Managerial Accounting Management – Finance

Managerial Accounting Management Test

This test is about managerial accounting management of finance and accounting.


In order to be useful to managers, management accounting reports should possess all of the following characteristics EXCEPT:

provide objective measures of past operations and subjective estimates about future decisions

be prepared in accordance with generally accepted accounting principlescorrect

be provided at any time management needs information

be prepared to report information for any unit of the business to support decision making


What is the primary criterion for the preparation of managerial accounting reports?

Relevance of the reports

Meet the manager needscorrect

Timing of the reports

Cost of the reports


Which of the following is most associated with managerial accounting?

Must follow GAAP

May rely on estimates and forecastscorrect

Is prepared for users outside the organization

Always reports on the entire entity


Which of the following is most associated with financial accounting?

Can have both objective and subjective information

Can be prepared periodically, or as needed

Prepared in accordance with GAAPcorrect

Can be prepared for the entity or segment


Which of the following statements is false?

There is no overlap between financial and managerial accountingcorrect

Managerial accounting sometimes relies on past information.

Managerial accounting does not need to conform to GAAP

Financial accounting must conform to GAAP.


In most business organizations, the chief management accountant is called the:

chief accounting officer

controllercorrect

chairman of the board

chief executive officer


All of the following employees hold line positions in Anthea Electric EXCEPT:

vice president of production

vice president of financecorrect

manager of the Valhalla Plant

vice president of sales


The controller’s staff often consists of several management accountants. All of the following would most likely be on the controller’s staff EXCEPT:

general accountants

budgets and budget analysts

investments and shareholder relations managerscorrect

cost accountants


Managerial accounting

is prepared according to GAAP.

is prepared according to management needscorrect

is prepared periodically only.

is related to the entire business entity only.


Who are the individuals charged with the responsibility for directing the day-to-day operations of a business?

Investors

Managerscorrect

Shareholders

Customers


Which of the following are basic phases of the management process?

Supervising and directing

Decision making and supervising

Organizing and directing

Planning and controllingcorrect


What term is used to describe the process of developing the organization’s objectives and translating those into courses of action?

Supervising

Planningcorrect

Improving

Decision making


Which of the following is the principle reason for preparing managerial accounting reports?

Usefulness to managementcorrect

Cost of preparation

Clarity

GAAP


Which of the following is not a characteristic of useful managerial accounting reports?

Accuracy

GAAPcorrect

historical and estimated data

reports prepared as needed


Compute conversion costs given the following data: Direct Materials, $347,500; Direct Labor, $186,300; Factory Overhead, $187,900; and Selling Expenses, $45,290.

$533,800

$187,900

$721,700

$374,200correct


The cost of a manufactured product generally consists of which of the following costs?

Direct materials cost and factory overhead cost

Direct labor cost and factory overhead cost

Direct labor cost, direct materials cost, and factory overhead costcorrect

Direct materials cost and direct labor cost


Materials must have which two qualities in order to be classified as direct materials?

They must be classified as both prime costs and conversion costs.

They must be introduced into the process in both work-in-process inventories and finished goods inventories.

They must be an integral part of the finished product, but can be an insignificant portion of the total product cost.

They must be an integral part of the finished product and be a significant portion of the total product cost.correct


If the cost of direct materials is a small portion of total production cost, it may be classified as part of:

direct labor cost

selling and administrative costs

miscellaneous costs

factory overhead costcorrect


The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished product is classified as:

factory overhead cost

direct labor costcorrect

miscellaneous costs

direct materials cost


Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as:

factory overhead costcorrect

miscellaneous expense

product costs

period cost


Another term often used to refer to factory overhead is:

surplus

period cost

supervisory cost

factory burdencorrect


Which of the following costs are referred to as conversion costs?

Direct labor cost and factory overhead costcorrect

Direct materials cost and direct labor cost

Factory overhead cost

Direct materials cost and factory overhead cost


What term is used to refer to the cost of changing direct materials into a finished manufactured product?

Factory overhead cost

Period cost

Conversion costcorrect

Direct labor cost


Prime costs are

direct materials and factory overhead

direct materials and direct laborcorrect

direct labor and factory overhead

period costs and factory overhead


Conversion costs are

direct materials and direct labor

direct materials and factory overhead

factory overhead and direct laborcorrect

direct materials and indirect labor


Which of the following are the two main types of cost accounting systems for manufacturing operations?

Process cost and general accounting systems

Job order cost and process cost systemscorrect

Job order and general accounting systems

d. Process cost and replacement cost systems


Which of the following would most likely use a job order costing system?

A paper mill

A swimming pool installercorrect

A company that manufactures chlorine for swimming pools

An oil refinery


An oil refinery

Which of the following systems provides for a separate record of the cost of each particular quantity of product that passes through the factory?

Job order cost systemcorrect

General cost system

Replacement cost system

Process cost system


For which of the following businesses would the job order cost system be appropriate?

Meat processor

Automobile manufacturer

Oil refinery

Construction contractorcorrect


Job order costing and process costing are

pricing systems

cost accounting systemscorrect

cost flow systems

inventory tracking systems


Which of the following costs are NOT included in finished goods inventory?

Direct labor

Factory overhead

Company president’s salarycorrect

Direct materials


Which of the following is the correct flow of manufacturing costs?

Raw materials, work in process, finished goods, cost of goods soldcorrect

Raw materials, finished goods, cost of goods sold, work in process

Work in process, finished goods, raw materials, cost of goods sold

Cost of goods sold, raw materials, work in process, finished goods.


The document authorizing the issuance of materials from the storeroom is the:

materials requisitioncorrect

purchase requisition

receiving report

purchase order


In a job order cost accounting system, when goods that have been ordered are received, the receiving department personnel count, inspect the goods, and complete a:

purchase order

sales invoice

receiving reportcorrect

purchase requisition


The amount of time spent by each employee and the labor cost incurred for each individual job or for factory overhead are recorded on:

pay stubs.

in-and-out cards.

time tickets.correct

employees’ earnings records


At the end of the fiscal year, the balance in Factory Overhead is small. This balance would normally be:

transferred to Work in Process

transferred to Cost of Goods Soldcorrect

transferred to Finished Goods

allocated between Work in Process and Finished Goods


The controlling account for the cost ledger is:

Finished Goods

Materials

Work in Processcorrect

Cost of Goods Sold


A widely used activity base for developing factory overhead rates in highly automated settings is:

direct labor hours

direct labor dollars

direct materials

machine hourscorrect


The entries to record cost and sale of a finished good on account is:

debit Cost of Goods Sold, credit Finished Goods

debit Cost of Goods Sold, credit Finished Goods, debit Accounts Receivable, credit Salescorrect

debit Sales Expense, credit Finished Goods, credit Cash, credit Accounts Receivable

debit Work in Process, credit Finished Goods, debit Accounts Receivable, credit Sales


All of the following are examples of activity bases except: 

salaries of supervisorscorrect

quality inspections of products

number of machine setups

raw materials storage


Costs that are used in generating revenues during the current period, but are not involved in the manufacturing process are often referred to as:

period costscorrect

conversion costs

factory overhead costs

product costs


Costs that are treated as assets until the product is sold are called:

product costscorrect

period costs

conversion costs

selling expenses


The period costs of a textbook publisher would include:

wages of a press operator

factory utility costs

advertising expensescorrect

paper costs


Which types of inventories does a manufacturing business report on the balance sheet?

Finished goods inventory and work in process inventory

Direct materials inventory and work in process inventory

Direct materials inventory, work in process inventory, and finished goods inventorycorrect

Direct materials inventory and finished goods inventory


For the manufacturing business, inventory which is in the process of being manufactured is referred to as:

supplies inventory

work in process inventorycorrect

finished goods inventory

direct materials inventory


The proper journal entry to record the purchase of $30,000 of raw materials on account would be:

Raw Material Inventory 30,000 Accounts Receivable 30,000

Raw Material Inventory 30,000 Accounts Payable 30,000correct

Inventory 30,000 Accounts Receivable 30,000

Inventory 30,000 Cash 30,000


A separate account for each material is found in a

general ledger

materials ledgercorrect

receiving report

job cost sheet


Period costs are

found on the balance sheet.

not involved in the production processcorrect

classified as direct labor, direct material, or factory overhead

found on the job order cost sheets.


The direct labor and overhead costs of providing services to clients are accumulated in:

finished services expense

work in processcorrect

administrative salaries expense

overhead


In a job order cost accounting system used by a service business, which of the following items would normally not be included as part of overhead?

Materials

Direct laborcorrect

Rent

Supplies


Which of the following is not a factory overhead allocation method?

single plantwide rate

multiple departmental rates

factory costingcorrect

activity-based costing


Pinacle Corp. budgeted $350,000 of overhead cost for 2012. Actual overhead costs for the year were $325,000. Pinacle’s plantwide allocation base, machine hours, was budgeted at 50,000 hours. Actual machine hours were 40,000. A total of 100,000 units was budgeted to be produced and 98,000 units were actually produced. Pinacle’s plantwide factory overhead rate for 2012 is:

$8.13 per machine hour

$7.00 per machine hourcorrect

$6.50 per machine hour

$8.75 per machine hour


The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below.

ProductNumber of unitsLabor hrs per unitMachine hours per unit
Blinks1,00045
Dinks2,00028

All of the machine hours take place in the Fabrication department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $72,000.

The Ramapo Company uses a single overhead rate to apply all overhead costs based on labor hours. What is the overhead cost per unit for Blinks?

$78.00correct

$19.50

$37.45

$56.00


ProductNumber of unitsLabor hrs per unitMachine hours per unit
Blinks1,00045
Dinks2,00028

The Ramapo Company uses a single overhead rate to apply all overhead costs based on labor hours. What is the overhead cost per unit for Dinks?

$77.00

$39.00

$19.50

$59.92


The Ramapo Company uses a single overhead rate to apply all overhead costs.  What would the single plantwide rate be if it was based on machine hours instead of labor hours?

ProductNumber of unitsLabor hrs per unitMachine hours per unit
Blinks1,00045
Dinks2,00028

$9.00 per MH

$19.50 per MH

$7.43 per MHcorrect

$4.00 per MH


Common allocation bases are

direct labor dollars, direct labor hours, direct material dollars

direct labor dollars, direct labor hours, machine hourscorrect

direct labor dollars, direct labor hours, machine dollars

machine dollars, direct labor dollars, machine hours


The Baffin Factory has determined that its budgeted factory overhead budget for the year is $7,750,000.  They plan to produce 1,000,000 units.  Budgeted direct labor hours are 525,000 and budgeted machine hours are 375,000. Using the single plantwide factory overhead rate based on direct labor hours, calculate the factory overhead rate for the year.

$14.76correct

$20.67

$7.75

$77.50


The Cunningham Factory has determined that its budgeted factory overhead budget for the year is $6,750,000 and budgeted direct labor hours are 5,000,000. If the actual direct labors for the period are 175,000 how much overhead would be allocated to the period?

$675,000

$129,630

$236,250correct

$175,000


Blackwelder Factory produces two similar products – small lamps and desk lamps. The total plant overhead budget is $640,000 with 400,000 estimated direct labor hours. It is further estimated that small lamp production will require 275,000 direct labor hours and desk lamp production will need 125,000 direct labor hours.

Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will be allocated to the small lamp production if the actual direct hours for the period is 285,000?

$275,000

$285,000

$440,000

$456,000correct


Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will be allocated to the desk lamp production if the actual direct hours for the period is 118,000?

$118,000

$200,000

$188,800correct

$125,000


Using multiple department factory overhead rates instead of a single plantwide factory overhead rate:

results in more accurate product costscorrect

results in distorted product costs

is simpler and less expensive than a plantwide rate

applies overhead costs to all departments equally


Scoresby Co. uses 3 machine hours and 1 direct labor hour to produce Product X. It uses 4 machine hours and 8 direct labor hours to produce Product Y. Scoresby’s Assembly and Finishing Departments have factory overhead rates of $240 per machine hour and $160 per direct labor hour, respectively. How much overhead cost will be charged to the two products?

Product X = $1,600; Product Y = $4,800

Product X = $400; Product Y = $400

Product X = $880; Product Y = $2,240correct

Product X = $720; Product Y = $1,280


The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments—fabrication and assembly. Data for the products and departments are listed below.

ProductNumber of unitsLabor hrs per unitMachine hours  per unit
Rings1,00046
Dings2,00039

The Aleutian Company uses a departmental overhead rates. The fabrication department uses machine hours for an allocation base, and the assembly department uses labor hours. 

All of the machine hours take place in the Fabrication department, which has an estimated overhead of $90,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $105,000.

What is the assembly department overhead rate per labor hour?

$10.50correct

$19.50

$3.75

$4.38


What is the overhead cost per unit for Rings?

$65.25

$23.25

$44.10

$64.50correct


What is the overhead cost per unit for Dings?

$65.25correct

$56.75

$23.25

$64.50


What is the fabrication department overhead rate per machine hour?

$10.50

$9.00

$8.12

$3.75correct


All of the following can be used as an allocation base for calculating factory overhead rates except:

direct labor dollars

direct labor hours

machine hours

total overhead costscorrect


Which of the following are the two most common allocation bases for factory overhead?

Total overhead dollars and machine hours

Direct labor hours and machine hourscorrect

Direct labor hours and factory expenses

d. Machine hours and factory expenses


Activity rates are determined by

dividing the actual cost for each activity pool by the actual activity base for that pool.

dividing the cost budgeted for each activity pool by the estimated activity base for that pool.correct

dividing the actual cost for each activity pool by the estimated activity base for that pool.

dividing the cost budgeted for each activity pool by the actual activity base in that pool.


Shubelik Company is changing to an activity-based costing method. They have determined that they will use three cost pools. They are setups, inspections, and assembly. Which of the following would be used as the activity base for assembly?

number of direct labor hourscorrect

number of setups

number of inspections

number of units to be produced


Given the following information, determine the activity rate for setups.

Activity PoolActivity BaseBudgeted Amount
Setups10,000$60,000
Inspections24,000$120,000
Assembly (DLH)80,000$400,000

$58.00

$6.00correct

$.75

$5.09


If selling and administrative expenses are allocated to different products, they should be reported as a

product cost

factory overhead cost

period costcorrect

cost of goods sold


Activity-based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products. Which of the following is the best allocation base for help desk costs?

Number of callscorrect

Square footage of the help desk office

Number of products sold

Number of employees


The Beauty Beyond Words Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows:

ActivityActivity Rate
Hair Washing$3.00
Conditioning$3.50
Chemical Treatment$25.00
Styling$10.00
Hair WashingConditioningChemical TreatmentStyling
Hair Cut1100
Complete Style1101
Perms2311
Hi-Lights3421

Calculate the cost of services for a hair cut.

$3.00

$6.50correct

$3.50

$16.50


The Beauty Beyond Words Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows:

ActivityActivity Rate
Hair Washing$3.00
Conditioning$3.50
Chemical Treatment$25.00
Styling$10.00
Hair WashingConditioningChemical TreatmentStyling
Hair Cut1100
Complete Style1101
Perms2311
Hi-Lights3421

Calculate the cost of services for a perm.

$51.50correct

$41.50

$44.50

$25.00


In process cost accounting, the costs of direct materials and direct labor are charged directly to:

service departments

processing departmentscorrect

customer accounts receivable

job orders


In a process cost system, the cost of completed production in Department A is transferred to Department B by which of the following entries?

Debit Work in Process–Dept. B; credit Work in Process–Dept. A.correct

Debit Work in Process–Dept. B; credit Finished Goods–Dept. A.

Debit Work in Process–Dept. B; credit Cost of Goods Sold–Dept. A.

Debit Finished Goods; credit Work in Process–Dept. B.


The three categories of manufacturing costs comprising the cost of work in process are direct labor, direct materials, and

office expenses

direct expenses

sales salaries expense

factory overheadcorrect


Which of the following is not characteristic of a process cost system?

The system may use several work in process inventory accounts

Manufacturing costs are grouped by department rather than by jobs.

The system accumulates costs per job.correct

The system emphasizes time periods rather than the time it takes to complete a job


Which of the following is not a characteristic of a process cost system?

Manufacturing costs are grouped by departments.

The system may use several Work-in-Process accounts

The system measures costs for each completed job.correct

The system allocates costs between completed and partially completed units within a department.


If a company uses a process costing system to account for the costs in its four production departments, how many Work-in-Process will it use?

3

4correct

1

2


The four steps necessary to determine the cost of goods completed and the ending inventory valuation in a process cost system are:

1.allocate costs to transferred and partially completed units
2.determine the units to be assigned costs
3.determine the cost per equivalent unit
4.calculate equivalent units of production

The correct ordering of the steps is:

2, 4, 3, 1correct

4, 2, 3, 1

2, 3, 4, 1

2, 3, 1, 4


Which of the following costs incurred by a paper manufacturer would be included in the group of costs referred to as conversion costs?

Advertising costs

Raw lumber (direct materials)

Machine operator’s wages (direct labor)correct

Sales salaries


In the manufacture of 15,000 units of a product, direct materials cost incurred was $165,000, direct labor cost incurred was $105,000, and applied factory overhead was $53,500. What is the total conversion cost?

$270,000

$158,500correct

$323,500

$53,500


If Department H had 600 units, 60% completed, in process at the beginning of the period, 6,000 units were completed during the period, and 700 units were 30% completed at the end of the period, what was the number of equivalent units of production for conversion costs for the period, if the first-in, first-out method is used to cost inventories?

7,300

5,640

6,700

5,850correct


If Department K had 2,000 units, 40% completed, in process at the beginning of the period, 12,000 units were completed during the period, and 1,200 units were 25% completed at the end of the period, what was the number of equivalent units of production for conversion costs for the period if the first-in, first-out method is used to cost inventories?

11,500correct

11,200

15,200

10,000


Department X had 5,000 units in work in process that were 75% completed as to labor and overhead at the beginning of the period, 30,000 units of direct materials were added during the period, 32,000 units were completed during the period, and 3,000 units were 40% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost inventories. The number of equivalent units of production for conversion costs for the period was:

32,450

29,450correct

31,950

26,000


Department Z had no work in process at the beginning of the period. 12,000 units of direct materials were added during the period at a cost of $84,000, 9,000 units were completed during the period, and 3,000 units were 30% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. Direct labor was $49,500 and factory overhead was $9,900.

The total conversion costs for the period were:

$59,400correct

$49,500

$143,400

$9,900


Department Z had no work in process at the beginning of the period. 12,000 units of direct materials were added during the period at a cost of $84,000, 9,000 units were completed during the period, and 3,000 units were 30% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. Direct labor was $49,500 and factory overhead was $9,900.

The total cost of units completed during the period were:

$117,000correct

$143,400

$121,000

$127,450


The following production data were taken from the records of the Finishing Department for June:

Inventory in process, 6-1, 
  25% completed1,500 units
Transferred to finished goods 
  during June5,000 units
Equivalent units of production 
  during June5,200 units

Determine the number of equivalent units of production in the June 30 Finishing Department inventory, assuming that the first-in, first-out method is used to cost inventories.  Assume the completion percentage of 25% applies to both direct materials and conversion costs.

575 unitscorrect

200 units

1,000 units

300 units


The debits to Work in Process–Assembly Department for April, together with data concerning production, are as follows:

April 1, work in process: 
  Materials cost, 3,000 units$  8,000
  Conversion costs, 3,000 units, 
    66.7% completed6,000
Materials added during April, 10,000 units30,000
Conversion costs during April31,000
Goods finished during April, 11,500 units
April 30 work in process, 1,500 units, 
  50% completed

All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The materials cost per equivalent unit for April is:

$3.00correct

$3.80

$2.92

$2.31


Department E had 4,000 units in Work in Process that were 40% completed at the beginning of the period at a cost of $12,500. 14,000 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 3,000 units were 75% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710. The number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories was:

15,650correct

14,850

14,150

14,650


Department A had 1,000 units in Work in Process that were 60% completed at the beginning of the period at a cost of $7,000. 4,000 units of direct materials were added during the period at a cost of $8,200. 4,500 units were completed during the period, and 500 units were 40% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $28,700 and factory overhead was $4,510. The cost of the 500 units in process at the end of the period if the first-in, first-out method is used to cost inventories was:

$3,240

$5,175

$2,569

$2,645correct


In the manufacture of 10,000 units of a product, direct materials cost incurred was $145,800, direct labor cost incurred was $82,000, and applied factory overhead was $45,500. What is the total conversion cost?

$127,500correct

$145,800

$272,200

$273,300


 If Department H had 600 units, 60% completed, in process at the beginning of the period, 8,000 units were completed during the period, and 500 units were 30% completed at the end of the period, what was the number of equivalent units of production for the period for conversion  if the first-in, first-out method is used to cost inventories? Assume the completion percentage applies to both direct materials and conversion cost.

7,790correct

8,390

8,600

8,000


If Department K had 2,500 units, 45% completed, in process at the beginning of the period, 15,000 units were completed during the period, and 1,200 units were 40% completed at the end of the period, what was the number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories? Assume the completion percentage applies to both direct materials and conversion cost.

16,855

16,605

13,460

14,355correct


Department A had 4,000 units in work in process that were 60% completed as to labor and overhead at the beginning of the period, 29,000 units of direct materials were added during the period, 31,000 units were completed during the period, and 2,000 units were 80% completed as to labor and overhead at the end of the period. All materials are added at the beginning of the process. The first-in, first-out method is used to cost inventories.

The number of equivalent units of production for conversion costs for the period was:

30,200correct

29,800

33,800

33,000


The debits to Work in Process–Assembly Department for April, together with data concerning production, are as follows:

April 1, work in process: 
  Materials cost, 3,000 units$  7,200
  Conversion costs, 3,000 units, 
   60% completed6,000
Materials added during April, 10,000 units25,000
Conversion costs during April35,750
Goods finished during April, 12,000 units
April 30 work in process, 1,000 units, 
  40% completed

All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The materials cost per equivalent unit for April is:

$2.48

$2.08

$2.50correct

$5.25


The debits to Work in Process–Assembly Department for April, together with data concerning production, are as follows:

April 1, work in process: 
  Materials cost, 3,000 units$  7,200
  Conversion costs, 3,000 units, 
   40% completed6,000
Materials added during April, 10,000 units25,000
Conversion costs during April30,800
Goods finished during April, 12,000 units
April 30 work in process, 1,000 units, 
  40% completed

All direct materials are placed in process at the beginning of the process and the first-in, first-out method is used to cost inventories. The conversion cost per equivalent unit for April is:

$2.48

$2.75correct

$2.50

$5.25


Department B had 3,000 units in Work in Process that were 25% completed at the beginning of the period at a cost of $12,500. 13,700 units of direct materials were added during the period at a cost of $28,700. 15,000 units were completed during the period, and 1,700 units were 95% completed at the end of the period. All materials are added at the beginning of the process. Direct labor was $32,450 and factory overhead was $18,710.

The number of equivalent units of production for the period for conversion if the first-in, first-out method is used to cost inventories was:

14,365

13,615

12,000

15,865correct


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