Question 1

If expected factory overhead costs are $300 000 and expected direct labour hours are 25 000, what is the overhead application rate per direct labour hour?

Accepted Answer

A)  $0.08 
B)  $12.00 
C)  $83.00 
D)  $120.00 
A)  $0.08 
B)  $12.00 
C)  $83.00 
D)  $120.00 B

Question 2

Which of the following statements is incorrect?

Accepted Answer

A)  Today, with automation and computerisation, factory overhead costs are often a higher proportion of total manufacturing costs than direct labour costs. 
B)  An overhead application rate is an historical rate. 
C)  The direct labour rate per unit of output is constant but total direct labour costs increase with an increase in the level of production. 
D)  A manufacturing entity using a periodic inventory system must rely on the judgement of the accountant and/or the production manager to estimate the value of ending work in process. 
A)  Today, with automation and computerisation, factory overhead costs are often a higher proportion of total manufacturing costs than direct labour costs. 
B)  An overhead application rate is an historical rate. 
C)  The direct labour rate per unit of output is constant but total direct labour costs increase with an increase in the level of production. 
D)  A manufacturing entity using a periodic inventory system must rely on the judgement of the accountant and/or the production manager to estimate the value of ending work in process. B

Question 3

In relation to the cost of goods manufactured report, which of the following statements is incorrect?

Accepted Answer

A)  Cost of goods manufactured is transferred to the cost of sales account. 
B)  It is prepared to calculate the cost of goods completed in the period. 
C)  The ending work in process is subtracted to obtain the cost of completed goods manufactured for the period. 
D)  The total of direct materials, direct labour and factory overhead represent the manufacturing costs for the period. 
A)  Cost of goods manufactured is transferred to the cost of sales account. 
B)  It is prepared to calculate the cost of goods completed in the period. 
C)  The ending work in process is subtracted to obtain the cost of completed goods manufactured for the period. 
D)  The total of direct materials, direct labour and factory overhead represent the manufacturing costs for the period. A

Question 4

What type of business would calculate cost of sales in the income statement as stock of finished goods at start + purchases - stock of finished goods at end?

Accepted Answer

A)  A lawyer 
B)  A clothing shop 
C)  A carpet factory 
D)  A school 
A)  A lawyer 
B)  A clothing shop 
C)  A carpet factory 
D)  A school

Question 5

Product costs are integral to the production of a product and are expensed in the period in which the:

Accepted Answer

A)  costs are paid. 
B)  costs are incurred. 
C)  related products are sold. 
D)  related products are produced. 
A)  costs are paid. 
B)  costs are incurred. 
C)  related products are sold. 
D)  related products are produced.

Question 6

Indirect materials and indirect labour incurred by the factory are classified as:

Accepted Answer

A)  administrative expenses. 
B)  factory overhead. 
C)  fixed costs. 
D)  period costs. 
A)  administrative expenses. 
B)  factory overhead. 
C)  fixed costs. 
D)  period costs.

Question 7

Which of the following statements is incorrect?

Accepted Answer

A)  Many costs eventually become expenses. 
B)  A cost that provides future economic benefits is treated as an asset. 
C)  To accountants, the terms cost and expense always mean the same thing. 
D)  An expense is the consumption or loss of resources that will result in a decrease in equity. 
A)  Many costs eventually become expenses. 
B)  A cost that provides future economic benefits is treated as an asset. 
C)  To accountants, the terms cost and expense always mean the same thing. 
D)  An expense is the consumption or loss of resources that will result in a decrease in equity.

Question 8

Which of the following inventory accounts are maintained by a manufacturer?
I. Stock of raw materials
II. Stock of work in process
III. Stock of finished goods

Accepted Answer

A)  None 
B)  I, II and III 
C)  I and II only 
D)  I and III only 
A)  None 
B)  I, II and III 
C)  I and II only 
D)  I and III only

Question 9

Raw materials inventory is:

Accepted Answer

A)  stock of supplies. 
B)  stock of partly finished goods. 
C)  materials that have been scrapped. 
D)  stock of materials purchased for conversion into saleable goods. 
A)  stock of supplies. 
B)  stock of partly finished goods. 
C)  materials that have been scrapped. 
D)  stock of materials purchased for conversion into saleable goods.

Question 10

The following issues must be resolved in accounting for factory overhead except for:

Accepted Answer

A)  the allocation of product costs. 
B)  the allocation of common costs between activities. 
C)  how to assign factory overhead costs as product costs. 
D)  the assignment of service department costs to production departments. 
A)  the allocation of product costs. 
B)  the allocation of common costs between activities. 
C)  how to assign factory overhead costs as product costs. 
D)  the assignment of service department costs to production departments.

Question 11

Work in process inventory is:

Accepted Answer

A)  work that is in the planning process. 
B)  raw materials that have not been paid for. 
C)  product that has been partly processed. 
D)  inventory that is subject to a legal dispute. 
A)  work that is in the planning process. 
B)  raw materials that have not been paid for. 
C)  product that has been partly processed. 
D)  inventory that is subject to a legal dispute.

Question 12

Which of the following is an example of a period cost?

Accepted Answer

A)  Factory rent 
B)  Admin wages 
C)  Direct materials 
D)  Production supervisor's salary 
A)  Factory rent 
B)  Admin wages 
C)  Direct materials 
D)  Production supervisor's salary

Question 13

Although the terms cost and expense are often used synonymously there is a difference between them. A cost can be an asset or an expense whereas an expense is:

Accepted Answer

A)  where the future economic benefits have not expired. 
B)  the consumption or loss of resources that will result in a decrease in equity. 
C)  used to run the business. 
D)  paid out in cash. 
A)  where the future economic benefits have not expired. 
B)  the consumption or loss of resources that will result in a decrease in equity. 
C)  used to run the business. 
D)  paid out in cash.

Question 14

A fixed cost is one that:

Accepted Answer

A)  does not rise as inflation changes. 
B)  is the same per unit of production regardless of volume. 
C)  remains constant in total within the relevant production range. 
D)  increases on a per unit basis as volume increases. 
A)  does not rise as inflation changes. 
B)  is the same per unit of production regardless of volume. 
C)  remains constant in total within the relevant production range. 
D)  increases on a per unit basis as volume increases.

Question 15

Accounting standard IAS 2/AASB 102 Inventories:

Accepted Answer

A)  only allows the use of direct costing for external financial reporting purposes. 
B)  only allows the use of absorption costing for external financial reporting purposes. 
C)  allows the use of direct costing and absorption costing for external financial reporting purposes. 
D)  does not allow the use of either direct costing or absorption costing for external financial reporting purposes. 
A)  only allows the use of direct costing for external financial reporting purposes. 
B)  only allows the use of absorption costing for external financial reporting purposes. 
C)  allows the use of direct costing and absorption costing for external financial reporting purposes. 
D)  does not allow the use of either direct costing or absorption costing for external financial reporting purposes.

Question 16

Any increase in unit product cost must result in a decreased profit margin if the selling price of the product cannot be:

Accepted Answer

A)  increased. 
B)  decreased. 
C)  measured. 
D)  calculated. 
A)  increased. 
B)  decreased. 
C)  measured. 
D)  calculated.

Question 17

The format for the cost of goods manufactured statement is direct materials + direct labour + factory overhead + __________ - ending work in process.

Accepted Answer

A)  indirect materials 
B)  indirect labour 
C)  indirect materials. 
D)  beginning work in process 
A)  indirect materials 
B)  indirect labour 
C)  indirect materials. 
D)  beginning work in process

Question 18

Direct material costs plus direct labour costs are known as:

Accepted Answer

A)  prime costs. 
B)  fixed costs. 
C)  period costs. 
D)  conversion costs. 
A)  prime costs. 
B)  fixed costs. 
C)  period costs. 
D)  conversion costs.

Question 19

Product costs need to be calculated by a manufacturer for which of the following purposes?
Inventory Profit Management decision-
Valuation determination making

Accepted Answer

A)  Yes No Yes 
B)  No Yes Yes 
C)  No No Yes 
D)  Yes Yes Yes 
A)  Yes No Yes 
B)  No Yes Yes 
C)  No No Yes 
D)  Yes Yes Yes

Question 20

Costs that remain constant per unit regardless of the level of output are known as:

Accepted Answer

A)  variable costs. 
B)  mixed costs. 
C)  direct costs. 
D)  fixed costs. 
A)  variable costs. 
B)  mixed costs. 
C)  direct costs. 
D)  fixed costs.

Exam 20: Accounting for Manufacturing

If expected factory overhead costs are $300 000 and expected direct labour hours are 25 000, what is the overhead application rate per direct labour hour?

Which of the following statements is incorrect?

In relation to the cost of goods manufactured report, which of the following statements is incorrect?

What type of business would calculate cost of sales in the income statement as stock of finished goods at start + purchases - stock of finished goods at end?

Product costs are integral to the production of a product and are expensed in the period in which the:

Indirect materials and indirect labour incurred by the factory are classified as:

Which of the following statements is incorrect?

Which of the following inventory accounts are maintained by a manufacturer? I. Stock of raw materials II. Stock of work in process III. Stock of finished goods

Raw materials inventory is:

The following issues must be resolved in accounting for factory overhead except for:

Work in process inventory is:

Which of the following is an example of a period cost?

Although the terms cost and expense are often used synonymously there is a difference between them. A cost can be an asset or an expense whereas an expense is:

A fixed cost is one that:

Accounting standard IAS 2/AASB 102 Inventories:

Any increase in unit product cost must result in a decreased profit margin if the selling price of the product cannot be:

The format for the cost of goods manufactured statement is direct materials + direct labour + factory overhead + __________ - ending work in process.

Direct material costs plus direct labour costs are known as:

Product costs need to be calculated by a manufacturer for which of the following purposes? Inventory Profit Management decision- Valuation determination making

Costs that remain constant per unit regardless of the level of output are known as:

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation, Disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Cost Accounting Systems

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

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