Cost Accounting

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Select the one best answer for each:

1. Which one of the following would not be classified as manufacturing overhead? a.Indirect labor
b.Direct materials
c.Insurance on factory building
d.Indirect materials

2. Prime costs of a company are $3,000,000, manufacturing overhead is $1,500,000 and direct labor is $750,000. What is the amount of direct materials? a.$1,500,000.
d.Cannot be determined from the information provided.

3. An important feature of a job order cost system is that each job a.must be similar to previous jobs completed.
b.has its own distinguishing characteristics.
c.must be completed before a new job is accepted.
d.consists of one unit of output.

4. When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is a.Finished Goods Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
b.Work In Process Inventory
Direct Materials
Direct Labor
Manufacturing Overhead
c.Raw Materials Inventory
Work In Process Inventory
d.Finished Goods Inventory
Work In Process Inventory

5. 3,000 units in a process that are 70% complete, are referred to as a.3,000 equivalent units of production.
b.900 equivalent units of production.
c.2,100 equivalent units of production.
d.900 unequivalent units of production.

6. Which of the following is correct?
Job OrderProcess Cost
a.Work in process accountseveralone for each process b.Work in process accountoneone
c.Work in process accountoneone for each process
d.Work in process accountseveralone4.

7. A well-designed activity-based costing system starts with a.identifying the activity-cost pools.
b.computing the activity-based overhead rate.
c.assigning manufacturing overhead costs for each activity cost pool to products. d.analyzing the activities performed to manufacture a product.

8. Which of the following factors would suggest a switch to activity-based costing? a.Product lines similar in volume and manufacturing complexity. b.Overhead costs constitute a significant portion of total costs. c.The manufacturing process has been stable.

d.Production managers use data provided by the existing system.

9. Which of the following is not typical of traditional costing systems? a.Use of a single predetermined overhead rate.
b.Use of direct labor hours or direct labor cost to assign overhead. c.Assumption of correlation between direct labor and incurrence of overhead cost. d.Use of multiple cost drivers to allocate overhead.

10. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs:

Unit Variable CostUnit Fixed Cost
b.Remains constantRemains constant
c.DecreaseRemains constant
d.Remains constantDecrease

11. The relevant range of activity refers to the
a.geographical areas where the company plans to operate. b.activity level where all costs are curvilinear.
c.levels of activity over which the company expects to operate. d.level of activity where all costs are constant.

12. The financial budgets include the budget and the selling and administrative expense budget. budget and the budgeted balance sheet.
c.budgeted balance sheet and the budgeted income statement. budget and the production budget.

13. It is important that budgets be accepted by
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