the term that they relate to.

All departmental manufacturing costs divided by the production for the period

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

All manufacturing costs not classified as direct materials or direct labor

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

Costs of units transferred out plus the cost of the ending work in process units

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

Units begun but not yet completed

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

Estimated number of units that could have been started and completed with the same effort and costs incurred in the department during the same time period

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

Cumulative cost total

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

The units completed but not yet sold

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

Summarizes total costs to be accounted for and total costs accounted for

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

The total of the number of units sold times the average cost for each

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

Summarizes total units to be accounted for and total units accounted for

[ Choose ] unit cost costs accounted for manufacturing overhead quantity schedule cost schedule finished goods work in process equivalent units costs to be accounted for cost of goods sold

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Question 231 pts

The amount of floor space occupied by each department is a common basis for allocating rent expense or utilities expense.

True

False

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Question 241 pts

The raw materials inventory, the work in process inventory, and the finished goods inventory are all shown in the Current Assets section of the balance sheet.

True

False

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Question 251 pts

Interest expense is treated as an outflow of cash from a financing activity.

True

False

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Question 261 pts

At the end of each year, the underapplied or overapplied overhead usually is closed out to the Cost of Goods Sold account.

True

False

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Question 271 pts

In a process cost accounting system, the average unit cost of a product is determined by dividing the total manufacturing cost incurred by the number of units placed in production during the period.

True

False

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Question 281 pts

For accounting purposes, both revenue and cost data are accumulated for a profit center.

True

False

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Question 291 pts

Goods transferred to another department for further processing are nonetheless considered 100 percent complete on the cost of production report of the department making the transfer.

True

False

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Question 301 pts

In managerial decisions, nonmanufacturing costs can be ignored.

True

False

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Question 311 pts

If a decision must be made to replace a machine, the book value of the existing machine is a sunk cost.

True

False

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Question 321 pts

At the end of the month, if the total of the credits in the Manufacturing Overhead Applied account is greater than the total of the debits in the Manufacturing Overhead account, overhead has been underapplied.

True

False