Question 371 pts

Gross profit for a manufacturing business is computed by deducting cost of goods manufactured from net sales.

True

False

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Question 381 pts

Purchases of raw materials are debited to the Work in Process Inventory account.

True

False

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Question 391 pts

In a job order cost system, the entry to record the labor costs for a period includes a debit to Work in Process Inventory for direct labor and a debit to Manufacturing Overhead for indirect labor.

True

False

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Question 401 pts

The starting point for analyzing cash flows from operating activities is the beginning balance of cash.

True

False

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Question 411 pts

A statement of cost goods manufactured supports the income statement.

True

False

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Question 421 pts

Usually, there is a difference between the net income reported on the income statement and the net cash from operating activities shown on the statement of cash flows.

True

False

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Question 431 pts

A company may have several cost centers, but it can have only one profit center.

True

False

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Question 441 pts

There is no need to take a physical count of inventory periodically when the perpetual inventory system is used.

True

False

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Question 451 pts

A cost that does not change regardless of the option selected need not be considered in the decision-making process.

True

False

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Question 461 pts

Contribution margin is another name for gross profit.

True

False

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Question 471 pts

Under direct costing, all fixed manufacturing overhead is charged off as a current expense.

True

False

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Question 481 pts

Nonoperating income, such as interest income, should be allocated on the basis of total sales in each department.

True

False

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Question 491 pts

Direct costing is extremely useful in setting prices of products in special-order situations.

True

False

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Question 501 pts

Idle time is generally charged to manufacturing overhead.

True

False

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Question 512 pts

When a perpetual inventory system is used, the balance of the Raw Materials Inventory account at the end of an accounting period should reflect the cost of materials on hand.

True

False

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Question 522 pts

When a firm issues a long-term note payable, the amount that it receives for the note is considered a cash inflow from operating activities.

True

False

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Question 532 pts

The statement of cash flows provides information about cash flows from operating activities, investing activities, and financing activities.

True

False

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Question 542 pts

The units transferred in from a prior department are included in the quantity to be accounted for on the cost of production report for the receiving department.

True

False

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Question 552 pts

It is appropriate to consider nonfinancial factors in the decision-making process.

True

False

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Question 562 pts

Office salaries expense should be allocated on the basis of total sales in each department.

True

False

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Question 572 pts

Under the average cost method, the beginning inventory amount for each cost element is added to the amount of that cost element incurred during the current period.

True

False

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Question 582 pts

The manufacturing overhead recorded in the Work in Process Inventory account is not necessarily the actual overhead incurred.

True

False

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Question 592 pts

Management decisions involving the elimination of a department should be based on the contribution margin of the department.

True

False

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Question 602 pts

In deciding whether to manufacture or to purchase a product, fixed costs are generally ignored.

True

False

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Question 612 pts

Amounts paid to factory repair and maintenance employees are considered direct labor.

True

False

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Question 622 pts

Equivalent production units are determined for materials and labor but not for manufacturing overhead.

True

False

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Question 632 pts

Products that are only partially completed are called work in process.

True

False

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Question 642 pts

In a manufacturing company, it is not necessary to take a physical inventory of the finished goods.

True

False

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Question 652 pts

The ending work in process inventory does not appear on the following month's cost of production report.

True

False

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Question 662 pts

When a departmentalized income statement is to be prepared, the sales journal must be departmentalized.

True

False

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Question 672 pts

Current assets and current liabilities are often referred to as operating assets and liabilities.

True

False

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Question 682 pts

The difficulty of fairly allocating direct expenses is one limitation of departmental income statements.

True

False

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Question 692 pts

The beginning and ending balances of the finished goods inventory are not used in the computation of cost of goods manufactured.

True

False

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Question 702 pts

Before deciding whether to purchase new equipment, a firm should consider employee morale and the quality of the new equipment's output.

True

False

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Question 712 pts

The departments of Cacophony Music Company are listed below. For each, determine whether it is a cost center or a profit center.

Instrument Rental Department

[ Choose ] Cost Profit

Instrument Repair Department

[ Choose ] Cost Profit

Accounting Department

[ Choose ] Cost Profit

Recording Studio

[ Choose ] Cost Profit

Maintenance Department

[ Choose ] Cost Profit

Sheet Music Department

[ Choose ] Cost Profit

Storeroom

[ Choose ] Cost Profit

Customer Service

[ Choose ] Cost Profit

CDs and Tapes Department

[ Choose ] Cost Profit

Purchasing & Receiving

[ Choose ] Cost Profit

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Question 722 pts

A complete set of published financial statements for a corporation must include a statement of cash flow.

True

False

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Question 732 pts

Raw Materials Used is not an element of manufacturing overhead.

True

False

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Question 742 pts

Income statements prepared on an absorption-costing basis normally are more useful for internal decision making than income statements prepared on a direct costing basis.

True

False

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Question 752 pts

Common costs are allocated to each segment of a business to determine the segment's contribution margin.

True

False