Deck 16: Cost Flows and Business Organizations

Question 1

Work-in-Process Inventory is debited when:

A) Direct materials are issued to production
B) Direct laborers have earned wages for production output
C) Manufacturing overhead is applied
D) All of these occur

Answer 1

D

Question 2

Work-in-Process Inventory is debited when:

A) Manufacturing overhead is applied
B) Indirect materials are used in production
C) Production is completed
D) All of these occur

Answer 2

A

Question 3

Which of the following is NOT critical to accurately measure product costs?

A) Allocate the appropriate amount of overhead costs to the correct product
B) Trace all period costs to the correct product
C) Trace all direct costs to the correct product
D) Track the product through the production process

Answer 3

B

Question 4

When a product is sold in a job order costing system, the costs associated with that product appear:

A) In finished goods inventory
B) On the income statement
C) On the balance sheet
D) None of these are correct

Question 5

A plant manager's salary is debited to:

A) Wages Expense
B) Work-in-Process
C) Manufacturing Overhead
D) Wages Payable

Question 6

The actual costs of indirect materials are:

A) Charged to products in the same manner as direct materials
B) Debited to Manufacturing Overhead
C) Insignificant, so they can be ignored in product costing
D) Credited to Manufacturing Overhead

Question 7

An estimate of the overhead that will be incurred for each unit is the:

A) Direct materials cost
B) Manufacturing overhead rate
C) Work-in-process inventory
D) Direct labor cost

Question 8

When materials are requisitioned from raw materials inventory, the journal entry includes:

A) A debit to Work-in-Process Inventory or Manufacturing Overhead
B) A debit to Work-in-Process Inventory only
C) A debit to Raw Materials Inventory
D) A debit to Manufacturing Overhead only

Question 9

Under job order costing, the journal entry made to record indirect labor cost includes a:

A) Debit to Wages Payable
B) Debit to Work-in-Process Inventory
C) Credit to Wages Payable
D) Credit to Manufacturing Overhead

Question 10

Which of the following would NOT properly be classified as manufacturing overhead?

A) Nails used to manufacture furniture
B) Custodial wages for factory custodians
C) Wood to manufacture cabinets
D) Insurance on factory

Question 11

The order of cost flow through the accounts in a manufacturing firm is:

A) Raw Materials, Work-in-Process, Cost of Goods Sold, Finished Goods
B) Raw Materials, Work-in-Process, Finished Goods, Cost of Goods Sold
C) Raw Materials, Finished Goods, Work-in-Process, Cost of Goods Sold
D) Work-in-Process, Raw Materials, Finished Goods, Cost of Goods Sold

Question 12

Which of the following is usually NOT a manufacturing cost?

A) Indirect labor
B) Inexpensive items such as glue and nails
C) Depreciation of machinery
D) Depreciation on a delivery truck

Question 13

Which of the following costs would NOT be classified as a product cost?

A) Cost of raw materials
B) Cost of labor for factory employees
C) Salary of the Vice President of Manufacturing
D) Salary of the Vice President of Finance

Question 14

After the completion of a product, the product costs are transferred to:

A) Work-in-process
B) Finished goods
C) Period costs
D) Manufacturing overhead

Question 15

When relatively inexpensive materials are requisitioned by the production department,

A) Raw Materials Inventory should be debited
B) Manufacturing Overhead should be credited
C) Work-in-Process Inventory should be debited
D) Manufacturing Overhead should be debited

Question 16

Which of the following is NOT a period cost?

A) Sales salaries
B) Delivery cost of finished goods
C) Plant manager's salary
D) Administrative utilities

Question 17

Which of the following is NOT a part of job order costing?

A) Specifically trace the direct costs to each product
B) Identify the product that needs cost measurement
C) Allocate selling costs to the product
D) Allocate an appropriate amount of overhead to the product

Question 18

The journal entry to apply manufacturing overhead to products includes a debit to:

A) Manufacturing Expense
B) Manufacturing Overhead
C) Work-in-Process Inventory
D) Finished Goods Inventory

Question 19

Which of the following is one of the three types of product costs?

A) Manufacturing overhead
B) Period costs
C) Selling and administrative costs
D) Job order costs

Question 20

Raw Materials Inventory is debited:

A) When raw materials are purchased
B) When raw materials are used in production
C) When raw materials are requisitioned by a production department
D) None of these are correct

Question 21

Exhibit 16-1 Jack Corporation used a job order costing system to account for jobs in its construction division. During April, the following transactions occurred:
Refer to Exhibit 16-1. Given the information above, the entry to record the purchase of the $4,000 of lumber would include a:

A) Debit to Work-in-Process Inventory of $4,000
B) Credit to Cash of $4,000
C) Credit to Raw Materials Inventory of $4,000
D) Credit to Accounts Payable of $4,000

Question 22

The Colonial Company produces porcelain collectibles. In August, the molding department had a beginning work-in-process inventory of $16,800. Costs added during August totaled $79,200 (direct materials $43,200; conversion costs $36,000). At the end of the month, the ending work-in-process inventory value was $14,400. Assuming that Colonial Company uses job order costing, the cost of goods completed and transferred to the next department (glazing) in August was:

A) $62,400
B) $64,800
C) $79,200
D) $81,600

Question 23

Exhibit 16-1 Jack Corporation used a job order costing system to account for jobs in its construction division. During April, the following transactions occurred:
Refer to Exhibit 16-1. Given the information above, the entry to record the depreciation on construction equipment would include a:

A) Credit to Depreciation Expense of $1,600
B) Debit to Manufacturing Overhead of $1,600
C) Debit to Work-in-Process Inventory of $1,600
D) Credit to Manufacturing Overhead of $1,600

Question 24

What type of transaction is represented in the following entry?

A) Materials were purchased
B) Direct materials were requisitioned for the production department
C) Direct labor costs were incurred
D) Indirect materials were requisitioned for the production department

Question 25

If ending Work-in-Process Inventory is understated,

A) Finished Goods Inventory will be understated
B) Cost of Goods Sold will be overstated
C) Manufacturing Overhead will be overapplied
D) Cost of Goods Sold will be understated

Question 26

If direct labor time is charged to the wrong job number, that job will:

A) Appear more profitable than it should
B) Appear less profitable than it should
C) Report the correct profitability
D) None of these are correct

Question 27

The amount of manufacturing overhead predicted for the next period is known as:

A) Overapplied manufacturing overhead
B) Actual manufacturing overhead
C) Estimated manufacturing overhead
D) Underapplied manufacturing overhead

Question 28

Product costs assigned to jobs are:

A) Applied costs for direct materials and direct labor, but actual costs for manufacturing overhead
B) Actual costs for direct materials and direct labor, but applied costs for manufacturing overhead
C) Actual costs for direct materials, direct labor, and manufacturing overhead
D) Applied costs for direct materials, direct labor, and manufacturing overhead

Question 29

Predetermined overhead rates are used because:

A) Total manufacturing overhead costs are not known until year-end
B) Manufacturing overhead benefits many products and therefore cannot be directly assigned
C) Both total manufacturing overhead costs are not known until year-end and manufacturing overhead benefits many products and therefore cannot be directly assigned
D) Neither total manufacturing overhead costs are not known until year-end nor manufacturing overhead benefits many products and therefore cannot be directly assigned

Question 30

A debit to Work-in-Process Inventory is sometimes accompanied by a credit to:

A) Accumulated Depreciation
B) Indirect Wages Expense
C) Manufacturing Overhead
D) None of these are correct

Question 31

Exhibit 16-1 Jack Corporation used a job order costing system to account for jobs in its construction division. During April, the following transactions occurred:
Refer to Exhibit 16-1. Given the information above, the entry to record the direct labor costs of $8,000 includes a:

A) Debit to Wages Expense of $8,000
B) Debit to Manufacturing Overhead of $8,000
C) Debit to Work-in-Process Inventory of $8,000
D) Credit to Work-in-Process Inventory of $8,000

Question 32

Work-in-Process Inventory is credited when:

A) Manufactured goods are sold
B) Manufactured goods are completed
C) Raw materials are used in production
D) Closing entries are made

Question 33

Finished Goods Inventory is debited when:

A) Manufactured goods are completed
B) Manufactured goods are sold
C) Direct labor is used in production
D) Manufacturing overhead is applied

Question 34

If a company uses job order costing, the amount transferred from Work-in-Process Inventory to Finished Goods Inventory is equal to the cost of goods:

A) Sold during the period
B) Completed during the period
C) Completed and sold during the period
D) Placed in production during the period

Question 35

When recording depreciation for manufacturing equipment, the entry should be:

A) Debit to Depreciation Expense, Credit to Accumulated Depreciation
B) Debit to Manufacturing Overhead, Credit to Depreciation Expense
C) Debit to Accumulated Depreciation, Credit to Manufacturing Overhead
D) Debit to Manufacturing Overhead, Credit to Accumulated Depreciation

Question 36

Exhibit 16-1 Jack Corporation used a job order costing system to account for jobs in its construction division. During April, the following transactions occurred:
Purchased $\$ 4,000$ of lumber (raw materials) on account. Incurred direct labor costs of $\$ 8,000$ .
Depreciation on construction equipment of $\$ 1,600$ was recorded.
A house that was completed in March at a cost of $\$ 160,000$ was sold for $\$ 184,000$ .

-Refer to Exhibit 16-1. Given the information above, the entry to record the sale of the house would include a:

A) Debit to Cost of Goods Sold
B) Debit to Finished Goods Inventory
C) Debit to Work-in-Process Inventory
D) Credit to Cash

Question 37

Which of the following costs is included in manufacturing overhead?

A) Indirect materials
B) Plant depreciation
C) Rent on a manufacturing facility
D) All of these are manufacturing overhead costs

Question 38

Manufacturing overhead is difficult to connect to products for all but which of the following reasons?

A) Manufacturing overhead costs are not related to the flow of production
B) The accounting system is not set up to separate manufacturing overhead from administrative costs
C) Total costs are not known until the end of the period
D) It is not easily connected to specific products

Question 39

Which entry traces direct materials, direct labor and manufacturing overhead costs onto the income statement:

A) Finished Goods xxx Work in Process xxx
B) Raw Materials xxx Accounts Payable xxx
C) Costs of Goods Sold xxx Finished Goods xxx
D) Work in Process xxx Raw Materials xxx

Question 40

The formula for the predetermined overhead rate is:

A) Applied overhead ¸ actual overhead
B) Estimated overhead ¸ estimated activity level
C) Actual overhead ¸ estimated overhead
D) Actual overhead ¸ actual activity level

Question 41

Assuming that actual manufacturing overhead costs for Colorado Iron Company are $10,000 for cutting; $14,000 for shaping; and $6,000 for finishing; and applied manufacturing overhead is $11,400 for cutting; $11,000 for shaping; and $6,600 for finishing, what is the amount of over- or underapplied overhead?

A) $1,000 overapplied
B) $1,000 underapplied
C) $400 overapplied
D) $400 underapplied

Question 42

The most accurate method of eliminating under- or overapplied manufacturing overhead is to:

A) Close it to Cost of Goods Sold
B) Close it to Cost of Goods Manufactured
C) Allocate it to the different inventory accounts and Cost of Goods Sold
D) Close it to Miscellaneous Expense

Question 43

If manufacturing overhead is applied on the basis of machine hours and actual machine hours are more than anticipated, which of the following is true?

A) Manufacturing overhead is probably overapplied
B) Manufacturing overhead is probably underapplied
C) Actual manufacturing overhead equals applied manufacturing overhead
D) None of these are correct

Question 44

If overapplied manufacturing overhead is closed to Cost of Goods Sold, the journal entry would include a debit to:

A) Cost of Goods Sold
B) Manufacturing Overhead
C) Finished Goods
D) Work-in-Process Inventory

Question 45

Exhibit 16-2 Dietrich Company has the following data for August:
Refer to Exhibit 16-2. Given the information above, which manufacturing overhead rate results in the least amount of over- or underapplied overhead?

A) 80% of direct labor costs
B) $4.50 per direct labor hour
C) $7 per machine hour
D) 100% of direct labor costs

Question 46

Exhibit 16-2 Dietrich Company has the following data for August:
Refer to Exhibit 16-2. Given the information above, if manufacturing overhead is applied at the rate of $7 per machine hour, overhead for August is:

A) $2,000 overapplied
B) $2,000 underapplied
C) $3,000 overapplied
D) $4,000 underapplied

Question 47

The manufacturing overhead account is credited when:

A) Manufacturing overhead is applied to a job or product
B) Actual manufacturing overhead costs are recorded
C) Manufacturing overhead is estimated
D) A predicted overhead rate is calculated

Question 48

Smorgasbord Inc. estimated the following for 2012: The overhead rate for the finishing department is determined on the basis of labor hours. Using the data above, what is the predetermined overhead rate for the finishing department?

A) $2.00
B) $3.56
C) $4.00
D) $5.33

Question 49

Smorgasbord Inc. estimated the following for 2012: The overhead rate for the cutting department is determined on the basis of machine hours. Using the data above, what is the predetermined overhead rate for the cutting department?

A) $2.40
B) $4.00
C) $4.50
D) $6.00

Question 50

Which of the following is NOT true about cost of goods manufactured?

A) Shows total cost of items completed during the period
B) Includes some costs incurred in prior periods
C) Includes only current period costs
D) Includes most costs incurred during the period

Question 51

If manufacturing overhead is applied on the basis of direct labor hours and if actual hours worked are less than anticipated, which of the following is true?

A) Manufacturing overhead is probably overapplied
B) Manufacturing overhead is probably underapplied
C) Applied manufacturing overhead equals actual manufacturing overhead
D) None of these are correct

Question 52

Costs incurred to manufacture goods during a period can be found in:

A) A cost of goods sold account
B) A cost of goods manufactured schedule
C) Income statement
D) Balance sheet

Question 53

California Company uses a predetermined overhead rate of $3.50 per machine hour based on an estimate of 50,000 machine hours for the year. The estimated manufacturing overhead cost for the period for The Club is:

A) $15,000
B) $80,000
C) $120,000
D) $175,000

Question 54

Which of the following is NOT true about total manufacturing costs?

A) Includes new manufacturing costs incurred during the period
B) Represents the level of production during the period
C) Includes raw materials, direct labor, and manufacturing overhead costs
D) Reflects changes in finished goods inventory

Question 55

Exhibit 16-2 Dietrich Company has the following data for August:
Refer to Exhibit 16-2. Given the information above, if manufacturing overhead is applied at the rate of $4.50 per direct labor hour, overhead for August is:

A) $1,500 overapplied
B) $2,000 overapplied
C) $1,500 underapplied
D) $2,000 underapplied

Question 56

Exhibit 16-2 Dietrich Company has the following data for August:
Refer to Exhibit 16-2. Given the information above, if manufacturing overhead is applied at the rate of 80% of direct labor cost, overhead for August is:

A) $1,000 overapplied
B) $1,000 underapplied
C) $5,000 overapplied
D) $5,000 underapplied

Question 57

Which of the following statements is true?

A) Actual overhead costs are entered as credits to Manufacturing Overhead
B) Manufacturing Overhead is debited when overhead is applied
C) When the credit balance in Manufacturing Overhead exceeds the debit balance in Manufacturing Overhead, manufacturing overhead has been underapplied
D) When the debit balance in Manufacturing Overhead exceeds the credit balance in Manufacturing Overhead, manufacturing overhead has been underapplied

Question 58

Rex Company's manufacturing overhead was overapplied by $10,000 in July. Estimated overhead was $755,000, and actual overhead was $752,000. The amount of overhead applied for May was:

A) $742,000
B) $745,000
C) $762,000
D) $765,000

Question 59

Before any journal entries are made to deal with underapplied overhead, the total cost of jobs is:

A) Not affected
B) Overstated
C) Understated
D) None of these are correct

Question 60

Work-in-Process Inventory for Wendall Productions has a balance of $2,600 at the end of the accounting period. The cost summaries for the uncompleted jobs showed direct materials of $1,200 and direct labor of $800. Wendall applies manufacturing overhead on the basis of direct labor cost. The company's predetermined overhead rate is:

A) $0.50 per direct labor dollar
B) $0.65 per direct labor dollar
C) $0.75 per direct labor dollar
D) $1.00 per direct labor dollar

Question 61

Delaware Manufacturing had the following information for March 2012: Based on this information, the cost of goods manufactured is:

A) $309,120
B) $320,640
C) $326,400
D) $352,320

Question 62

For 2012, Fli-Hi Woods' end-of-year information is as follows: Based on this information, the cost of goods manufactured for Fli-Hi Woods is:

A) $75,480
B) $77,160
C) $78,840
D) $82,200

Question 63

The most significant similarity between service companies and manufacturing companies is that both will likely have a significant amount of:

A) Raw materials
B) Direct labor
C) Finished goods
D) All of these are correct

Question 64

The schedule of cost of goods manufactured for the Cutler Company shows the following balances for the year ended July 31, 2012: The beginning work-in-process inventory was:

A) $30,000
B) $220,000
C) $260,000
D) $635,000

Question 65

For June 2012, Mitsumi Exports' beginning work-in-process inventory is $1,000, ending work-in-process inventory is $3,000, and cost of goods manufactured is $34,000. What are the total manufacturing costs for June?

A) $31,000
B) $32,000
C) $35,000
D) $36,000

Question 66

Waterbed Factory has the following information for 2012: Based on this information, the cost of goods manufactured is:

A) $91,300
B) $92,200
C) $93,100
D) $95,200

Question 67

When comparing a service company to a manufacturing company, the service company is less likely to have:

A) Direct labor
B) Overhead costs
C) Work-in-process services
D) Raw materials

Question 68

In the cost of goods sold calculation, overapplied manufacturing overhead is usually:

A) Added to unadjusted cost of goods sold
B) Subtracted from unadjusted cost of goods sold
C) Not used to calculate cost of goods sold
D) Shown separately on the income statement

Question 69

Famous Furniture Manufacturing Company reported the following information for 2012: Famous Furniture Manufacturing Company's cost of goods manufactured for the year is:

A) $308,700
B) $333,200
C) $357,700
D) $392,700

Question 70

Exhibit 16-3 Garret Manufacturing Company's accounting records reflect the following inventories:
During 2012, $75,000 of raw materials were purchased, direct labor costs amounted to $90,000, and manufacturing overhead incurred was $120,000.
Refer to Exhibit 16-3. Garret Manufacturing Company's total manufacturing costs incurred in 2012 amounted to:

A) $270,000
B) $273,000
C) $348,000
D) $381,000

Question 71

Nester Company recorded the following data for 2012: Additional data:
If raw materials costing $65,000 were purchased during the year, the total manufacturing costs for 2012 would be:

A) $322,400
B) $325,000
C) $327,600
D) $332,800

Question 72

The formula for total manufacturing costs is:

A) Raw materials used + Direct labor costs + Applied manufacturing overhead
B) Raw materials purchased + Direct labor costs + Applied manufacturing overhead
C) Raw materials used + Direct labor costs + Actual manufacturing overhead
D) Raw materials purchased + Direct labor costs + Actual manufacturing overhead

Question 73

The manufacturing operations of Sentinel Company had the following inventory balances for 2012: If Sentinel purchased $90,000 of raw materials during the year, the cost of raw materials used during 2012 would be:

A) $80,000
B) $85,000
C) $110,000
D) $190,000

Question 74

The management process in a service organization is much like that of a(n):

A) Manufacturing company
B) Merchandising company
C) E-merchant
D) None of these are correct

Question 75

The manufacturing operations of Beam Company had the following inventory balances for 2012: If Beam's cost of goods manufactured for 2012 was $152,000, what was Beam's cost of goods sold for the year?

A) $120,000
B) $152,000
C) $172,000
D) $184,000

Question 76

Which of the following would NOT be found on a cost of goods manufactured schedule?

A) Raw materials purchased
B) Ending work-in-process inventory
C) Applied manufacturing overhead
D) Finished goods inventory

Question 77

The following information is taken from the records of Minnesota Company for the year ended January 31, 2012: The amount of beginning work-in-process inventory is:

A) $0
B) $16,000
C) $24,000
D) $64,000

Question 78

Which of the following inventory balances is NOT needed when preparing a cost of goods manufactured schedule?

A) Work-in-process beginning inventory balance
B) Work-in-process ending inventory balance
C) Finished goods beginning inventory balance
D) Raw materials ending inventory balance

Question 79

Exhibit 16-3 Garret Manufacturing Company's accounting records reflect the following inventories:
During 2012, $75,000 of raw materials were purchased, direct labor costs amounted to $90,000, and manufacturing overhead incurred was $120,000.
Refer to Exhibit 16-3. Garret Manufacturing Company's cost of goods sold for the year 2012 is:

A) $201,000
B) $219,000
C) $231,000
D) $279,000

Question 80

Michigan Motors has a beginning finished goods inventory of $81,600, cost of raw material purchases of $106,800, cost of goods manufactured of $176,400, and an ending finished goods inventory of $92,400. The cost of goods sold for this company is:

A) $96,000
B) $165,600
C) $208,800
D) $258,000