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Cost Accounting Multiple Choice Questions.

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1) The basic types of cost accounting system are:
A)Job order cost systems, activity based cost systems and process cost systems. (B) Direct cost system and indirect cost systems (C) Complete job cost systems and work in process cost system. (D) Fixed cost systems and variable cost systems

2) In ABC, only one cost driver should be used in applying overhead.
A) True (B) False

3) Elston's Metal Shop uses a job order cost system. It applies overhead to jobs at a rate of 150% of direct labor costs. Job No.2617 required $500bin direct labor costs. The job was initially budgeted to require $550 in direct labor costs. Overhead applied to No.2617 during the period amounted to:
A) $550 (B) $750 (C) $825 (D) some other amount.

4) If the manufacturing overhead account at month end has a remaining debit balance, this indicates that overhead is under applied.
A) True (B) False

5)A predetermined overhead application rate:
A) Is used in a job order cost system but cannot be used in a process cost system (B) Can be determined by dividing budgeted direct labor cost by the budgeted factory overhead costs. (C) Is not generally accepted for financial reporting purpose. (D) Tends to avoid wide variation in per-unit overhead cost because of short -run changes in volume.

6) Parkway Auto Body uses a job order cost system. Overhead is applied to jobs on the basis of direct labor hours. During the current period, jobs on the basis of direct labor hours. During the current period, Job No.337was charged $400 in direct material , $450 in direct labor, and $180 in overhead. If direct labor cost an average f $15 per hour, the company's overhead application rate is:
A) $9 per direct labor hour B) $6 per direct labor hour ( C ) $17 per direct labor hour (D) $20 per direct labor hour

7) The type of cost accounting system best suited to a particular company depends on:
A) The nature of the company's manufacturing operations (B) The requirement set forth by the FASB (C) Government regulation (D) The type of cost drivers available

8) If manufacturing overhead is materially over applied, its best to close it to:
A) Work in process inventory (B) Finished goods inventory (C) Cost of goods sold (D) All three in an apportioned manner

9) All of the following are advantages of developing a predetermined overhead application rate except:
A) Short run fluctuations in volume of output are normalized (B) In a job system, unit costs can be determined as soon as jobs are completed (C) The overhead application rate facilitates assigning overhead cost to the ending inventory of work in process. (D) Actual overhead will always be less than applied overhead.

10) PAK Co. uses a job order cost accounting system. At year -end the work in process Inventory controlling account showed a debit balance of $57,500. For the two job in process at year-end, one showed $8,000 in direct materials and $6,000 in direct labor. The job cost sheet for the second job showed $12,000 in direct material and $9,000 in direct labor. If the company is using a predetermined overhead application rate based on direct labor cost, the rate is:
A) 50% (B) 100% (C) 150% (D) 200%

11) In a job cost system, the work in process inventory controlling account may be reconciled to the total of the:
A) Employee time cards (B) Materials requisitions (C) Work in process Inventory records for each department or process(D) Job cost sheets

Use the following to answer question 12-14

Swift Boat Company Corporation uses a job order cost system and applies overhead based on percentage of direct labor cost. Cost flow through the work in Process Inventory account during March are given below

Work in Process
Beginning Balance 0 Transferred out 240,000
Direct Materials 45,000
Direct Labor 75,000
Overhead 225,000

Ending Balance 105,000

Only Job # 007 was still in process at the end of March and this job had been charged with $15,000 in direct material cost.

12)Refer to the information above . The amount of direct materials cost charged to completed jobs during March was:
A) $15,000 (B) $45,000 (C) $30,000 (D) some other amount

13) Refer to the above information . The predetermined overhead application rate at Swift Boat is what percentage of direct labor cost.
A) 33% (B) 67% (C) 300% (D) 400%

14 Refer to the information above. The journal entry which accounts for the $240,000 transferred out of work in process includes a debit of $240,000 to
A) Finished Goods (B) Cost of Goods Sold (C) Accounts Receivable (D) Sales

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Solution Summary

Solution contains answers of multiple choice questions.

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1. Absorption costing measures contribution to profit as:
A) Sales less unit- level costs spent of goods sold.
B) Sales less absorption cost of goods sold.
C) Sales less absorption cost of goods sold.
D) Sales less all costs including operating expenses.

2. In a job-order costing system, the journal entry to record depreciation on factory equipment would be recorded by a:
A) Debit to Depreciation Expense, credit to Accumulated Depreciation
B) Debit to Manufacturing Overhead, credit to Depreciation Expense
C) Debit to manufacturing Overhead, credit to Work-in-Process
D) Debit to Manufacturing Overhead, credit to Accumulated Depreciation

3. Which of the following statements regarding traditional cost accounting systems is False?
A) Products are often over or under costed in traditional cost accounting systems
B) Most traditional cost accounting systems do not trace individual costs to products.
C) The advantage of traditional cost accounting systems is their simplicity.
D) Traditional cost accounting systems can be sufficient to meet managers' cost information needs as long as the level of indirect costs is relatively high compared to the level of direct costs.

4. Which of the following indicates that a company may benefit from an Activity-Based Costing system?
A) Standard high-volume goods and services show significant profits.
B) Indirect costs are insignificant in proportion to direct costs.
C) The company loses relatively high priced bids.
D) Goods and services are complex and may require many different processes or inputs

5. Which of the following is not a planning issue in Activity-Based-Management?
A) The intended scope of the project
B) The current customer base
C) Information gathering
D) Resistance to change

6. Under what conditions will the FIFO method produce the same cost of goods manufactured as the weighted-average method?
A) When there is no ending inventory
B) When the beginning and ending inventories are both 50% complete
C) When there is no beginning inventory
D) When the beginning and ending inventories are equal

7. Which of the following is not a step needed to maximize the profits from joint products?
A) Forecasting the sales price of each final product.
B) B) Identifying alternative sets and quantities of final products possible from the joint process.
C) Determining how to allocate joint costs to the final products.
D) Estimating the costs required to further process joint products into salable products.

8. Which of the following is not a method of allocating joint costs?
A) Sales value at split-off
B) Net realizable value
C) By-product method
D) Physical-measures method

9. Which of the following statements best describes the account analysis approach to cost estimation?
A) Cost estimates are based on optimal or ideal operating conditions.
B) Discernible patterns of the past are used to predict future behavior.
C) Historical operating costs are plotted against some past operating activity.
D) Relies heavily on the accounting personnel's experience and judgment.

10. Which cost estimation method is based on both past and future data?
A) Engineering method.
B) Regression method.
C) Account analysis method.
D) All of the above.

11. Cost-volume profit (CVP) analysis is a key factor in many decisions, including choice of product lines, pricing of products, marketing strategy, and use of productive facilities. A calculation used in a CVP analysis is the break-even point. Once the break-even point has been reached, operating income will increase by the
A) contribution margin per unit for each additional unit sold
B) fixed cost per unit for each additional unit sold.
C) variable cost per unit for each additional unit sold
D) none of the above.

12. Break-even analysis assumes that:
A) total revenue is constant.
B) unit variable cost is constant.
C) unit fixed cost is constant.
D) all of the above.

13. Which of the following is typically considered fixed under traditional budgeting processes, but considered variable under activity based budgeting:
A) Set ups, inspections and purchasing
B) Material handling, designing and quality control
C) A and B
D) None of the above

14. Which of the following does not affect a material purchase price variance?
A) Increases in the demand for the firm's output
B) Need to purchase component parts with precise engineering specifications
C) Rush order requests from the production department
D) World-wide shortages of critical input materials

15. Subjective performance evaluation:
A) Compares an individual's performance to that of others.
B) Bases rewards on a performance evaluation formula.
C) Compares individual performance to set objectives or expectations.
D) Uses non-quantified criteria to evaluate individuals.

16. In a multi-product firm, activity levels for a flexible budget are based on
A) output measures
B) input measures
C) Either
D) Neither

17. Which of the following companies would most likely use a process costing system?
A) A large computer manufacturer where each computer is made to customer specifications.
B) A luxury home builder
C) A law firm
D) A manufacturer of cereals

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