Test 1 Spring 2008 Chapters 1-3 Name: __________________________

A)
B)
C)
D)

Row?_________

1. Managerial accounting:
is more future oriented than financial accounting.
tends to summarize information more than financial accounting
is primarily concerned with providing information to external users.
is more concerned with precision than timeliness.

2. The function of management that compares planned results to actual results is known
as:
A)
planning.
B)
directing and motivating.
C)
controlling.
D)
decision making.
A)
B)
C)
D)

3. Which of the functions of management involves overseeing day-to-day activities?

Planning
Directing and motivating
Controlling
Decision making

4. Ideally, how many units should be produced in a just-in-time manufacturing system?

A)
budgeted customer demand for the current week.
B)
budgeted customer demand for the following week.
C)
actual customer demand for the current week.
D)
maximum production capacity for the current week.
5. After careful planning, Jammu Manufacturing Corporation has decided to switch to a
just-in-time inventory system. At the beginning of this switch, Jammu has 30 units of
product in inventory. Jammu has 2,000 labor hours available in the first month of this
switch. These hours could produce 500 units of product. Customer demand for this first
month is 400 units. If just-in-time principles are correctly followed, how many units
should Jammu plan to produce in the first month of the switch?
A)
370
B)
400
C)
430
D)
470
A)
B)
C)
D)

6. Management accounting focuses primarily on providing data for:

internal uses by managers.
external uses by stockholders and creditors.
external uses by the Internal Revenue Service.
external uses by the Securities and Exchange Commission.

A)
B)
C)
D)

7. Indirect labor is a part of:

Prime cost.
Conversion cost.
Period cost.
Nonmanufacturing cost.
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8. The cost of lubricants used to grease a production machine in a manufacturing

company is an example of a(n):
A)
period cost.
B)
direct material cost.
C)
indirect material cost.
D)
none of the above.
9. The salary paid to the president of King Company would be classified on the income
statement as a(n):
A)
administrative expense.
B)
direct labor cost.
C)
manufacturing overhead cost.
D)
selling expense.
10. Direct labor cost is a part of:
A
B
C
D

)
)
)
)

C o n v e rs io n c o s t
N o
N o
Yes
Yes

P rim e c o s t
N o
Yes
Yes
N o

11. Direct material cost is a:

A
B
C
D

)
)
)
)

C o n v e rs io n c o s t
N o
N o
Yes
Yes

P rim e c o s t
N o
Yes
Yes
N o

12. Prime cost and conversion cost share what common element of total cost?
A)
Direct materials.
B)
Direct labor.
C)
Variable overhead.
D)
Fixed overhead.
13. Wages paid to a timekeeper in a factory are a:
A
B
C
D

)
)
)
)

P rim e c o s t
Yes
Yes
N o
N o

C o n v e rs io n c o s t
N o
Yes
N o
Yes

14. Property taxes on a company's factory building would be classified as a(n):

A)
product cost.

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B)
C)
D)

opportunity cost.
period cost.
variable cost.

15. Aable Company's manufacturing overhead is 20% of its total conversion costs. If direct
labor is $45,000 and if direct materials are $53,000, the manufacturing overhead is:
A)
$11,250
B)
$13,250
C)
$180,000
D)
$24,500
16. During the month of January, direct labor cost totaled $17,000 and direct labor cost was
60% of prime cost. If total manufacturing costs during January were $82,000, the
manufacturing overhead was:
A)
$11,333
B)
$53,667
C)
$28,333
D)
$65,000
17. Last month a manufacturing company had the following operating results:
B e g in n in g f in is h e d g o o d s in v e n to r y ...............
E n d in g f in is h e d g o o d s in v e n to r y ....................
S a le s ................................................................
G r o s s m a r g in ...................................................
A)
B)
C)
D)

$ 7 2 ,0 0 0
$ 6 6 ,0 0 0
$ 4 6 5 ,0 0 0
$ 8 8 ,0 0 0

What was the cost of goods manufactured for the month?

$371,000
$459,000
$383,000
$377,000

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Use the following to answer questions 18-21:

The following data (in thousands of dollars) have been taken from the accounting records of
Karsen Corporation for the just completed year.
S a le s ......................................................................
R a w m a te r ia ls in v e n to r y , b e g in n in g .....................
R a w m a te r ia ls in v e n to r y , e n d in g ...........................
P u r c h a s e s o f r a w m a te r ia ls ....................................
D ir e c t la b o r ............................................................
M a n u f a c tu r in g o v e r h e a d .......................................
A d m in is tra tiv e e x p e n s e s .......................................
S e llin g e x p e n s e s ....................................................
W o r k in p r o c e s s in v e n to r y , b e g in n in g ..................
W o r k in p r o c e s s in v e n to r y , e n d in g .......................
F in is h e d g o o d s in v e n to r y , b e g in n in g ....................
F in is h e d g o o d s in v e n to r y , e n d in g .........................

$930
$70
$40
$190
$150
$210
$90
$120
$80
$70
$90
$140

Use these data to answer the following series of questions.

18. The cost of the raw materials used in production during the year (in thousands of
dollars) was:
A)
$230
B)
$220
C)
$160
D)
$260
19. The cost of goods manufactured (finished) for the year (in thousands of dollars) was:
A)
$590
B)
$650
C)
$660
D)
$570
20. The cost of goods sold for the year (in thousands of dollars) was:
A)
$680
B)
$540
C)
$640
D)
$730
21. The net operating income for the year (in thousands of dollars) was:
A)
$180
B)
$170
C)
$390
D)
$190
22. Emco Company uses direct labor cost as a basis for computing its predetermined
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A)
B)
C)
D)

overhead rate. In computing the predetermined overhead rate for last year, the company
misclassified a portion of direct labor cost as indirect labor. The effect of this
misclassification will be to:
understate the predetermined overhead rate.
overstate the predetermined overhead rate.
have no effect on the predetermined overhead rate.
cannot be determined from the information given.

23. Which of the following entries would record correctly the application of overhead cost?
A )

A)
B)
C)
D)

W o r k in P r o c e s s ..................................
A c c o u n ts P a y a b le .......................
B)
M a n u f a c tu r in g O v e r h e a d .....................
A c c o u n ts P a y a b le .......................
C)
M a n u f a c tu r in g O v e r h e a d .....................
W o r k in P r o c e s s .........................
D )
W o r k in P r o c e s s ..................................
M a n u f a c tu r in g O v e r h e a d ...........
Item A
Item B
Item C
Item D

X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X

24. The operations of Kalispell Company resulted in overapplied overhead for the month
just completed. Which of the following journal entries can be correct if Kalispell
allocates under- or overapplied overhead among accounts?
A )

A)
B)
C)
D)

C o s t o f G o o d s S o ld .................................
M a n u f a c tu r in g O v e r h e a d ...............
B)
M a n u f a c tu r in g O v e r h e a d .........................
C o s t o f G o o d s S o ld ........................
C)
W o r k in P r o c e s s ......................................
F in is h e d G o o d s ........................................
C o s t o f G o o d s S o ld ........................
M a n u f a c tu r in g O v e r h e a d ...............
D )
M a n u f a c tu r in g O v e r h e a d .........................
W o r k in P r o c e s s .............................
F in is h e d G o o d s ..............................
C o s t o f G o o d s S o ld ........................
Item A
Item B
Item C
Item D

X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X

25. Which of the following entries would record correctly the monthly salaries earned by
the top management of a manufacturing company?

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A )

A)
B)
C)
D)

M a n u f a c tu r in g O v e r h e a d ............................
S a la r ie s a n d W a g e s P a y a b le .............
B )
S a la r ie s E x p e n s e .........................................
S a la r ie s a n d W a g e s P a y a b le .............
C )
W o r k in P r o c e s s .........................................
S a la r ie s a n d W a g e s P a y a b le .............
D )
S a la r ie s a n d W a g e s P a y a b le .......................
S a la r ie s E x p e n s e ...............................
Item A
Item B
Item C
Item D

X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X

26. The journal entry to record applying overhead during the production process is:
A )

A)
B)
C)
D)

M a n u f a c tu r in g O v e r h e a d .....................................
W o r k I n P r o c e s s .........................................
B)
F in is h e d G o o d s ....................................................
M a n u f a c tu r in g O v e r h e a d ...........................
C)
M a n u f a c tu r in g O v e r h e a d .....................................
F in is h e d G o o d s ..........................................
D )
W o r k I n P r o c e s s ..................................................
M a n u f a c tu r in g O v e r h e a d ...........................
Item A
Item B
Item C
Item D

X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X

27. When manufacturing overhead is applied to production, it is added to:

A)
the Cost of Goods Sold account.
B)
the Raw Materials account.
C)
the Work in Process account.
D)
the Finished Goods inventory account.
28. Under a job-order costing system, the dollar amount transferred from Work in Process
to Finished Goods is the sum of the costs charged to all jobs:
A)
started in process during the period.
B)
in process during the period.
C)
completed and sold during the period.
D)
completed during the period.
29. Blackwood Co. uses a predetermined overhead rate based on direct labor cost to apply
manufacturing overhead to jobs. The predetermined overhead rates for the year are
200% for Department A and 50% for Department B. Job 123, started and completed
during the year, was charged with the following costs:

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D e p t. A
D ir e c t m a te r ia ls .............................. $ 2 5 ,0 0 0
D ir e c t la b o r.....................................
?
M a n u f a c tu r in g o v e r h e a d ................ $ 4 0 ,0 0 0
A)
B)
C)
D)

D e p t. B
$ 5 ,0 0 0
$ 3 0 ,0 0 0
?

The total manufacturing costs associated with Job 123 should be:
$135,000
$180,000
$195,000
$240,000
Source: CPA, adapted

30. At the beginning of the year, manufacturing overhead for the year was estimated to be
$477,590. At the end of the year, actual direct labor-hours for the year were 29,000
hours, the actual manufacturing overhead for the year was $472,590, and
manufacturing overhead for the year was overapplied by $110. If the predetermined
overhead rate is based on direct labor-hours, then the estimated direct labor-hours at the
beginning of the year used in the predetermined overhead rate must have been:
A)
29,300 direct labor-hours
B)
28,987 direct labor-hours
C)
28,993 direct labor-hours
D)
29,000 direct labor-hours

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Answer Key
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.

A
C
B
C
A
A
B
C
A
C
B
B
D
A
A
B
A
B
A
B
A
B
D
D
B
D
C
D
A
A

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