Deck 16: Cost Accounting Systems

Question 1

In a job order costing system, direct labour hours are controlled by a:

A) ledger account.
B) time sheet.
C) purchases journal.
D) inventory record.

Answer 1

time sheet.

Question 2

After all postings have been completed, the sum of the balances in the Raw materials subsidiary ledger should equal the:

A) balance in the Raw materials inventory control account.
B) cost of materials charged to Work in process inventory.
C) cost of materials purchased.
D) cost of the materials placed into production.

Answer 2

balance in the Raw materials inventory control account.

Question 3

Which of the following shows entries only to control accounts?

A)

B)

C)

D)

Answer 3

Question 4

Factory labour costs are transferred into:

A) direct materials account.
B) overhead applied account.
C) work in process inventory.
D) purchases.

Question 5

Direct labour costs include:

A) depreciation.
B) insurance expense.
C) factory labour incurred.
D) repairs expense.

Question 6

The entry to record the acquisition of raw materials on account is:

A)

B)

C)

D)

Question 7

A materials requisition slip showed that direct materials requested were $30,000 and indirect materials requested were $6,000. The entry to record the transfer of materials from the storeroom is:

A)

B)

C)

D)

Question 8

The predetermined overhead rate may be computed using all of the following activity bases except:

A) direct labour costs.
B) direct labour hours.
C) machine hours.
D) indirect labour costs.

Question 9

At the end of each month, the sum of the costs shown on the job cost sheets should equal the balance in:

A) Cost of sales.
B) Finished goods inventory.
C) Manufacturing overhead.
D) Work in process inventory.

Question 10

Manufacturing overhead over or under applied is transferred to:

A) Cost of goods manufactured.
B) Manufacturing overhead.
C) Finished goods inventory.
D) Cost of sales.

Question 11

In service entities that use job order costing:

A) fewer direct materials are used.
B) direct materials are never used.
C) direct materials is always a major component of the product cost.
D) less direct materials are used.

Question 12

Price Manufacturing assigns overhead based on machine hours. Department A logs 600 machine hours and Department B shows 1200 machine hours for the period. If the overhead rate is $10 per machine hour, the entry to assign overhead will show a:

A) debit to Manufacturing overhead applied for $18,000.
B) credit to Work in process - department B for $12,000.
C) debit to Work in process for $12,000.
D) credit to Manufacturing overhead applied for $18,000.

Question 13

The measure of work done during a period, expressed in fully completed units is:

A) equivalent units.
B) weighted average units.
C) work in process inventory.
D) standardised units.

Question 14

3,000 units in a process that are 70% complete, are referred to as:

A) 3,000 equivalent units of production.
B) 900 equivalent units of production.
C) 2,100 equivalent units of production.
D) 900 unequal units of production.

Question 15

River Ltd had the following department data:
Materials are added at the beginning of the process. What is the total number of equivalent units for materials in July?

A) 27,000.
B) 30,000.
C) 42,000.
D) 36,000.

Question 16

An example of a common cost that generally cannot be traced to an individual product is:

A) direct labour.
B) direct material.
C) raw material.
D) overhead.

Question 17

One of Dale Ltd's activity cost pools is machine set-ups, with estimated overhead of $300,000. Dale produces flares (400 set-ups) and health packs (600 set-ups). How much of the machine set-up cost pool should be assigned to flares?

A) $0.
B) $120,000.
C) $150,000.
D) $180,000.

Question 18

The presence of any of the following factors would suggest a switch to activity based costing except when:

A) product lines differ greatly in volume.
B) overhead costs constitute a minor portion of total costs.
C) the manufacturing process has changed significantly.
D) production managers are ignoring data provided by the existing system.

Question 19

A benefit of the just-in-time processing system is that it:

A) minimises inventory storage problems.
B) increases waiting time for operations.
C) maximises inventory insurance costs.
D) maintains excessive inventory levels.

Question 20

A selected list of accounts used by Walker Manufacturing Ltd follows:
Walker Manufacturing Ltd uses a job order system and maintains perpetual inventory records.
Instructions: Place the appropriate code letter in the columns indicating the appropriate account(s) to be debited and credited for the transactions listed below.

Question 21

Selected accounts of Morrison Ltd at year end appear below:
Instructions: Explain the probable transaction that took place for each of the items identified by letters in the accounts.
For example: (a) Raw materials costing $40,000 were purchased.

Question 22

The gross earnings of factory workers for Lee Ltd during the month of January are $100,000. The employer's payroll taxes for the factory payroll are $12,000. Of the total accumulated cost of factory labour, 75% is related to direct labour and 25% is attributable to indirect labour.
Instructions :
(a) Prepare the entry to record the factory labour costs for the month of January.
(b) Prepare the entry to assign factory labour to production.
(c) Prepare the entry to assign manufacturing overhead to production, assuming the predetermined overhead rate is 125% of direct labour cost.

Question 23

Jagger Ltd uses a job order cost accounting system. On April 1, the company has Work in process inventory of $7,600 and two jobs in process: job no. 221, $3,600, and job no. 222, $4,000. During April, a summary of source documents reveals the following:
Jagger applies manufacturing overhead to jobs at an overhead rate of 60% of direct labour cost. Job no. 221 is completed during the month.
Instructions :
(a) Prepare summary journal entries to record the raw materials requisitioned, factory labour used, the assignment of manufacturing overhead to jobs, and the completion of job no. 221.
(b) Calculate the balance of the Work in process inventory account at 30 April.

Question 24

Paige Ltd had the following transactions during its first month of operations:
1. Purchased raw materials on account, $85,000.
2. Raw materials of $30,000 were requisitioned to the factory. An analysis of the materials requisition slips indicated that $6,000 was classified as indirect materials.
3. Factory labour costs incurred were $95,000 of which $84,000 pertained to factory wages payable and $11,000 pertained to employer payroll taxes payable.
4. Time tickets indicated that $80,000 was direct labour and $15,000 was indirect labour.
5. Overhead costs incurred on account were $96,000.
6. Manufacturing overhead was applied at the rate of 150% of direct labour cost.
7. Goods costing $115,000 are still incomplete at the end of the month; the other goods were completed and transferred to finished goods.
8. Finished goods costing $90,000 to manufacture were sold on account for $120,000.
Instructions: Journalise the above transactions for Paige Ltd.

Question 25

Plant Ltd employs a job order cost accounting system and keeps perpetual inventory records. The following transactions occurred in the first month of operations:
1. 2. 3. Manufacturing overhead was applied to jobs worked on using a predetermined overhead rate based on 75% of direct labour costs.
4. Actual manufacturing overhead costs incurred during the month amounted to $66,000.
5. Job 101 consisting of 1000 units and Job 103 consisting of 200 units were completed during the month.
Instructions:
(a) Prepare journal entries to record the above transactions.
(b) Answer the following:
1. How much manufacturing overhead was applied to job 103 during the month?
2. Compute the unit cost of jobs 101 and 103.
3. What is the balance in Work in process inventory at the end of the month?
4. Determine if manufacturing overhead was under- or over-applied during the month. By how much?

Question 26

The following information is available for Simmonds Ltd at 31 December 2018:
1. 2. Debit postings to Work in process inventory during the year were:
3. Sales totalled $350,000 for the year.
Instructions:
(a) Prepare a condensed cost of goods manufactured schedule.
(b) Prepare an income statement for the year through gross profit.

Question 27

Whelands Manufacturing Ltd produces a product in two departments: (1) Mixing and (2) Finishing. The company uses a process cost accounting system.
(a) Purchased raw materials for $50,000 on account.
(b) Raw materials requisitioned for production were:
(c) Incurred labour costs of $64,000.
(d) Factory labour used:
(e) Manufacturing overhead is applied to the product based on machine hours used in each department:
Mixing department - 400 machine hours at $30 per machine hour.
Finishing department - 500 machine hours at $20 per machine hour.
(f) Units costing $56,000 were completed in the Mixing Department and were transferred to the Finishing Department.
(g) Units costing $60,000 were completed in the Finishing Department and were transferred to finished goods.
(h) Finished goods costing $30,000 were sold on account for $45,000.
Instructions
: Prepare the journal entries to record the preceding transactions for Whelands Manufacturing Ltd.

Question 28

Match the items below by choosing the appropriate code letter :

-Used to apply manufacturing overhead to jobs.

A)Cost accounting
B)Materials requisition slip
C)TimeTicket
D)Cost accounting system
E) Job order cost system
F)Process cost system
G)Job cost sheets
H)Predetermined overhead rate

Question 29

Match the items below by choosing the appropriate code letter :

-Measures, records and reports product costs.

A)Cost accounting
B)Materials requisition slip
C)TimeTicket
D)Cost accounting system
E) Job order cost system
F)Process cost system
G)Job cost sheets
H)Predetermined overhead rate

Question 30

Match the items below by choosing the appropriate code letter :

-Manufacturing cost accounts are fully integrated into the general ledger.

A)Cost accounting
B)Materials requisition slip
C)TimeTicket
D)Cost accounting system
E) Job order cost system
F)Process cost system
G)Job cost sheets
H)Predetermined overhead rate

Question 31

Match the items below by choosing the appropriate code letter :

-Source document that authorises the issue of raw materials to production.

A)Cost accounting
B)Materials requisition slip
C)TimeTicket
D)Cost accounting system
E) Job order cost system
F)Process cost system
G)Job cost sheets
H)Predetermined overhead rate

Question 32

Match the items below by choosing the appropriate code letter :

-Appropriate when products have distinguishing and heterogeneous features.

A)Cost accounting
B)Materials requisition slip
C)TimeTicket
D)Cost accounting system
E) Job order cost system
F)Process cost system
G)Job cost sheets
H)Predetermined overhead rate

Question 33

Match the items below by choosing the appropriate code letter :

-Constitute a subsidiary ledger for Work in process inventory.

A)Cost accounting
B)Materials requisition slip
C)TimeTicket
D)Cost accounting system
E) Job order cost system
F)Process cost system
G)Job cost sheets
H)Predetermined overhead rate

Question 34

Match the items below by choosing the appropriate code letter :

-Indicates number of hours that employees work and the account to be charged.

A)Cost accounting
B)Materials requisition slip
C)TimeTicket
D)Cost accounting system
E) Job order cost system
F)Process cost system
G)Job cost sheets
H)Predetermined overhead rate

Question 35

Match the items below by choosing the appropriate code letter :

-Appropriate when products are homogeneous and are produced continuously.

A)Cost accounting
B)Materials requisition slip
C)TimeTicket
D)Cost accounting system

Question 36

Match the items below by choosing the appropriate code letter :

-A summary of both production quantity and cost data for a production department.

A)Equivalent units of production
B)Total units accounted for
C)Production cost report
D)Units transferred out
E)Weighted average method
F)Physical units
G)Unit production costs
H)Total manufacturing cost per unit

Question 37

Match the items below by choosing the appropriate code letter :

-Work done during a period expressed in fully completed units.

A)Equivalent units of production
B)Total units accounted for
C)Production cost report
D)Units transferred out
E)Weighted average method
F)Physical units
G)Unit production costs
H)Total manufacturing cost per unit

Question 38

Match the items below by choosing the appropriate code letter :

-Considers the degree of completion of the units completed and transferred out and the ending work in process.

A)Equivalent units of production
B)Total units accounted for
C)Production cost report
D)Units transferred out
E)Weighted average method
F)Physical units
G)Unit production costs
H)Total manufacturing cost per unit

Question 39

Match the items below by choosing the appropriate code letter :

-Actual units to be accounted for during a period, irrespective of any work performed.

A)Equivalent units of production
B)Total units accounted for
C)Production cost report
D)Units transferred out
E)Weighted average method
F)Physical units
G)Unit production costs
H)Total manufacturing cost per unit

Question 40

Match the items below by choosing the appropriate code letter :

-Units transferred out during the period plus units in ending work in process.

A)Equivalent units of production
B)Total units accounted for
C)Production cost report
D)Units transferred out
E)Weighted average method
F)Physical units
G)Unit production costs
H)Total manufacturing cost per unit

Question 41

Match the items below by choosing the appropriate code letter :

-Unit materials cost plus unit conversion cost.

A)Equivalent units of production
B)Total units accounted for
C)Production cost report
D)Units transferred out
E)Weighted average method
F)Physical units
G)Unit production costs
H)Total manufacturing cost per unit

Question 42

Match the items below by choosing the appropriate code letter :

-Total units accounted for minus units in ending work in process.

A)Equivalent units of production
B)Total units accounted for
C)Production cost report
D)Units transferred out
E)Weighted average method
F)Physical units
G)Unit production costs
H)Total manufacturing cost per unit

Question 43

Match the items below by choosing the appropriate code letter :

-Costs expressed in terms of equivalent units of production.

A)Equivalent units of production
B)Total units accounted for
C)Production cost report
D)Units transferred out
E)Weighted average method
F)Physical units
G)Unit production costs
H)Total manufacturing cost per unit

Question 44

Match the items below by choosing the appropriate code letter :

-Allocates overhead to multiple activity cost pools, then assigns the activity cost pools to products.

A)Cost driver
B)Facility-level activity
C)Unit-level activity
D)Activity-based costing
E)Batch-level activity
F)Product-level activity
G)Non-value-added activity
H)Value-added activity

Question 45

Match the items below by choosing the appropriate code letter :

-An activity that has a direct cause-effect relationship with the resources consumed.

A)Cost driver
B)Facility-level activity
C)Unit-level activity
D)Activity-based costing
E)Batch-level activity
F)Product-level activity
G)Non-value-added activity
H)Value-added activity

Question 46

Match the items below by choosing the appropriate code letter :

-Increases the worth of a product or service to customers.

A)Cost driver
B)Facility-level activity
C)Unit-level activity
D)Activity-based costing
E)Batch-level activity
F)Product-level activity
G)Non-value-added activity
H)Value-added activity

Question 47

Match the items below by choosing the appropriate code letter :

-Should be eliminated or reduced.

A)Cost driver
B)Facility-level activity
C)Unit-level activity
D)Activity-based costing
E)Batch-level activity
F)Product-level activity
G)Non-value-added activity
H)Value-added activity

Question 48

Match the items below by choosing the appropriate code letter :

-Plant management.

A)Cost driver
B)Facility-level activity
C)Unit-level activity
D)Activity-based costing
E)Batch-level activity
F)Product-level activity
G)Non-value-added activity
H)Value-added activity

Question 49

Match the items below by choosing the appropriate code letter :

-Engineering changes.

A)Cost driver
B)Facility-level activity
C)Unit-level activity
D)Activity-based costing
E)Batch-level activity
F)Product-level activity
G)Non-value-added activity
H)Value-added activity

Question 50

Match the items below by choosing the appropriate code letter :

-Equipment set-ups.

A)Cost driver
B)Facility-level activity
C)Unit-level activity
D)Activity-based costing
E)Batch-level activity
F)Product-level activity
G)Non-value-added activity
H)Value-added activity

Question 51

Match the items below by choosing the appropriate code letter :

-Assembling.

A)Cost driver
B)Facility-level activity
C)Unit-level activity
D)Activity-based costing
E)Batch-level activity
F)Product-level activity
G)Non-value-added activity
H)Value-added activity

Question 52

Ethics: Miniature Magic Ltd. manufactures dollhouses in a continuous process. Various customising features and furnishings are added at the end of the process to create the various models that are sold. The basic design and floor plans of all the houses are identical, however.
During the most recent month, the lumber used in trimming the houses was inadvertently recorded as direct materials. At month end, when the error was discovered, Susan Long, the accountant, was told by the accounting manager, Tina Barr, not to bother with correcting the error, because the dollar amount of the error was not 'worth it.' Susan believes that the dollar amount is not as important as the quality of the reports. She wonders whether she would be committing an unethical act if she were to make the changes anyway, despite her superior's telling her not to.
Required:
1. Who are the stakeholders in this situation?
2. Was it unethical for the company to ask that the error not be corrected? Explain briefly.
3. Would it be unethical for Susan to correct the error? Explain briefly.