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ADVANCED COST ACCOUNTING MULTIPLE CHOICE QUESTIONS

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ADVANCED COST ACCOUNTING MULTIPLE CHOICE QUESTIONS

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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Financial Accounting

Please see the questions attached.
An accountant has debited an asset account for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction?
a. Nothing further must be done.
b. Debit a stockholders' equity account for $500.
c. Debit another asset account for $500.
d. Credit a different asset account for $500.

12. An accountant has debited an asset account for $1,000 and credited a liability account for $500. Which of the following would be an incorrect way to complete the recording of the transaction?
a. Credit an asset account for $500.
b. Credit another liability account for $500.
c. Credit a stockholders' equity account for $500.
d. Debit a stockholders' equity account for $500.

On June 1, 2000 Donna Lane buys a copier machine for her business and finances this purchase with cash and a note. When journalizing this transaction, she will
a. use two journal entries.
b. make a compound entry.
c. make a simple entry.
d. list the credit entries first, which is proper form for this
type of transaction

15. A company spends $10 million dollars for an office building.
Over what period should the cost be written off?
a. When the $10 million is expended in cash
b. All in the first year
c. Over the useful life of the building
d. After $10 million in revenue is earned

Reed Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,200 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be to
a. Debit Office Supplies Expense, $1,200; Credit Office Supplies,
$1,200.
b. Debit Office Supplies, $2,800; Credit Office Supplies Expense,
$2,800.
c. Debit Office Supplies Expense, $2,800; Credit Office Supplies,
$2,800.
d. Debit Office Supplies, $1,200; Credit Office Supplies Expense,
$1,200.

19. A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause
a. expenses to be overstated.
b. net income to be overstated.
c. liabilities to be understated.
d. revenues to be understated.

20 On July 1 the Dryer Shoe Store paid $9,000 to Ace Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the
adjusting entry to be made by the Dryer Shoe Store is
a. Debit Rent Expense, $9,000; Credit Prepaid Rent, $1,500.
b. Debit Prepaid Rent, $1,500; Credit Rent Expense, $1,500.
c. Debit Rent Expense, $1,500; Credit Prepaid Rent, $1,500.
d. Debit Rent Expense, $9,000; Credit Prepaid Rent, $9,000.

21. Neal Realty Company received a check for $15,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent was credited for the full $15,000. Financial statements will be prepared on July 31. Neal Realty should make the following adjusting entry on July 31:
a. Debit Unearned Rent, $2,500; Credit Rent Revenue, $2,500.
b. Debit Rent Revenue, $2,500; Credit Unearned Rent Revenue,
$2,500.
c. Debit Unearned Rent, $15,000; Credit Rent Revenue, $15,000.
d. Debit Cash, $15,000; Credit Rent Revenue, $15,000.

22 A lawyer collected $960 of legal service revenue in advance. He erroneously debited Cash for $690 and credited Accounts Receivable for $690. The correcting entry is
a. Cash .................................. 690
Accounts Receivable ................... 270
Unearned Legal Service Revenue .... 960
b. Cash .................................. 960
Legal Service Revenue ............. 960
c. Cash .................................. 270
Accounts Receivable ................... 690
Unearned Legal Service Revenue .... 960
d. Cash .................................. 270
Accounts Receivable ............... 270

40 A company has goods available for sale during a period at cost and at retail of $60,000 and $100,000, respectively. If sales during the period amounted to $80,000, an estimate of the ending inventory at cost at the end of the period under the retail method is
a. $32,000.
b. $48,000.
c. $12,000.
d. $20,000.

42. Winter Department Store utilizes the retail inventory method to estimate its inventories. It calculated its cost to retail ratio during the period at 70%. Goods available for sale at retail amounted to $300,000 and goods were sold during the period for $200,000. The estimated cost of the ending inventory is
a. $100,000.
b. $210,000.
c. $70,000.
d. $142,857.

43 Winter Department Store utilizes the retail inventory method to
estimate its inventories. It calculated its cost to retail ratio
during the period at 70%. Goods available for sale at retail
amounted to $300,000 and goods were sold during the period for
$200,000. The estimated cost of the ending inventory is
a. $100,000.
b. $210,000.
c. $70,000.
d. $142,857.

1. A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $80; Second purchase $95; Third purchase $85. If the company sold two units for
a total of $250 and used FIFO costing, the gross profit for the
period would be
a. $75.
b. $85.
c. $70.
d. $60.

2. The income statement and balance sheet columns of Grant Company's
work sheet reflects the following totals:
?????????????????????????????????????????
Income Statement Balance Sheet
?????????????????? ???????????????????
Dr. Cr. Dr. Cr.
??????? ??????? ??????? ???????
Totals $45,000 $55,000 $44,000 $34,000

24. The net income (or loss) for the period is
a. $45,000 income.
b. $10,000 loss.
c. $10,000 income.
d. not determinable.

1 A lawyer collected $960 of legal service revenue in advance. He
erroneously debited Cash for $690 and credited Accounts Receivable for $690. The correcting entry is
a. Cash .................................. 690
Accounts Receivable ................... 270
Unearned Legal Service Revenue .... 960
b. Cash .................................. 960
Legal Service Revenue ............. 960
c. Cash .................................. 270
Accounts Receivable ................... 690
Unearned Legal Service Revenue .... 960
d. Cash .................................. 270
Accounts Receivable ............... 270

2 Jeff is a barber who does his own accounting for his shop. When he buys supplies, he routinely debits Supplies Expense. Jeff purchased $1,500 of supplies in January and his inventory at the end of January shows $400 of supplies remaining. What adjusting entry should Jeff make on January 31?
a. Supplies Expense ...................... 400
Supplies .......................... 400
b. Supplies Expense ...................... 1,500
Cash .............................. 1,500
c. Supplies .............................. 400
Supplies Expense .................. 400
d. Supplies Expense ...................... 1,100
Supplies .......................... 1,100

32. A new accountant working for McCoy Company records $600 Depreciation Expense on store equipment as follows:
Dr. Depreciation Expense ............ 600
Cr. Cash ........................ 600
The effect of this entry is to
a. adjust the accounts to their proper amounts on December 31.
b. understate total assets on the balance sheet as of December 31.
c. overstate the book value of the depreciable assets at
December 31.
d. understate the book value of the depreciable assets as of
December 31.

38 On January 2, 2000, Columbia Savings and Loan purchased a general
liability insurance policy for $2,400 for coverage for the calendar year. The entire $2,400 was charged to Insurance Expense on January 2, 2000. If the firm prepares monthly financial statements, the proper adjusting entry on January 31, 2000, will be:
a. Insurance Expense ..................... 2,200
Prepaid Insurance ................. 2,200
b. Prepaid Insurance ..................... 2,200
Insurance Expense ................. 2,200
c. Insurance Expense ..................... 200
Prepaid Insurance ................. 200
d. Prepaid Insurance ..................... 200
Insurance Expense ................. 200

39. Reed Company purchased office supplies costing $4,000 and debited
Office Supplies for the full amount. At the end of the accounting
period, a physical count of office supplies revealed $1,200 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be
a. Debit Office Supplies Expense, $1,200; Credit Office Supplies,
$1,200.
b. Debit Office Supplies, $2,800; Credit Office Supplies Expense,
$2,800.
c. Debit Office Supplies Expense, $2,800; Credit Office Supplies,
$2,800.
d. Debit Office Supplies, $1,200; Credit Office Supplies Expense,
$1,200.

40 Larkin Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an
inventory of the laundry supplies indicated only $2,000 on hand.
The adjusting entry that should be made by the company on June 30 is
a. Debit Laundry Supplies Expense, $2,000; Credit Laundry Supplies,
$2,000.
b. Debit Laundry Supplies Expense, $4,500; Credit Laundry Supplies,
$4,000.
c. Debit Laundry Supplies, $4,500; Credit Laundry Supplies Expense,
$4,500.
d. Debit Laundry Supplies Expense, $4,500; Credit Laundry Supplies,
$4,500.

1. Carey Guitar Company borrowed $20,000 from the bank signing a 9%,
3-month note on September 1. Principal and interest are payable to the bank on December 1. If the company prepares monthly financial statements, the adjusting entry that the company should make for interest on September 30, would be
a. Debit Interest Expense, $1,800; Credit Interest Payable, $1,800.
b. Debit Interest Expense, $150; Credit Interest Payable, $150.
c. Debit Note Payable, $1,800; Credit Cash, $1,800.
d. Debit Cash, $450; Credit Interest Payable, $450.

2. Jill Ryan has performed $600 of CPA services for a client but
has not billed the client as of the end of the accounting period.
What adjusting entry must Jill make?
a. Debit Cash and credit Unearned Service Revenue
b. Debit Accounts Receivable and credit Unearned Service Revenue
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Unearned Service Revenue and credit Service Revenue

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