Cost Accumulation Systems MCQs

A metal fabricating company uses a job-order cost system. The company expects to have small residual pieces of metal cuttings and shavings from all of...

Debit direct materials quantity variance for $1,200 (800 lbs. at $1.50/lb.) and credit work-in-process inventory control for $1,200, with postings to each job from which the scrap metal was recovered.
Debit scrap inventory for $280 (800 lbs. at $.35/lb.) and credit factory overhead control for $280.
For materiality reasons, no entry is made until the scrap metal is sold. At that time, debit cash and credit factory overhead control for the quantity sold at the current market price.
Debit direct materials quantity variance for $1,200 (800 lbs. at $1.50/lb.) and credit factory overhead control for $1,200 at the time of recovery, and when the scrap is sold, debit cash and credit direct materials quantity variance for the quantity sold at the current market price.

Kepler Optics makes lenses for telescopes. Because Kepler will only sell lenses of the highest quality, the normal spoilage during a reporting period...

700 units.
1,000 units.
1,700 units.
3,200 units.

A manufacturing firm may experience both normal and abnormal spoilage in its operations. The costs of both normal and abnormal spoilage are accounted...

Assigned to the good units transferred to finished goods.
Allocated between the units transferred to finished goods and those remaining in work-in-process.
Charged to the manufacturing overhead control account.
Charged to a special abnormal spoilage loss account.

What is the journal entry to record the purchase of materials on account?

Raw materials inventory $XX Accounts payable $XX
Accounts payable $XX Raw materials inventory $XX
Accounts receivable $XX Accounts payable $XX
Raw materials inventory $XX Cash $XX

Darden Manufacturing, a calendar-year corporation, had $17,000 of spoilage during April that production management characterized as abnormal. The spo...

Increase No effect
Increase Decrease
No effect Decrease
No effect Not enough information to judge

A specialty instrument manufacturer is in the process of establishing a cost system. The company produces machines that are unique and distinctive. T...

Backflush costing.
Batch-level costing
Job-order costing.
Process costing.

During the production of its single product, a company discovers that an unusual overnight power failure ruined an entire day’s in-process productio...

Added to the cost of future good units produced.
Written off as a loss.
Added to the cost of the next day’s production.c
Added to general factory overhead.

Trout Company manufactures a single product. During the manufacturing process, a small number of units do not pass final inspection and are destroyed....

Added to the cost of good units produced.
Ignored as immaterial.
Expensed as incurred.
Added to the cost of warranties.

A company that uses a process costing system inspects its goods at the 60% stage of completion. If the firmâ€™s ending work-in-process inventory...

Both normal and abnormal spoilage costs would be added to the cost of the good units completed during the period.
Both normal and abnormal spoilage costs would be written off as an expense of the period.
Normal spoilage costs would be added to the cost of the good units completed during the period; in contrast, abnormal spoilage costs would be written off as a loss.
Normal spoilage costs would be allocated between the cost of good units completed during the period and the ending work-in-process inventory. In contrast, abnormal spoilage costs would be written off as a loss.

When considering normal and abnormal spoilage, which one of the following is theoretically the best accounting method for spoilage in a process-costi...

Both normal and abnormal spoilage cost should be charged to a separate expense account.
Normal spoilage cost should be charged to good units and abnormal spoilage cost should be charged to a separate expense account.
Both normal and abnormal spoilage costs should be charged to good units.
Normal spoilage costs should be charged to a separate expense account and abnormal spoilage cost should be charged to good units

Colt Company uses a first-in, first-out (FIFO) process cost system to account for the cost of producing a chemical compound. As part of production, M...

65,000 units.
70,000 units.
85,000 units.
90,000 units.

San Jose, Inc., uses a weighted-average process costing system. All materials are introduced at the start of manufacturing, and conversion cost is inc...

70,000 70,000
82,000 82,000
100,000 70,000
100,000 82,000

Waller Co. uses a weighted-average process-costing system. Material B is added at two different points in the production of shirms, 40% is added when...

4,400
8,800
11,000
22,000

A company uses a process cost system in accounting for its single product. The cost of units failing final inspection, termed normal spoilage, is add...

Increase net income from the sale of the abnormal spoilage and increase net income from the sale of the normal spoilage.
Increase net income from the sale of the abnormal spoilage and decrease net income from the sale of the normal spoilage.
Decrease net income from the sale of the abnormal spoilage and increase net income from the sale of the normal spoilage.
Decrease net income from the sale of the abnormal spoilage and decrease net income from the sale of the normal spoilage.

Fact Pattern: Morris Metal Fabricators specializes in the production of metal antennae. The fabrication process includes three steps:...

734 units.
746 units.
824 units.
890 units.

A profitable company with five departments uses plantwide overhead rates for its highly diversified operation. The firm is studying a change to eithe...

Departmental Departmental
Departmental ABC
ABC Departmental
ABC ABC

A company with three products classifies its costs as belonging to five functions: design, production, marketing, distribution, and customer services....

Number of customer phone calls.
Number of shipments.
Number of sales persons.
Dollar sales volume.

Young Company is beginning operations and is considering three alternative ways in which to allocate manufacturing overhead to individual units produ...

All production costs approach those costs that were budgeted.
The sales mix does not vary from the mix that was budgeted.
All manufacturing overhead is a fixed cost.
All ending inventory balances are zero.

Cost allocation is the process of assigning indirect costs to a cost object. The indirect costs are grouped in cost pools and then allocated by a comm...

Have a cause-and-effect relationship with the cost items in the cost pool.
Assign the costs in the pool uniformly to cost objects even if the cost objects use resources in a nonuniform way.
Be a nonfinancial measure (e.g., number of setups) because a nonfinancial measure is more objective.
Have a high correlation with the cost items in the cost pool as the sole criterion for selection.

Activities, their drivers, and their costs may be classified as unit-level, batch-level, product-level, and facility-level. If activity-based costing ...

Unit-level.
Batch-level.
Product-level.
Facility-level.

Process value analysis is a key component of activity-based management that links product costing and

Reduction of the number of cost pools.
Continuous improvement
Accumulation of heterogeneous cost pools.
Overhead rates based on broad averages.

Nile Co. is a manufacturer whose cost assignment and product costing procedures follow activity-based costing principles. Activities have been identi...

Design engineering activity
Heat treatment activity
Drill press activity.
Raw materials storage activity.

The series of activities in which customer usefulness is added to the product is the definition of

A value chain.
Process value analysis.
Integrated manufacturing.
Activity-based costing.

The use of activity-based costing (ABC) normally results in

Substantially greater unit costs for low-volume products than is reported by traditional product costing.
Substantially lower unit costs for low-volume products than is reported by traditional product costing.
Decreased setup costs being charged to low-volume products.
Equalizing setup costs for all product lines.

"Davis Corporation has used a traditional cost accounting system to apply quality control costs uniformly to all produc...

$150 per order.
$404 lower than using the traditional system.
$4,500
$404 higher than using the traditional system.

Which of the following statements about activity-based costing (ABC) is false?

Activity-based costing is useful for allocating marketing and distribution costs.
Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
In activity-based costing, cost drivers are what cause costs to be incurred.
Activity-based costing differs from traditional costing systems in that Products are not cross-subsidized.

Because of changes that are occurring in the basic operations of many firms, all of the following represent trends in the way indirect costs are alloc...

Treating direct labor as an indirect manufacturing cost in an automated factory.
Using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time.
Preferring plant-wide application rates that are applied to machine hours rather than incurring the cost of detailed allocations.
Using several machine cost pools to measure product costs on the basis of time in a machine center.

Multiple or departmental overhead rates are considered preferable to a single or plantwide overhead rate when

Manufacturing is limited to a single product flowing through identical departments in a fixed sequence.
Various products are manufactured that do not pass through the same departments or use the same manufacturing techniques.
Cost drivers, such as direct labor, are the same over all processes.
Individual cost drivers cannot accurately be determined with respect to cause-and-effect relationships.

Factory Company makes two products, X and Z. X is being introduced this period, and Z has been in production for 2 years. For the period about to begi...

$1.20
$2.40
$3.60
$4.80

"ALF Co. is an assisted-living facility that provides services in the form of residential space, meals, and other occupant as...

$182.50 for occupants in the low-usage category.
$145.00 for occupants in the medium-usage category.
$245.00 for occupants in the high-usage category.
$620.00 for all occupants.

Sanscom Corporation utilizes an activity-based costing system for applying costs to its two products, P and Q. In the assembly department, material h...

Material handling cost per Q will remain unchanged, and machinery maintenance cost per Q unit will remain unchanged.
Material handling cost per Q unit will increase, and machinery maintenance cost per Q unit will remain unchanged.
Material handling cost per Q will remain unchanged, and machinery maintenance cost per Q unit will increase
Material handling cost per Q unit will increase, and machinery maintenance cost per Q unit will increase.

When using activity-based costing techniques, which one of the following departmental activities would be expected to use machine hours as a cost dri...

Plant cafeteria.
Machine setups.
Material handling.
Robotics painting.

A company is considering the implementation of an activity-based costing and management program. The company

Should focus on manufacturing activities and avoid implementation with service-type functions.
Would probably find a lack of software in the marketplace to assist with the related recordkeeping.
Would normally gain added insights into causes of cost.
Would likely use fewer cost pools than it did under more traditional accounting methods

All of the following are likely to be used as a cost allocation base in activity-based costing except the

Number of different materials used to manufacture the product.
Units of materials used to manufacture the product.
Number of vendors supplying the materials used to manufacture the product
Cost of materials used to manufacture the product.

Which one of the following is least likely to be an objective of a cost accounting system?

Product costing.
Department efficiency.
Inventory valuation.
Sales commission determination.

In a broad sense, cost accounting can best be defined within the accounting system as

Internal and external reporting that may be used in making nonroutine decisions and in developing plans and policies.
External reporting to government, various outside parties, and shareholders.
Internal reporting for use in management planning and control, and external reporting to the extent its product-costing function satisfies external reporting requirements.
Internal reporting for use in planning and controlling routine operations.

A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. The manufacturer has identifi...

Direct labor hours
Number of units produced.
Number of vendors involved.
Number of parts used.

Which one of the following is the focus of activity-based management?

To improve allocation of indirect production costs.
To reduce the number of cost pools.
To increase the number of volume-related allocation bases.
To improve the effectiveness of activities.

"Huntley Company has two departments, Machining and Assembly. This year’s budget for the plant contained the following info...

$10 per hour.
$20 per hour.
$40 per hour.
$75 per hour.

"Huntley Company has two departments, Machining and Assembly, at its Milwaukee plant. This year’s budget for the plant cont...

$1,100
$1,200
$2,100
$2,200

Which one of the following is not a benefit of activity-based management?

Improved competitive advantage by using continuous improvement methods.
Improving the value the customer receives
Better allocation of resources to key value-added activities.
Better costing information.

Fact Pattern: "Louis Diamonds manufactures diamond earrings and pendants. The company uses activitybased budgeting and has establish...

$6.30
$7.00
$7.70
$7.78

A company manufactures a line of products that vary with complexity: a basic model, a standard model, and a deluxe model. The company uses 25 differe...

Traditional budgeting.
Zero-based budgeting
Activity-based budgeting.
Flexible budgeting

Traditional budgeting methods look at historical data and current resources and then project forward. Activity-based budgeting is different in that ...

I only.
I and III only.
II and III only.
II and IV only.

Electronics, Inc., manufactures an increasing variety of consumer communications devices. The company has always used a traditional cost allocation s...

Provide more accurate reporting of each product’s cost so that management can make more informed pricing decisions.
Are less expensive to use than traditional cost systems.
Eliminate the use of arbitrary cost allocations that are used in traditional cost systems.
Focus on manufacturing activities and eliminate engineering, marketing, and other non-traceable activities from costing considerations

Life-cycle costing

Is sometimes used as a basis for cost planning and product pricing.
Includes only manufacturing costs incurred over the life of the product.
Includes only manufacturing cost, selling expense, and distribution expense.
Emphasizes cost savings opportunities during the manufacturing cycle.

Target pricing

Is more effective when applied to mature, long-established products.
Considers short-term variable costs and excludes fixed costs.
Is often used when costs are difficult to control
Is a pricing strategy used to create competitive advantage.

In target costing,

The market price of the product is taken as a given.
Only raw materials, labor, and variable overhead cannot exceed a threshold target.
Only raw materials cannot exceed a threshold target.
Raw materials are recorded directly to cost of goods sold

"A company’s product has an expected 4-year life cycle from research, development, and design through its withdrawal from the mar...

$15
$31
$36
$45

The operations of Kalispell Company resulted in overapplied overhead for the month just completed. Which of the following journal entries can be corr...

Cost of Goods Sold ................................. XXX
Manufacturing Overhead ............... XXX
Manufacturing Overhead ........................ XXX
Cost of Goods Sold ........................ XXX
Work in Process ...................................... XXX
Finished Goods ....................................... XXX
Cost of Goods Sold ........................ XXX
Manufacturing Overhead ............... XXX
Manufacturing Overhead ........................ XXX
Work in Process ............................. XXX
Finished Goods .............................. XXX
Cost of Goods Sold ........................ XXX

Average accumulated expenditures:

Is an approximation of the average debt a firm would have outstanding if it financed all construction through debt.
Is computed as a simple average if all construction expenditures are made at the end of the period.
Are irrelevant if the companyâ€™s total outstanding debt is less than total costs of construction.
All of the above are true statements.

Marfan. Manufacturing produces a product that passes through two departments. The units from the molding department are completed in the assembly depa...

30,000 units.
38,000 units.
40,800 units.
42,000 units.

Marfan. Manufacturing produces a product that passes through two departments. The units from the molding department are completed in the assembly depa...

34,800 units.
40,800 units.
42,800 units.
43,200 units.

Marfan. Manufacturing produces a product that passes through two departments. The units from the molding department are completed in the assembly depa...

30,000 units.
38,000 units.
40,800 units.
42,000 units.

Target pricing

Is more effective when applied to mature, long established products.
Considers short-term variable costs and excludes fixed costs.
Is often used when costs are difficult to control.
Is a pricing strategy used to create competitive advantage.

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Cost Accumulation Systems MCQs