Deck 8: Accounting for Manufacturing

Question 1

How many of the following are reasons why managers need information on manufacturing costs?
I)Inventory valuation
Ii)Profit determination
Iii)Pricing
Iv)Future planning

A)1
B)2
C)3
D)4

Answer 1

D

Question 2

A fixed cost is one that:

A)Is the same per unit of production regardless of volume
B)Remain constant in total within the relevant production range
C)Increases on a per unit basis as volume increases
D)Does not rise as inflation changes

Answer 2

B

Question 3

Direct material costs plus direct labour costs are known as:

A)Prime costs
B)Conversion costs
C)Fixed costs
D)Period costs

Answer 3

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?

A)A service business
B)A manufacturer
C)A retailer
D)Partnership

Question 5

If projected factory overhead is $150 000 p.a.and projected direct labour hours are 30 000 hours p.a.,the overhead application rate is:

A)$5 per Direct labour Hour
B)$30 per Direct labour Hour
C)20c per Direct labour Hour
D)$150 000

Question 6

As manufacturing overhead costs cannot be traced to products a method must be developed for assigning them to products.Common bases for assignment are all of the following except:

A)Direct labour cost
B)Direct labour hours
C)Machine hours
D)Direct labour hours plus direct machine hours

Question 7

If total fixed costs are $25 000 what is the per unit overhead cost for R Co if 50 000 units are produced? Assume units of production are used as the basis for applying overhead to product.

A)$50
B)$5
C)$0.50
D)$0.05

Question 8

Costs which are not directly required to produce a product but are expensed in the income statement in the period in which they are incurred are called:

A)Product costs
B)Period costs
C)Variable costs
D)Fixed costs

Question 9

Issues that must be resolved in accounting for factory overhead are all of the following except:

A)The allocation of common costs between activities
B)The assignment of service department costs to production departments
C)How to assign factory overhead costs as product costs
D)How to calculate prime cost

Question 10

Which of these is an example of a product cost?

A)Assembly line worker's wages
B)General office printing and stationery
C)Interest expense
D)Depreciation of office furniture

Question 11

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

A)The related units are sold
B)The related units are produced
C)The costs are paid
D)The costs are incurred

Question 12

If expected factory overhead costs are $400 000 and expected direct labour hours are 40 000,what is the overhead application rate per direct labour hour?

A)$10
B)$100
C)$1 000
D)$16

Question 13

The correct statement is:

A)Items such as glue,nails and screws become part of the finished product but are usually classified as factory overhead
B)The cost of collecting debts from customers is classified as part of factory overhead
C)Power used for factory lighting and heating is classified as a period cost
D)Absorption costing splits up factory costs into product and period costs

Question 14

Which of these is not a product cost:

A)Factory power
B)Wages of factory workers
C)Material used in production
D)Advertising of a new product

Question 15

Direct labour costs plus factory overhead costs are known as:

A)Prime costs
B)Conversion costs
C)Direct costs
D)Variable costs

Question 16

Which of these is an example of a period cost?

A)Direct materials
B)Production supervisor's salary
C)Factory rent
D)Freight outwards

Question 17

Variable costs:

A)Remain constant in total regardless of the level of output
B)Increase per unit as output increases
C)Decrease per unit as output decreases
D)Remain constant per unit regardless of the level of output

Question 18

Which of these would normally be classified as direct materials?

Question 19

Applying overhead to products means:

A)Assigning the overhead on a basis that closely relates it to the work performed
B)Adding up the overhead
C)Directly tracing the overhead to products
D)Passing on the overhead costs to customers in the price charged

Question 20

Which of these statements is not correct?

A)An expense is the consumption or loss of resources that will result in a decrease in equity
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)Many costs eventually become expenses

Question 21

Mc Manufacturing reports the following information for a recent year.Determine the cost of

Question 22

For a manufacturing firm,at the end of the accounting period,all manufacturing costs are closed to the M________________ S_____________ ledger account.

Question 23

Before the application of overhead costs Veccio Corporation has the following costs traced to production: $$\begin{array} { c c c } & \text { Direct Materials } & \text { Direct Labour } \\\text { Charged to production } & \$ 30000 & \$ 40000\end{array}$$ Assuming that overhead is applied at the rate of 100% of direct labour cost what is the amount of inventory finished for the period assume no work in process ?

A)$30 000
B)$40 000
C)$80 000
D)$110 000

Question 24

The cost of a finished product consists of three basic elements: raw materials,d______________ l______________,and factory overhead.

Question 25

If budgeted overhead is $20,000 and estimated direct labour hours are 2000,the overhead recovery rate is $_________ per direct labour hour.

Question 26

In relation to the cost of goods manufactured report which is not a correct statement?

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

Question 27

Fixed costs per unit vary directly/inversely __________ with the level of activity.

Question 28

The factory office and the quality control departments are known as s_____________ departments and are considered to be part of the manufacturing process.

Question 29

For a manufacturer,if cost of goods manufactured is $652 000,stock of finished goods at start is $36 000 and stock of finished goods at end is $40 000,calculate the cost of sales.

A)$656 000
B)$648 000
C)$728 000
D)Cannot be calculated with the information available

Question 30

In comparing the income statement of a manufacturer and a retailer cost of goods manufactured takes the place of _________________ for a retailer.

Question 31

The correct statement is:

A)Manufacturing overhead costs are treated as period costs rather than product cost
B)GST is treated as a period cost
C)For a retailer all costs and expenses are treated as period costs
D)Product costs are included in inventory until the product is sold

Question 32

The correct statement concerning sustainable manufacturing is:

A)Manufacturing in a sustainable way always involves higher manufacturing costs
B)Recycling can occur within the production process or at the end of the product's useful life
C)Businesses in Australia have little interest in sustainable manufacturing
D)Businesses that operate sustainably make less profit than businesses that ignore sustainability

Question 33

When preparing a Cost of Goods Manufactured Statement from the following information the total cost of goods manufactured is:

Question 34

P_______________ costs are expensed in the income statement in the period when they are incurred.

Question 35

An overhead application rate is developed by dividing the estimated o_______________ costs by the basis used to measure estimated productive capacity.

Question 36

All manufacturing costs,except direct materials and direct labour,are included in factory _________________.

Question 37

Calculate product cost per unit. $$\begin{array} { l l } \text { Direct materials per unit } & \$ 50 \\\text { Direct labour per unit } & \$ 30\end{array}$$ Factory overhead applied at 2/3 of direct labour cost

A)$110
B)$100
C)$90
D)$80

Question 38

In the general ledger the accounts used to determine the cost of goods manufactured are closed to the manufacturing summary account which is then closed to the:

A)Income summary account
B)Cost of sales account
C)Gross profit account
D)Profit account

Question 39

These figures have been extracted from the trial balance of ABC Ltd for June 2011:
$\begin{array}{lr}\text { Direct Materials } & \$ 5000 \\\text { Light and Power Factory } & 14000 \\\text { Freight Outwards } & 2000 \\\text { Office Salaries } & 11000\\\text { Depreciation on Factory Plant } & 6000 \\\text { Directors' Fees } & 7000 \\\text { Salesmen's Commission } & 8000 \\\text { Factory Wages - Direct } & 30000 \\{\text { - Indirect }} & 10000\end{array}$
There was no opening or closing work in process. Total factory overhead expenses are:

A)$35 000
B)$30 000
C)$60 000
D)$20 000

Question 40

Deficiencies of using a periodic inventory system for a manufacturer increase with the number of products and production departments,consequently such a system can only be used satisfactorily by a s_______ manufacturing entity.