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Gleim Test 2
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Questions in this quiz (46)
1To identify costs that relate to a specific product, an allocation base should be chosen that
- Aa. Does not have a cause-and-effect relationship.
- Bb. Has a cause-and-effect relationship.
- Cc. Considers variable costs but not fixed costs.
- Dd. Considers direct materials and direct labor but not factory overhead.
2Jonathan Manufacturing adopted a job-costing system. For the current year, budgeted cost driver activity levels for direct labor hours and direct labor costs were 20,000 and $100,000, respectively. In addition, budgeted variable and fixed factory overhead costs were $50,000 and $25,000, respectively. Actual costs and hours for the year were as follows:
Direct labor hours 21,000
Direct labor costs $110,000
Machine hours 35,000
For a particular job, 1,500 direct-labor hours were used. Using direct-labor hours as the cost driver, what amount of overhead should be applied to this job?- A$3,214
- B$5,357
- C$5,625
- D$7,500
3In a job-order cost system, the use of direct materials previously purchased usually is recorded as an increase in
- AWork-In-Progress Control
- BFactory Overhead Control
- CStores Control
- DFactory Overhead Allocated
4Birk Co. uses a job-order cost system. The following debits (credit) appeared in Birk’s work-in-process account for the month just ended:
Date Description Amount
1 Balance $4,000
31 Direct Materials $24,000
31 Direct Labor $16,000
31 Factory O/H $12,800
31 To Finished Goods -$48,000
Birk applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process at month end, has been charged with direct labor of $2,000. What was the amount of direct materials charged to Job No. 5?- A$3,000
- B$5,200
- C$8,800
- D$24,000
5A direct labor overtime premium should be charged to a specific job when the overtime is caused by the
- AIncreased overall level of activity
- BCustomer's requirement for early completion of the job
- CManagements failure to include the job in the production schedule
- DManagements requirement that the job be completed before the annual factory vacation closure
6A job-order cost system uses a predetermined factory overhead rate based on expected volume and expected fixed cost. At the end of the year, underapplied overhead might be explained by which of the following situations?
Actual Volume / Actual Fixed Costs- Aa. Greater than expected / Greater than expected
- Bb. Greater than expected / Less than expected
- Cc. Less than expected / Greater than expected
- Dd. Less than expected / Less than expected
7Mason Co. uses a job-order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct-labor dollars. The rate for the current year is 200% of direct-labor dollars. This rate was calculated last year and will be used throughout the current year. Mason had one job, No. 150, in process at the beginning of the month with raw materials costs of $2,000 and direct-labor costs of $3,000. During the month, raw materials and direct labor added to jobs were as follows:
Raw Materials Direct Labor
Job 150 $0 $1,500
Job 151 $4,000 $5,000
Job 152 $1,000 $2,500
Actual manufacturing overhead for the month was $20,000. During the month, Mason completed Job Nos. 150 and 151. For the month, manufacturing overhead was- AOver by $4,000
- BUnder by $7,000
- CUnder by $2,000
- DUnder by $1,000
8In a job cost system, manufacturing overhead is
An Indirect Cost of Jobs / A Necessary Element in Production- ANo / Yes
- BNo / No
- CYes / Yes
- DYes / No
9Lucy Sportswear manufactures a specialty line of T-shirts using a job-order cost system. During March, the following costs were incurred in completing Job ICU2: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would be
- A$6.50
- B$6.30
- C$5.70
- D$5.50
10Felicity Corporation manufactures a specialty line of dresses using a job-order cost system. During January, the following costs were incurred in completing job J-1:
Direct materials $27,400
Direct labor $9,600
Administrative costs $2,800
Selling costs $11,200
Overhead was applied at the rate of $50 per direct labor hour, and job J-1 required 400 direct labor hours. If job J-1 resulted in 4,000 good dresses, the cost of goods sold per unit is- A$9.25
- B$14.25
- C$14.95
- D$17.75
11Worley Company has underapplied overhead of $45,000 for the year. Before disposition of the underapplied overhead, selected year-end balances from Worley’s accounting records were
Sales $1,200,000
Cost of goods sold $720,000
Direct materials inventory $36,000
Work-in-process inventory $54,000
Finished goods inventory $90,000
Under Worley’s cost accounting system, over- or underapplied overhead is assigned to appropriate inventories and COGS based on year-end balances. In its year-end income statement, Worley should report COGS of- A$682,000
- B$684,000
- C$757,500
- D$765,000
12DJ Co. has a job-order cost system. The following debits (credits) appeared in the work-in-process account for the month of March:
March 1, Balance $12,000
March 31, DM $40,000
March 31, DL $36,000
March 31, Man O/H Applied $54,000
March 31 to FG ($100,000)
DJ Co. applies overhead at a predetermined rate of 90% of direct labor cost. Job No. 101, the only job still in process at the end of March, has been charged with manufacturing overhead of $2,250. What was the amount of direct materials charged to Job No. 101?- A$2,250
- B$2,500
- C$4,250
- D$4,725
13In a traditional job-order cost system, the issuance of indirect materials to a production department increases
- AStores Control
- BWork-in-Progress Control
- CFactory Overhead Control
- DFactory Overhead Applied
14In a job-order cost system, direct labor costs usually are recorded initially as an increase in
- AFactory Overhead Applied
- BFactory Overhead Control
- CFinished Goods Controls
- DWork-In-Progress Control
15In a job-order cost system, the application of factory overhead is usually reflected in the general ledger as an increase in
- AFactory Overhead Control
- BFinished Goods COntrol
- CWork-In-Progress Control
- DCost of Goods Sold
16Under a job-order system of cost accounting, the dollar amount of the general ledger entry involved in the transfer of inventory from work-in-process to finished goods is the sum of the costs charged to all jobs
- AStarted in process during the period
- BIn process during the period
- CCompleted and Sold during the period
- DCompleted during the period
17Regan Company operates its factory on a two-shift basis and pays a late-shift differential of 15%. Regan also pays a premium of 50% for overtime work. Because Regan manufactures only for stock, the cost system provides for uniform direct-labor hourly charges for production done without regard to shift worked or work done on an overtime basis. Overtime and late-shift differentials are included in Regan’s factory overhead application rate. The May payroll for production workers is as follows:
Wages at base direct-labor rates $325,000
Shift differentials $25,000
Overtime premiums $10,000
For the month of May, what amount of direct labor should Regan charge to work-in-process?- A$325,000
- B$335,000
- C$350,000
- D$360,000
18Lucas Co. has a job-order cost system. For the month of April, the following debits (credits) appeared in the general ledger account, work-in-process:
April 1, Balance $24,000
April 30, Direct materials $80,000
April 30, Direct labor $60,000
April 30, Factory overhead $54,000
April 30, To finished goods -$200,000
Lucas applies overhead to production at a predetermined rate of 90% based on direct labor cost. Job No. 100, the only job still in process at the end of April, has been charged with factory overhead of $4,500. The amount of direct materials charged to Job No. 100 was- A$18,000
- B$8,500
- C$5,000
- D$4,500
19Over- or underapplied manufacturing overhead should be closed to the cost of goods sold account at February 28 in the amount of
Fact Pattern: Hamilton Company uses job-order costing. Manufacturing overhead is applied to production at a predetermined rate of 150% of direct labor cost. Any over- or underapplied overhead is closed to the cost of goods sold account at the end of each month. Additional information is available as follows:
Job 101 was the only job in process at January 31, with accumulated costs as follows
Direct materials $4,000
Direct labor $2,000
Applied Factory overhead $3,000
Total Manufacturing Costs $9,000
Jobs 102, 103, and 104 were started during February.
Direct materials requisitions for February totaled $26,000.
Direct labor cost of $20,000 was incurred for February.
Actual manufacturing overhead was $32,000 for February.
The only job still in process on February 28 was Job 104, with costs of $2,800 for direct materials and $1,800 for direct labor.- A$700 Over
- B$1,000 Over
- C$1,700 Under
- D$2,000 Under
20The cost of goods manufactured for February was
Fact Pattern: Hamilton Company uses job-order costing. Manufacturing overhead is applied to production at a predetermined rate of 150% of direct labor cost. Any over- or underapplied overhead is closed to the cost of goods sold account at the end of each month. Additional information is available as follows:
Job 101 was the only job in process at January 31, with accumulated costs as follows:
Direct materials $4,000
Direct labor $2,000
Applied Factory overhead $3,000
Total Manufacturing Costs $9,000
Jobs 102, 103, and 104 were started during February.
Direct materials requisitions for February totaled $26,000.
Direct labor cost of $20,000 was incurred for February.
Actual manufacturing overhead was $32,000 for February.
The only job still in process on February 28 was Job 104, with costs of $2,800 for direct materials and $1,800 for direct labor.- A$77,700
- B$78,000
- C$79,700
- D$85,000
21The following were among Gage Co.’s costs during the month just ended:
Freight out $10,000
Excess of actual manufacturing costs over standard costs $20,000
Standard manufacturing costs $100,000
Actual prime manufacturing costs $80,000
Gage’s actual manufacturing overhead was- A$40,000
- B$45,000
- C$55,000
- D$120,000
22Merry Co. has two major categories of manufacturing overhead: material handling and quality control. The costs expected for these categories for the coming year are as follows:
Material handling $120,000
Quality inspection 200,000
The plant currently applies overhead based on direct labor hours. The estimated direct labor hours are 80,000 per year. The plant manager is asked to submit a bid and assembles the following data on a proposed job:
Direct materials $4,000
Direct labor (2,000 hours) $6,000
What is the estimated product cost on the proposed job?- A$8,000
- B$10,000
- C$14,000
- D$18,000
23The accountant for Champion Brake, Inc., applies overhead based on machine hours. The budgeted overhead and machine hours for the year are $260,000 and 16,000, respectively. The actual overhead and machine hours incurred were $275,000 and 20,000. The cost of goods sold and inventory data compiled for the year is as follows:
Direct materials $50,000
COGS $450,000
WIP (units) $100,000
Finished goods (units) $150,000
What is the amount of over/underapplied overhead for the year?- A$15,000
- B$50,000
- C$65,000
- D$67,000
24Activity-based costing (ABC) is a term used to describe allocation methods that are based on cause and effect (i.e., charging costs to whatever causes them). Why is this more important to project managers using job-order costing than those using process costing?
- Aa. Job-order costing is used if the products or services sold are different enough to justify the additional cost involved in tracing costs to their cause. Charging all products or services a flat amount per unit shifts costs from those that cause them to those that do not.
- Bb. Process costing is no longer used.
- Cc. If a project manager is charged for costs used, such as equipment rental, resources tend to sit idle in case they are needed.
- Dd. If project managers are charged an in-house rate for resources that exceeds the rate charged by an external supplier, they will not use company resources that sit idle. Total costs then decrease.
25Limitations of an activity-based costing system include which of the following?
- Aa. Control of overhead costs is enhanced.
- Bb. Activity-based costing systems are less reliable.
- Cc. The expense of obtaining cost data is relatively high.
- Dd. It eliminates arbitrary assignment of overhead costs.
26A CPA would recommend implementing an activity-based costing system under which of the following circumstances?
- Aa. The client is a single-product manufacturer.
- Bb. Most of the client’s costs currently are classified as direct costs.
- Cc. The client produced products that heterogeneously consume resources.
- Dd. The client produced many different products that homogeneously consume resources.
27Boyle, Inc., makes two products, X and Y, that require allocation of indirect manufacturing costs. The following data was compiled by the accountant before making any allocations:
Product X Product Y
Quantity produced 10,000 20,000
Direct manufacturing labor hours 15,000 5,000
Setup hours 500 1,500
The total cost of setting up manufacturing processes and equipment is $400,000. The company uses a job-costing system with a single indirect cost rate. Under this system, allocated costs were $300,000 and $100,000 for X and Y, respectively. If an activity-based system is used, what would be the allocated costs for each product?
Product X / Product Y- A$100,000 / $300,000
- B$150,000 / $250,000
- C$250,000 / $150,000
- D$200,000 / $200,000
28Nile Co. is a manufacturer whose cost assignment and product costing procedures follow activity-based costing principles. Activities have been identified and classified as being either value-adding or nonvalue-adding as to each product. Which of the following activities used in Nile’s production process is nonvalue-adding?
- ADesign engineering activity
- BHeat treatment activity
- CDrill press activity
- DRaw materials storage activity
29A basic assumption of activity-based costing (ABC) is that
- Aa. All manufacturing costs vary directly with units of production.
- Bb. Products or services require the performance of activities, and activities consume resources.
- Cc. Only costs that respond to unit-level drivers are product costs.
- Dd. Only variable costs are included in activity cost pools.
30Which of the following is true about activity-based costing?
- Aa. It should not be used with process or job costing.
- Bb. It can be used only with process costing.
- Cc. It can be used only with job costing.
- Dd. It can be used with either process or job costing.
31In an activity-based costing system, what should be used to assign a department’s manufacturing overhead costs to products produced in varying lot sizes?
- Aa. A single cause-and-effect relationship.
- Bb. Multiple cause-and-effect relationships.
- Cc. Relative net sales values of the products.
- Dd. A product’s ability to bear cost allocations.
32What is the normal effect on the numbers of cost pools and cost assignment bases when an activity-based cost (ABC) system replaces a traditional cost system?
Cost Pools / Cost Assignment Bases- ANo effect/ No effect
- BIncrease / No effect
- CNo effect / Increase
- DIncrease / Increase
33In an activity-based costing (ABC) system, cost reduction is accomplished by identifying and eliminating
All Cost Drivers / Nonvalue-Adding Activities- ANo/No
- BYes/Yes
- CNo/Yes
- DYes/No
34Which of the following statements about activity-based costing (ABC) is false?
- Aa. Activity-based costing is useful for allocating manufacturing overhead costs.
- Bb. 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.
- Cc. In activity-based costing, cost drivers are what cause costs to be incurred.
- Dd. Activity-based costing differs from traditional costing systems in that products are not cross-subsidized.
35Under a costing system that allocates overhead based on direct labor hours, Zeta Company’s materials handling costs allocated to one unit of wall mirrors would be
Fact Pattern: Zeta Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information given in the next column:
Wall Specialty
Mirrors Windows
Units produced 25 25
Material moves per product line 5 15
Direct labor hours per unit 200 200
Budgeted materials handling costs $50,000- A$1,000
- B$500
- C$2,000
- D$5,000
36Under activity-based costing (ABC), Zeta’s materials handling costs allocated to one unit of wall mirrors would be
Fact Pattern: Zeta Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information given in the next column:
Wall Specialty
Mirrors Windows
Units produced 25 25
Material moves per product line 5 15
Direct labor hours per unit 200 200
Budgeted materials handling costs $50,000- A$1,000
- B$500
- C$1,500
- D$2,500
37When using activity-based costing techniques, which one of the following departmental activities would be expected to use machine hours as a cost driver to allocate overhead costs to production?
- Aa. Plant cafeteria.
- Bb. Machine setups.
- Cc. Material handling.
- Dd. Robotics painting.
38A company is considering the implementation of an activity-based costing and management program. The company
- Aa. Should focus on manufacturing activities and avoid implementation with service-type functions.
- Bb. Would probably find a lack of software in the marketplace to assist with the related recordkeeping.
- Cc. Would normally gain added insights into causes of cost.
- Dd. Would likely use fewer cost pools than it did under more traditional accounting methods.
39All of the following are likely to be used as a cost allocation base in activity-based costing except the
- Aa. Number of different materials used to manufacture the product.
- Bb. Units of materials used to manufacture the product.
- Cc. Number of vendors supplying the materials used to manufacture the product.
- Dd. Cost of materials used to manufacture the product.
40A company with three products classifies its costs as belonging to five functions: design, production, marketing, distribution, and customer services. For pricing purposes, all company costs are assigned to the three products. The direct costs of each of the five functions are traced directly to the three products. The indirect costs of each of the five business functions are collected into five separate cost pools and then assigned to the three products using appropriate allocation bases. The allocation base that will most likely be the best for allocating the indirect costs of the distribution function is
- Aa. Number of customer phone calls.
- Bb. Number of shipments.
- Cc. Number of sales persons.
- Dd. Dollar sales volume.
41Cost 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 common allocation base to the cost object. The base that is employed to allocate a homogeneous cost pool should
- Aa. Have a cause-and-effect relationship with the cost items in the cost pool.
- Bb. Assign the costs in the pool uniformly to cost objects even if the cost objects use resources in a nonuniform way.
- Cc. Be a nonfinancial measure (e.g., number of setups) because a nonfinancial measure is more objective.
- Dd. Have a high correlation with the cost items in the cost pool as the sole criterion for selection.
42A manufacturing company has several product lines. Traditionally, it has allocated manufacturing overhead costs between product lines based on total machine hours for each product line. Under a new activity-based costing system, which of the following overhead costs would be most likely to have a new cost driver assigned to it?
- Aa. Electricity expense.
- Bb. Repair and maintenance expense.
- Cc. Employee benefits expense.
- Dd. Depreciation expense.
43Each of the following should be considered in the selection of appropriate cost drivers for an activity-based costing system, except
- Aa. Volume-based production.
- Bb. Behavioral effects.
- Cc. Cost of measurement.
- Dd. Degree of correlation.
44A company would most benefit from using an activity-based costing (ABC) system as opposed to a traditional costing system under which of the following conditions?
- Aa. When indirect costs are a high percentage of total costs.
- Bb. When each department within the company has a single activity.
- Cc. When different products use the different activities of the department in the same proportions.
- Dd. When batch-level and product-sustaining costs are immaterial.
45Which of the following cost methods is least likely to result in cost shifting in a multiproduct manufacturing environment?
- Aa. Activity-based costing.
- Bb. Traditional costing.
- Cc. Process costing.
- Dd. Straight-line costing.
46A company has two departments and allocates all overhead costs based on department revenues. The following information applies:
Department 1 revenue $1,000,000
Department 2 revenue $1,500,000
Corporate overhead costs $250,000
Department overhead costs $175,000
What amount is the company’s total overhead cost for Department 2?- A$425,000
- B$255,000
- C$170,000
- D$105,000
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- Accounting Quiz on Gleim Test 2, created by Senia Chrzanowski on 03/03/2020.
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- Senia Chrzanowski
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