Test Bank For Cost Accounting A Managerial Emphasis Fifth ... · 16) A unit cost is computed by dividing a total cost by some number of 16) _____ units. 17) Unit costs are not considered

Test Bank For Cost Accounting A Managerial

Emphasis Fifth Canadian 5th Edition By Horngren

Foster Datar And Gowing

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TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) "Cost" is defined by accountants as a resource sacrificed or foregone to 1) _______

achieve a specific objective.

2) Costs are typically accounted for in two stages of the cost system: (1) 2) _______

accumulation and (2) payment.

3) An actual cost is a predicted cost. 3) _______

4) Nearly all accounting systems accumulate forecasted costs. 4) _______

5) A cost object is anything for which a separate measurement of costs is 5) _______

desired.

6) Indirect costs cannot be economically traced directly to the cost 6) _______

objective.

7) Delivery charges are typically considered to be an indirect cost because 7) _______

it cannot be traced to each customer.

8) A cost is classified as a direct or indirect cost based on the applicable 8) _______

cost object.

9) Cost tracing assigns indirect costs to the chosen cost object. 9) _______

10) Factors affecting direct/indirect cost classifications are the materiality of 10) ______

the cost in question, the information-gathering technology used, and the

design of the accounting system

11) A relevant range is the range of the cost driver in which a specific 11) ______

relationship between cost and driver is valid.

12) Changes in particular cost drivers automatically result in decreases in 12) ______

overall costs.

13) A fixed cost is a cost that changes per unit as a cost driver changes. 13) ______

14) Variable costs do not change in direct proportion to changes in cost 14) ______

drivers.

15) When defining variable and fixed costs, it is assumed that there is only 15) ______

one cost driver.

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16) A unit cost is computed by dividing a total cost by some number of 16) ______

units.

17) Unit costs are not considered to be an average cost per unit. 17) ______

18) When a manager is making a decision based on cost figures, it is 18) ______

preferable that he (she) thinks in terms of unit costs. 19) When 50,000 units are produced the fixed costs are $10 per unit. 19) ______

Therefore when 100,000 units are produced fixed costs will remain at

$10 per unit.

20) There are three different sectors of the economy: service, merchandising, 20) ______

and manufacturing.

21) Service Sector companies provide services or intangible products to 21) ______

their customers.

22) Merchandising-sector companies include companies engaged in 22) ______

transporting goods from wholesalers to retailers.

23) Manufacturing-sector companies purchase materials and other 23) ______

resources for conversion into various finished goods.

24) Service-sector companies use employees to produce products and 24) ______

services for their customers.

25) Manufacturing firms have three types of inventory: direct materials, 25) ______

work in process, and merchandise.

26) Direct materials inventory is products held for resale. 26) ______

27) Work-in-process consists of partially completed goods not yet ready for 27) ______

sale.

28) Rent for the building that contains the manufacturing and engineering 28) ______

departments can all be charged as manufacturing overhead costs.

29) The plant supervisor's salary is a direct labour cost. 29) ______

30) Inventoriable costs are reported as an asset when incurred and expensed 30) ______

on the income statement when the product is sold.

31) Period costs are never included as part of inventory. 31) ______

32) Conversion costs include all direct manufacturing costs 32) ______

33) Overtime premium consists of wages paid to all workers in excess of 33) ______

their straight- time wage rates.

34) Operating income does not include interest expense and income taxes. 34) ______

35) Prime costs consist of direct and indirect manufacturing labour. 35) ______

36) Conversion costs are all manufacturing costs other than direct materials. 36) ______

37) Overtime premium is always a component of direct labour. 37) ______

38) Product costs are the sum of the costs assigned to a product for a 38) ______

specific purpose.

39) For purposes of calculating inventory costs under GAAP, only 39) ______

production costs can be used.

40) When producing for a government contract, all costs allowed by the 40) ______

producer will be paid by the government.

41) When producing to sell in the marketplace, all costs in the value chain 41) ______

for getting the product to the customer are included in determining the

selling price.

42) Management accountants help managers identify what information is 42) ______

relevant and what information can be ignored.

43) Obtaining information for performance evaluation is not one of the 43) ______

features of cost and management accounting.

44) Budgeting is the most commonly used tool for planning and control. 44) ______

45) Relevant information analysis is a key aspect of making decisions. 45) ______

46) Cost items that do not change between the alternative choices involved 46) ______

in the decision are not relevant to the decision to be made as they will be

incurred no matter which alternative is chosen.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or

answers the question.

47) Anything for which a separate measurement of costs is desired is 47) ______

known as:

A) a fixed cost item B) a cost item

C) a cost driver D) a variable cost object

E) a cost object

48) All of the following are cost objects EXCEPT 48) ______

A) activities or processes. B) departments.

C) outputs of processes. D) cost assignments.

E) customers.

49) The collection of accounting data in some organized way is 49) ______

A) cost accumulation. B) cost allocation

C) cost assignment. D) cost tracing.

E) cost conversion

51) The term used to identify both the tracing of accumulated costs and the 51) ______

allocation of those costs to a cost object is

A) cost management

B) cost assignment.

C) cost accumulation.

D) cost allocation

E) cost tracing.

52) Which one of the following items is typically an example of an indirect 52) ______

cost of a cost object?

A) manufacturing plant electricity

B) wood used for furniture manufacture C) direct manufacturing labour

D) courier charges for shipment delivery E) refundable sales tax on direct materials

53) Cost tracing is 53) ______

A) the process of tracking both direct and indirect costs associated with a cost object.

B) the process of determining the actual cost of the cost object.

C) a function of cost allocation. D) the process of comparing budgeted to actual costs.

E) the assignment of direct costs to the chosen cost object.

54) Which one of the following examples could be classified as a direct cost? 54) ______

A) The costs incurred for electricity in the office: Accounting department is the cost object.

B) The costs of an entire factory's electricity related to a product;

the product line is the cost object.

C) The salary of a maintenance supervisor in the manufacturing plant: Product A is the cost object.

D) advertising costs

E) The printing costs incurred for payroll cheque processing: the payroll cheque processing is the cost object.

55) The determination of a cost as being either direct or indirect depends 55) ______

upon

A) only the cost object chosen to determine its individual costs.

B) the cost tracing system.

C) the allocation system.

D) the accounting system.

E) the choice of the cost object, and the materiality of the cost in

question.

56) Competition places an increased emphasis on cost reductions. For an 56) ______

organization to reduce costs it must focus on

A) reporting non-value added costs separately from value-added

costs.

B) reducing the number of cost drivers.

C) the cost allocation process. D) maximizing the cost allocation system.

E) efficiently managing the use of the cost drivers in those

value-added activities.

57) All the following statements about cost management are TRUE EXCEPT

A) it requires efficient management of the use of the cost drivers in

the value-added activities

B) it requires that managers actively strive to reduce costs.

C) it focuses on value-added activities. D) changes in a cost driver doesn't necessarily change total costs.

E) it is not affected by the organization's customers.

57) ______

58) Which one of the following is a variable cost in an insurance company?

A) property taxes B) president's salary

C) administrative salaries D) rent

E) sales commissions

58) ______

59) Which of the following statements is a fixed cost in an automobile

manufacturing plant? A) machine electricity for each assembly line

B) parts used in assembly of the cars C) sales commissions

D) windows for each car produced E) administrative salaries

59) ______

60) If each furnace required a hose that costs $20 and 2,000 furnaces are produced for the month, the $40,000 total cost for hoses: A) is considered to be a direct variable cost.

60) ______

B) is considered to be an indirect fixed cost.

C) is considered to be a direct fixed cost. D) is considered variable or fixed, depending on the relevant range.

E) is considered to be an indirect variable cost.

Use the information below to answer the following question(s):

Macadamia Co. produced and sold 40,000 units last year. Per unit revenue and costs were as follows:

Revenue $100.00

Cost of Goods Sold:

Direct Materials $15.00

Direct Labour 30.00

Variable Manufacturing Overhead 20.00 Fixed Manufacturing Overhead 10.00

Total Cost of Goods Sold $75.00

Gross Margin $25.00

Selling and Administrative Costs:

Sales Commissions (10% of Sales) $10.00

Administrative Salaries 20.00

Total Selling and Administrative $30.00

Operating Income <Loss> <$5.00>

The Fixed Manufacturing Overhead provides a capacity of 50,000 units.

61) Calculate last year's operating income when the company produced and 61) ______

sold 40,000 units.

A) $ <200,000>

B) $ <500,000>

C) $0

D) $ <800,000>

E) None of the above.

62) Calculate this year's operating income if the company plans to produce 62) ______

and sell 50,000 units.

A) $50,000

B) $0

C) $ <550,000>

D) $<250,000>


63) Calculate this year's operating income if the company plans to produce 63) ______

and sell 60,000 units.

A) $ <250,000>

B) $ <550,000>

C) $0 D) $50,000


64) All of the following statements are CORRECT EXCEPT 64) ______

A) costs may be indirect and fixed. B) costs may be direct and variable.

C) costs may be indirect and variable. D) costs may not be indirect and fixed.

E) costs may be direct and fixed.

Use the information below to answer the following question(s).

Consider the following data of the Vancouver Company for the year 20x4:

Sandpaper-Plant $ 10,000 Leasing costs - plant $ 120,000

Materials handling-Plant 100,000 Amortization- equip. 70,000

Coolants-Plant 7,000 Property taxes - equip. 10,000

Indirect manufacturing labour 86,000 Fire insurance - equip. 5,000

Direct manufacturing labour 680,000 Direct materialspurchases 980,000

Direct materials, 1/1/x4 120,000 Direct materials 12/31/x4 86,000

Finished goods, 1/1/x4 210,000 Sales 4,000,000

Finished goods, 12/31/x4 400,000 Sales commissions 200,000

WIP, 1/1/x4 30,000 Sales salaries 180,000

WIP, 12/31/x4 20,000 Advertising costs 150,000

Administration costs 250,000

65) What is the unit cost for the direct materials for 20x4 assuming direct 65) ______

materials costs are for the production of 1,014,000 units?

A) $0.95 B) $0.80 C) $1.00 D) $1.11 E) $1.08

66) What is the unit cost for the plant leasing costs for 20x4 assuming plant 66) ______

leasing costs are for the production of 1,014,000 units?

A) $0.118

B) $0.119 C) $0.110

D) $0.943 E) $0.900

67) What is the unit cost for the direct materials for 20x4 assuming 2,000,000 67) ______

units are produced (direct materials costs are $1.00 per unit when

1,014,000 units are produced)?

A) $1.00 B) $0.80 C) $1.10 D) $0.95 E) $1.08

68) What is the unit cost for the plant leasing cost for 20x4 assuming 68) ______

2,000,000 units are produced (plant leasing costs are $0.118 per unit

when 1,014,000 units are produced)?

A) 0.18 B) 0.12 C) 0.04 D) 0.35 E) 0.06


The following information pertains to Payton's Shoe Manufacturing:

Manufacturing costs $1,000,000

Shoes manufactured 100,000

Beginning inventory 0 pairs 99,500 pairs of shoes are sold during the year for $18.

69) What is the manufacturing cost per pair of shoes?

A) $10.05 B) $100.00

C) $18.00

D) $10.00

E) $9.95

69) ______

70) When making decisions, it is best to use

A) total cost, rather than unit cost.

B) unit cost, rather than total cost. C) variable costs that would be incurred.

D) fixed costs that would be incurred. E) average costs.

70) ______

71) The following information pertains to the Stratford Company:

Beginning finished goods inventory $60,000 Cost of goods manufactured 410,000

Ending finished goods inventory 34,000

Wh ds at is sold?

the cost

of goo

71) ______

A) $384,000 B) $376,000

C) $444,000

D) $316,000

E) $436,000


Montreal Industries, Inc. had the following activities during the year::

Direct materials:

Beginning inventory $ 50,000

Purchases 154,000

Ending inventory 26,000

Direct manufacturing labour 40,000

Manufacturing overhead 30,000

Ending work in process inventory 10,000

Beginning work in process inventory 2,000


Beginning finished goods inventory 60,000

72) What is Montreal's cost of direct materials used during the year? 72) ______

A) $218,000

B) $204,000

C) $128,000

D) $24,000

E) $178,000

73) Which of the following is part of the service sector of our economy? 73) ______

A) a jeweller

B) a shoe producer

C) a florist

D) a shoe store

E) a bank

74) Manufacturing-sector companies 74) ______

A) purchase materials and convert them to finished goods.

B) provide services or intangible products.

C) buy goods and resell them.

D) do all of the above.

E) do none of the above.

75) Merchandising-sector companies 75) ______

A) provide services or intangible products.

B) buy goods and resell them.

C) purchase materials and convert them to finished goods.

D) do all of the above.


76) Service-sector companies 76) ______

A) provide services or intangible products.

B) buy goods and resell them.

C) purchase materials and convert them to finished goods. D) do all of the above.


77) Manufacturing-sector companies report 77) ______ A) only work in progress inventory.

B) only finished goods inventory.

C) no inventory accounts. D) only merchandise inventory. E) direct materials inventory, work-in-process inventory,

and finished goods inventory accounts.



Manufacturing costs $1,000,000 Shoes manufactured 100,000

Beginning inventory 0 pairs 99,500 pairs of shoes are sold during the year for $18.

78) What is the amount of ending finished goods inventory? A) $8,000

B) $5,000 C) $500

D) $99,500 E) $0

78) ______

79) For a manufacturing company, direct material costs may be included in A) direct materials inventory only.

B) both work-in-process inventory and finished goods inventory. C) merchandise inventory only.

D) direct materials inventory, work-in-process inventory, and finished goods inventory accounts.

E) none of the above.

79) ______

80) Which of the following statements would be INCORRECT in a manufacturing plant?

80) ______

A) There would be no merchandising inventory

B) Completed goods are included in the finished goods inventory.

C) Work in process may also be called "work in progress."

D) Materials put into production are included in the direct materials category.

E) Partially completed goods are part of the work in process category.



Direct materials:

Beginning inventory $ 50,000

Purchases

Ending inventory Direct manufacturing labour

Manufacturing overhead Ending work in process inventory Beginning work in process inventory Ending finished goods inventory

Beginning finished goods inventory

154,000

26,000 40,000

30,000 10,000

2,000 40,000

60,000

81) What is Montreal's cost of goods manufactured during the year?

A) $268,000 B) $248,000

C) $240,000 D) $260,000

E) $238,000

81) ______

82) Wages paid to machine operators on an assembly line are an example of

which type of cost? A) direct manufacturing overhead costs

B) direct materials costs C) indirect manufacturing overhead costs

D) indirect material costs

E) direct manufacturing labour costs

82) ______

83) Which of the following is true concerning Prime Costs? A) They equal the sum of fixed manufacturing costs plus conversion

costs. B) They are indirect manufacturing costs.

C) They include direct manufacturing labour, in a two-part

classification. D) They equal the sum of direct manufacturing costs plus conversion

costs. E) Prime costs are direct manufacturing costs.

83) ______



Manufacturing costs $1,000,000 Shoes manufactured 100,000

Beginning inventory 0 pairs

99,500 pairs of shoes are sold during the year for $18.

84) What is the amount of gross profit? A) $1,000,000

B) $796,000

84) ______

C) $1,791,000

D) $995,000

E) none of the above



Direct materials: Beginning inventory $ 50,000

Purchases 154,000








85) What is Montreal's cost of goods sold during the year? 85) ______

A) $232,000

B) $240,000 C) $260,000

D) $200,000 E) $220,000

86) Goods available for sale that are not in ending inventory 86) ______

A) are included in beginning inventory.

B) are included in goods available for sale at the end of the year.

C) are included in the work in process inventory at the end of the year.

D) are not accounted for until the next year.

E) are incorporated in the cost of goods sold amount.


Consider the following data of the Vancouver Company for the year 20x4:

Sandpaper-Plant $ 10,000 Leasing costs - plant $ 120,000

Materials handling-Plant 100,000 Amortization- equip. 70,000

Coolants-Plant 7,000 Property taxes - equip. 10,000

Indirect manufacturing labour 86,000 Fire insurance - equip. 5,000

Direct manufacturing labour 680,000 Direct materialspurchases 980,000

Direct materials, 1/1/x4 120,000 Direct materials 12/31/x4 86,000

Finished goods, 1/1/x4 210,000 Sales 4,000,000

Finished goods, 12/31/x4 400,000 Sales commissions 200,000

WIP, 1/1/x4 30,000 Sales salaries 180,000

WIP, 12/31/x4 20,000 Advertising costs 150,000

Administration costs 250,000

87) What is the amount of direct materials used for the year 20x4? 87) ______

A) $894,000 B) $946,000

C) $860,000

D) $1,031,000 E) $1,014,000

88) What is the manufacturing cost incurred in 20x4? 88) ______

A) $2,352,000

B) $1,088,000 C) $2,132,000

D) $2,097,000

E) $2,102,000

89) What is the cost of goods manufactured in 20x4? 89) ______

A) $2,112,000

B) $2,102,000 C) $2,132,000

D) $2,082,000 E) $2,097,000

90) What is the cost of goods sold in 20x4? 90) ______

A) $2,302,000

B) $1,922,000 C) $2,322,000

D) $1,502,000 E) $1,712,000


Frazer, Inc. had the following activities in the year:

Direct materials:

Beginning inventory $100,000

Purchases 308,000








91) What is Frazer's cost of goods manufactured? 91) ______

A) $512,000

B) $496,000

C) $536,000

D) $480,000

E) $476,000

92) What is Frazer's cost of goods sold? 92) ______

A) $400,000

B) $464,000

C) $520,000

D) $440,000

E) $516,000

93) Which statement about conversion costs is CORRECT using the 93) ______

two-part classification of costs?

A) They include indirect manufacturing labour costs but not

manufacturing overhead costs.

B) They include only indirect manufacturing costs. C) They include only direct manufacturing labour costs.

D) They include indirect manufacturing costs and

direct manufacturing labour costs.

E) They include both direct manufacturing labour costs and manufacturing overhead costs.

94) Service organizations in our economy 94) ______ A) have a finished goods inventory account.

B) have a work in process inventory account. C) do not have a direct materials inventory account.

D) have a raw materials account. E) do not have a supply inventory account.

95) Which of the following formulae would determine costs of goods sold in 95) ______ a merchandising entity?

A) Beginning inventory - Purchases + Ending inventory B) Ending Inventory - Beginning inventory - Purchases

C) Purchases - Ending inventory D) Beginning inventory + Purchases - Ending inventory

E) Beginning inventory - Ending inventory - Purchases

96) Which of the following formulae would determine cost of goods sold in 96) ______

a manufacturing entity? A) Cost of goods manufactured - Ending inventory + Beginning

inventory B) Cost of goods manufactured + Ending inventory + Beginning

inventory

C) Beginning inventory + Ending inventory - Cost of goods manufactured

D) Beginning inventory - Ending inventory - Cost of goods manufactured.

E) Ending inventory - Beginning inventory - Cost of goods manufactured

97) The following information pertains to Tom's Country Wood Shop: 97) ______

Beginning finished goods, 1/1/x4 $15,000 Ending finished goods, 12/31/x4 9,500

Cost of goods sold 56,000

Sales 112,500 Operating expenses 25,000

What is the cost of goods manufactured for 20x4?

A) $31,500 B) $61,500

C) $50,500

D) $66,500 E) $56,500

98) Generally, costs which are initially recorded as an asset and sub sequent

A) manufacturing costs. B) non-manufacturing costs.

C) non-inventoriable costs. D) inventoriable costs.

E) non-capitalized costs.

99) Which of the following is NOT TRUE of Period Costs? A) For manufacturing sector companies they include all

nonmanufacturing costs.

B) They are also called operating costs. C) They are expected to benefit future periods.

D) For merchandising sector companies they include all costs not related to the cost of goods purchased for resale.

E) They are all of the costs on the income statement except cost of goods sold.

99) ______

100) The components of prime costs and conversion costs include all of the following EXCEPT

A) direct materials costs. B) direct manufacturing labour costs plus indirect manufacturing

costs. C) indirect materials costs.

D) indirect manufacturing costs.

E) direct manufacturing labour costs.

100) _____

ANSWER KEY

1) TRUE 2) FALSE

3) FALSE

4) FALSE

5) TRUE 6) TRUE

7) FALSE

8) TRUE 9) FALSE

10) FALSE 11) TRUE

12) FALSE 13) TRUE

14) FALSE

15) TRUE 16) TRUE

17) FALSE 18) FALSE

19) FALSE 20) TRUE

21) TRUE

22) FALSE 23) TRUE

24) FALSE 25) FALSE

26) FALSE 27) TRUE

28) FALSE

29) FALSE 30) TRUE

31) TRUE 32) FALSE

33) TRUE 34) TRUE

35) FALSE

36) TRUE 37) FALSE

38) TRUE 39) TRUE

40) FALSE

41) TRUE 42) TRUE

43) FALSE 44) TRUE

45) TRUE 46) TRUE

47) E

48) D 49) A

50) E 51) B

52) A

53) E 54) E

55) E

56) E

57) E 58) E

59) E

60) A 61) A

62) A 63) E

64) D 65) C

66) A

67) A 68) E

69) D 70) A

71) E 72) E

73) E

74) A 75) B

76) A 77) E

78) B 79) D

80) D

81) C 82) E

83) E 84) B

85) C 86) E

87) E

88) E 89) A

90) B 91) D

92) C

93) B 94) C

95) D 96) A

97) C 98) D

99) C

100) C

Documents

Test Bank For Cost Accounting A Managerial Emphasis Fifth ... · 16) A unit cost is computed by dividing a total cost by some number of 16) _____ units. 17) Unit costs are not considered