Multiple Choice Commerce Test with Answers

Topics: Cost accounting, Costs, Inventory Pages: 6 (843 words) Published: December 3, 2014
1
In many industries that have a process manufacturing operation, the production process is of a nature that some units will always be lost due to evaporation, shrinkage, spillage, or other factors. These normal losses:

a.
are treated as period costs.

b.
are absorbed by good units.

c.
are charged to a separate Loss from Normal Spoilage account.

d.
are 100% avoidable costs.

status: incorrect (0.0)
correct: b
your answer: c
feedback: Incorrect. Normal losses are expected in the manufacturing process and cannot be avoided. They are treated as product costs; that is, the cost of the lost units is included as a part of the cost of all units finished or still in process because the good units could not have been produced without this normal spoilage.

2
An abnormal loss:

a.
is treated as a period cost.

b.
is included as part of the cost of transferred goods.

c.
results in higher unit cost of the remaining units.

d.
happens under normal, efficient operating conditions.

status: incorrect (0.0)
correct: a
your answer: b
feedback: Incorrect. Abnormal losses are not included as part of the cost of transferred or finished goods, but are treated as a period cost-that is, they are charged to a separate account such as Loss from Abnormal Spoilage.

3
Which of the following is the most commonly used method for assignment of joint costs?

a.
Average production cost

b.
Split-off method

c.
Relative sales value

d.
Relative percentage of direct costs basis

status: incorrect (0.0)
correct: c
your answer: b
feedback: Incorrect. The assignment of joint costs in proportion to the relative sales value of each product is most commonly used.

4
In which scenario would an adjusted sales value be used to assign costs?

a.
If a joint product is to be processed further after the point of separation.

b.
If joint products are separately identifiable before split-off point

c.
If abnormal losses occur during production of joint products.

d.
If one of the joint products has negligible market value.

status: incorrect (0.0)
correct: a
your answer: c
feedback: Incorrect. If a product is to be processed further after the point of separation, costs should not be assigned on the basis of ultimate sales value because the additional processing adds value to the product. In a case such as this, an adjusted sales value is used that takes into consideration the cost of the processing after split-off.

5
In accounting for by-products, when the by-products are sold for more than the estimated sales value, the difference is:

a.
debited to Gain or Loss on Sale of By-Product

b.
credited to By-Product Inventory.

c.
credited to Gain or Loss on Sale of By-Product

d.
immaterial, so not recorded.

status: incorrect (0.0)
correct: c
your answer: b
feedback: Incorrect. If a by-product is sold for more than the estimated sales value, the difference is credited to Gain or Loss on Sale of By-Product.

6
The following information is available for the month of January from the Forming department of the Bauxite Corporation:

Materials are added at the beginning of the process in the Forming department. Using the average cost method, what are the equivalent units of production for the month of January?

a.
Materials:120,000 Conversion:112,500

b.
Materials:150,000 Conversion:135,000

c.
Materials:120,000 Conversion:135,000

d.
Materials:105,000 Conversion:105,000

status: incorrect (0.0)
correct: a
your answer: b
feedback: Incorrect.

7
The following information is available for Delta Department of Ronen Company for the month of October:

All materials are added at the beginning of the process. Using the average cost method, the cost (rounded to two places) per equivalent unit for materials is:

a.
$2.40

b.
$2.00

c.
$1.60

d.
$1.92

status: incorrect...
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