Cost Accounting: Foundations and Evolutions 9th Edition by Michael R. Kinney Test Bank

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Cost Accounting: Foundations and Evolutions 9th Edition by Michael R. Kinney Test Bank

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WITH ANSWERS
Cost Accounting: Foundations and Evolutions 9th Edition by Michael R. Kinney Test Bank

 

Chapter 2Cost Terminology and Cost Behaviors

Student: ___________________________________________________________________________

  1. A cost object is anything for which management wants to collect or accumulate costs.
    True    False

 

  1. A production plant could be a cost object.
    True    False

 

  1. A specific product cannot be a cost object.
    True    False

 

  1. The portion of an assets value on the balance sheet is referred to as an expired cost.
    True    False

 

  1. The portion of an asset that was consumed during a period is referred to an expired cost.
    True    False

 

  1. A variable cost remains constant on a per-unit basis as production increases.
    True    False

 

  1. A fixed cost remains constant on a per-unit basis as production changes.
    True    False

 

  1. The relevant range is valid for all levels of activity.
    True    False

 

  1. An indirect cost can be easily traced to a cost object.
    True    False

 

  1. Both accountants and economists view variable costs as linear in nature.
    True    False

 

  1. Fixed cost per unit varies directly with production.
    True    False

 

  1. Variable cost per unit remains constant within the relevant range.
    True    False

 

  1. A cost that shifts upward or downward when activity changes by a certain interval is referred to as a mixed cost.
    True    False

 

  1. A cost that shifts upward or downward when activity changes by a certain interval is referred to as a step cost.
    True    False

 

  1. If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced, the cost is classified as a mixed cost.
    True    False

 

  1. If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced, the cost is classified as a step cost.
    True    False

 

  1. A predictor which has an absolute cause and effect relationship to a cost is referred to a cost driver.
    True    False

 

  1. A mixed cost will be an effective cost driver.
    True    False

 

  1. A variable cost will be an effective cost driver.
    True    False

 

  1. Unexpired costs are reflected on the balance sheet.
    True    False

 

  1. Expired costs are reflected on the balance sheet.
    True    False

 

  1. Distribution costs are an example of product costs.
    True    False

 

  1. Distribution costs are an example of period costs.
    True    False

 

  1. Retailers generally have a much higher degree of conversion than do manufacturing or professional firms.
    True    False

 

  1. Retailers generally have a much lower degree of conversion than do manufacturing or professional firms.
    True    False

 

  1. In a service industry, direct materials are usually insignificant in amount and can not easily be traced to a cost object.
    True    False

 

  1. In a service industry, direct materials are usually significant in amount and can be easily traced to a cost object.
    True    False

 

  1. There is typically an inverse relationship between prevention costs and failure costs.
    True    False

 

  1. There is typically a direct relationship between prevention costs and failure costs.
    True    False

 

  1. In an actual cost system, actual production overhead costs are typically accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.
    True    False

 

  1. In a normal cost system, actual production overhead costs are typically accumulated in an Overhead Control account and assigned to Work in Process at the end of the period.
    True    False

 

  1. In a normal cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.
    True    False

 

  1. In an actual cost system, factory overhead is applied to Work in Process using a predetermined overhead rate.
    True    False

 

  1. In an actual cost system, overhead is assigned to Work in Process Inventory with a debit entry to the account.
    True    False

 

  1. In an actual cost system, overhead is assigned to Work in Process Inventory with a credit entry to the account.
    True    False

 

  1. It is not necessary to prepare the Cost of Goods Manufactured statement prior to preparing the Cost of Goods Sold statement.
    True    False

 

  1. Anything for which management wants to accumulate or collect costs is known as a _________________________.
    ________________________________________

 

  1. Costs that can be conveniently traced to a cost object are referred to as ____________________ costs.
    ________________________________________

 

  1. Costs that cannot be conveniently traced to a cost object are known as ____________________ costs.
    ________________________________________

 

  1. A cost that remains unchanged in total within the relevant range is known as a ____________________ cost.
    ________________________________________

 

  1. A cost that varies in total in direct proportion to changes in activity is known as a ____________________ cost
    ________________________________________

 

  1. The assumed range of activity that reflects the companys normal operating range is referred to as the ______________________________.
    ________________________________________

 

  1. A cost that remains constant on a per unit basis within the relevant range is a ____________________ cost.
    ________________________________________

 

  1. A cost that varies inversely with the level of production is known as a ____________________ cost.
    ________________________________________

 

  1. A cost that has both fixed and variable components is known as a ____________________ cost.
    ________________________________________

 

  1. A cost that shifts upward or downward when activity changes by a certain interval is referred to as a ____________________ cost.
    ________________________________________

 

  1. Another name for inventoriable costs is ____________________ costs.
    ________________________________________

 

  1. The three stages of production for a manufacturing firm are _________________________, ______________________________, and _________________________.
    ________________________________________

 

  1. Costs that are incurred to improve quality by precluding defects and improper processing are referred to as ____________________ costs.
    ________________________________________

 

  1. Costs incurred for monitoring or inspecting products are known as ____________________ costs.
    ________________________________________

 

  1. Costs that result from defective units, product returns, and complaints are referred to as ____________________ costs.
    ________________________________________

 

  1. The term relevant range as used in cost accounting means the range over which
    A. costs may fluctuate.
    B. cost relationships are valid.
    C. production may vary.
    D. relevant costs are incurred.

 

  1. Which of the following defines variable cost behavior?
Total cost reaction
to increase in activity
Cost per unit reaction
to increase in activity
   
  1. remains constant                      remains constant
    B. remains constant                      increases
    C. increases                                 increases
    D. increases                                 remains constant

 

  1. When cost relationships are linear, total variable prime costs will vary in proportion to changes in
    A. direct labor hours.
    B. total material cost.
    C. total overhead cost.
    D. production volume.

 

  1. Which of the following would generally be considered a fixed factory overhead cost?
Straight-line Factory Units-of-production
depreciation insurance depreciation
     
  1. no          no           no
    B.      yes         no           yes
    C.      yes         yes          no
    D.      no          yes          no

 

  1. An example of a fixed cost is
    A. total indirect material cost.
    B. total hourly wages.
    C. cost of electricity.
    D. straight-line depreciation.

 

  1. A cost that remains constant in total but varies on a per-unit basis with changes in activity is called a(n)
    A. expired cost.
    B. fixed cost.
    C. variable cost.
    D. mixed cost.

 

  1. A(n) ____ cost increases or decreases in intervals as activity changes.
    A. historical cost
    B. fixed cost
    C. step cost
    D. budgeted cost

 

  1. When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n)
    A. increase in the fixed element.
    B. decrease in the variable element.
    C. increase in the mixed element.
    D. decrease in the fixed element.

 

  1. Which of the following always has a direct cause-effect relationship to a cost?
Predictor Cost driver
   
  1. yes         yes
    B. yes         no
    C. no          yes
    D. no          no

 

  1. A cost driver
    A. causes fixed costs to rise because of production changes.
    B. has a direct cause-effect relationship to a cost.
    C. can predict the cost behavior of a variable, but not a fixed, cost.
    D. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume.

 

  1. Product costs are deducted from revenue
    A. as expenditures are made.
    B. when production is completed.
    C. as goods are sold.
    D. to minimize taxable income.

 

  1. A selling cost is a(n)
product cost period cost inventoriable cost
     
  1. yes          yes          no
    B. yes          no           no
    C. no           yes          no
    D. no           yes          yes

 

  1. Which of the following is not a product cost component?
    A. rent on a factory building
    B. indirect production labor wages
    C. janitorial supplies used in a factory
    D. commission on the sale of a product

 

  1. Period costs
    A. are expensed in the same period in which they are incurred.
    B. are always variable costs.
    C. remain unchanged over a given period of time.
    D. are associated with the periodic inventory method.

 

  1. Period costs include
distribution costs outside processing costs sales commissions
     
  1. yes                    no                 yes
    B. no                     yes                yes
    C. no                     no                 no
    D. yes                    yes                yes

 

  1. The three primary inventory accounts in a manufacturing company are
    A. Merchandise Inventory, Supplies Inventory, and Finished Goods Inventory.
    B. Merchandise Inventory, Work in Process Inventory, and Finished Goods Inventory.
    C. Supplies Inventory, Work in Process Inventory, and Finished Goods Inventory.
    D. Raw Material Inventory, Work in Process Inventory, and Finished Goods Inventory.

 

  1. Cost of Goods Sold is an
    A. unexpired product cost.
    B. expired product cost.
    C. unexpired period cost.
    D. expired period cost.

 

  1. The indirect costs of converting raw material into finished goods are called
    A. period costs.
    B. prime costs.
    C. overhead costs.
    D. conversion costs.

 

  1. Which of the following would need to be allocated to a cost object?
    A. direct material
    B. direct labor
    C. direct production costs
    D. indirect production costs

 

  1. Conversion cost does not include
    A. direct labor.
    B. direct material.
    C. factory depreciation.
    D. supervisors salaries.

 

  1. The distinction between direct and indirect costs depends on whether a cost
    A. is controllable or non-controllable.
    B. is variable or fixed.
    C. can be conveniently and physically traced to a cost object under consideration.
    D. will increase with changes in levels of activity.

 

  1. Hunnicutt Company is a construction company that builds greenhouses on special request. What is the proper classification of the carpenters wages?
Product Period Direct
     
  1. yes      yes      no
    B. yes      no       yes
    C. no       no       no
    D. no       yes      yes

 

  1. Hunnicutt Company is a construction company that builds greenhouses on special request. What is the proper classification of the cost of the cement building slab used?
Direct Fixed
   
  1. no      no
    B. no      yes
    C. yes     yes
    D. yes     no

 

  1. Hunnicutt Company is a construction company that builds greenhouses on special request. What is the proper classification of indirect material used?
Prime Conversion Variable
     
  1. no      no           no
    B. no      yes          yes
    C. yes     yes          yes
    D. yes     no           no

 

  1. Which of the following costs would be considered overhead in the production of chocolate chip cookies?
    A. flour
    B. chocolate chips
    C. sugar
    D. oven electricity

 

  1. All costs related to the manufacturing function in a company are
    A. prime costs.
    B. direct costs.
    C. product costs.
    D. conversion costs.

 

  1. Prime cost consists of
direct material direct labor overhead
     
  1. no             yes        no
    B. yes            yes        no
    C. yes            no         yes
    D. no             yes        yes

 

  1. Plastic used to manufacture dolls is a
prime cost product cost direct cost fixed cost
       
  1. no        yes         yes        yes
    B. yes       no          yes        no
    C. yes       yes         no         yes
    D. yes       yes         yes        no

 

  1. The term prime cost refers to
    A. all manufacturing costs incurred to produce units of output.
    B. all manufacturing costs other than direct labor and raw material costs.
    C. raw material purchased and direct labor costs.
    D. the raw material used and direct labor costs.

 

  1. Conversion of inputs to outputs is recorded in the
    A. Work in Process Inventory account.
    B. Finished Goods Inventory account.
    C. Raw Material Inventory account.
    D. both a and b.

 

  1. In a perpetual inventory system, the sale of items for cash consists of two entries. One entry is a debit to Cash and a credit to Sales. The other entry is a debit to
    A. Work in Process Inventory and a credit to Finished Goods Inventory.
    B. Finished Goods Inventory and a credit to Cost of Goods Sold.
    C. Cost of Goods Sold and a credit to Finished Goods Inventory.
    D. Finished Goods Inventory and a credit to Work in Process Inventory.

 

  1. The formula to compute cost of goods manufactured is
    A. beginning Work in Process Inventory plus purchases of raw material minus ending Work in Process Inventory.
    B. beginning Work in Process Inventory plus direct labor plus direct material used plus overhead incurred minus ending Work in Process Inventory.
    C. direct material used plus direct labor plus overhead incurred.
    D. direct material used plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

 

  1. The final figure in the Schedule of Cost of Goods Manufactured represents the
    A. cost of goods sold for the period.
    B. total cost of manufacturing for the period.
    C. total cost of goods started and completed this period.
    D. total cost of goods completed for the period.

 

  1. The formula for cost of goods sold for a manufacturer is
    A. beginning Finished Goods Inventory plus Cost of Goods Manufactured minus ending Finished Goods Inventory.
    B. beginning Work in Process Inventory plus Cost of Goods Manufactured minus ending Work in Process Inventory.
    C. direct material plus direct labor plus applied overhead.
    D. direct material plus direct labor plus overhead incurred plus beginning Work in Process Inventory.

 

  1. Which of the following replaces the retailing component Purchases in computing Cost of Goods Sold for a manufacturing company?
    A. direct material used
    B. cost of goods manufactured
    C. total prime cost
    D. cost of goods available for sale

 

  1. Costs that are incurred to preclude defects and improper processing are:
    A. prevention costs
    B. detection costs
    C. appraisal costs
    D. failure costs

 

  1. Costs that are incurred for monitoring and inspecting are:
    A. prevention costs
    B. detection costs
    C. appraisal costs
    D. failure costs

 

  1. Costs that are incurred when customers complain are:
    A. prevention costs
    B. detection costs
    C. appraisal costs
    D. failure costs

 

  1. Richards Company

    The following information has been taken from the cost records of Richards Company for the past year:
Raw material used in production $326
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) 686
Cost of goods available for sale 826
Selling and Administrative expenses 25
   

 

Inventories Beginning Ending
Raw Material $75 $ 85
Work in Process 80 30
Finished Goods 90 110
     

Refer to Richards Company. The cost of raw material purchased during the year was
A. $316.
B. $336.
C. $360.
D. $411.

 

  1. Richards Company

    The following information has been taken from the cost records of Richards Company for the past year:
Raw material used in production $326
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) 686
Cost of goods available for sale 826
Selling and Administrative expenses 25
   

 

Inventories Beginning Ending
Raw Material $75 $ 85
Work in Process 80 30
Finished Goods 90 110
     

Refer to Richards Company. Direct labor cost charged to production during the year was
A. $135.
B. $216.
C. $225.
D. $360.

 

  1. Richards Company

    The following information has been taken from the cost records of Richards Company for the past year:
Raw material used in production $326
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) 686
Cost of goods available for sale 826
Selling and Administrative expenses 25
   

 

Inventories Beginning Ending
Raw Material $75 $ 85
Work in Process 80 30
Finished Goods 90 110
     

Refer to Richards Company. Cost of Goods Manufactured was
A. $636.
B. $716.
C. $736.
D. $766.

 

  1. Richards Company

    The following information has been taken from the cost records of Richards Company for the past year:
Raw material used in production $326
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 60% of direct labor cost) 686
Cost of goods available for sale 826
Selling and Administrative expenses 25
   

 

Inventories Beginning Ending
Raw Material $75 $ 85
Work in Process 80 30
Finished Goods 90 110
     

Refer to Richards Company. Cost of Goods Sold was
A. $691.
B. $716.
C. $736.
D. $801.

 

  1. Bridges Corporation

    The following information has been taken from the cost records of Bridges Corporation for the past year:
Raw material used in production $336
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) 711
Cost of goods available for sale 851
Selling and Administrative expenses 35
   

 

Inventories Beginning Ending
Raw Material $80 $ 90
Work in Process 85 25
Finished Goods 80 105
     

Refer to Bridges Corporation. The cost of raw material purchased during the year was
A. $326.
B. $346
C. $375
D. $426

 

  1. Bridges Corporation

    The following information has been taken from the cost records of Bridges Corporation for the past year:
Raw material used in production $336
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) 711
Cost of goods available for sale 851
Selling and Administrative expenses 35
   

 

Inventories Beginning Ending
Raw Material $80 $ 90
Work in Process 85 25
Finished Goods 80 105
     

Refer to Bridges Company. Direct labor cost charged to production during the year was
A. $125
B. $188
C. $250
D. $375.

 

  1. Bridges Corporation

    The following information has been taken from the cost records of Bridges Corporation for the past year:
Raw material used in production $336
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) 711
Cost of goods available for sale 851
Selling and Administrative expenses 35
   

 

Inventories Beginning Ending
Raw Material $80 $ 90
Work in Process 85 25
Finished Goods 80 105
     

Refer to Bridges Company. Cost of Goods Manufactured was
A. $651
B. $736
C. $771
D. $796

 

  1. Bridges Corporation

    The following information has been taken from the cost records of Bridges Corporation for the past year:
Raw material used in production $336
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and overhead equal to 50% of direct labor cost) 711
Cost of goods available for sale 851
Selling and Administrative expenses 35
   

 

Inventories Beginning Ending
Raw Material $80 $ 90
Work in Process 85 25
Finished Goods 80 105
     

Refer to Bridges Company. Cost of Goods Sold was
A. $711
B. $746
C. $796
D. $816

 

  1. Jackson Company.

    Jackson Company manufactures wood file cabinets. The following information is available for June of the current year.
  Beginning Ending
Raw Material Inventory $ 6,000 $ 7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300
     

The direct labor rate is $9.60 per hour and overhead for the month was $9,600.

Refer to Jackson Company.  Compute total manufacturing costs for June, if there were 1,500 direct labor hours and $21,000 of  raw material was purchased.
A. $58,500
B. $46,500
C. $43,500
D. $43,100

 

  1. Jackson Company.

    Jackson Company manufactures wood file cabinets. The following information is available for June of the current year.
  Beginning Ending
Raw Material Inventory $ 6,000 $ 7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300
     

The direct labor rate is $9.60 per hour and overhead for the month was $9,600.

Refer to Jackson Company.  What are prime costs and conversion costs, respectively if there were 1,500 direct labor hours and $21,000 of raw material was purchased?
A. $29,100 and $33,900
B. $33,900 and $24,000
C. $33,900 and $29,100
D. $24,000 and $33,900

 

  1. Jackson Company.

    Jackson Company manufactures wood file cabinets. The following information is available for June of the current year.
  Beginning Ending
Raw Material Inventory $ 6,000 $ 7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300
     

The direct labor rate is $9.60 per hour and overhead for the month was $9,600.

Refer to Jackson Company.  If there were 1,500 direct labor hours and $21,000 of raw material purchased, Cost of Goods Manufactured is:
A. $49,100.
B. $45,000.
C. $51,000.
D. $49,500.

 

  1. Jackson Company.

    Jackson Company manufactures wood file cabinets. The following information is available for June of the current year.
  Beginning Ending
Raw Material Inventory $ 6,000 $ 7,500
Work in Process Inventory 17,300 11,700
Finished Goods Inventory 21,000 16,300
     

The direct labor rate is $9.60 per hour and overhead for the month was $9,600.

Refer to Jackson Company.  If there were 1,500 direct labor hours and $21,000 of raw material purchased, how much is Cost of Goods Sold?
A. $64,500.
B. $59,800.
C. $38,800.
D. $53,800.

 

  1. Davis Company manufactures desks. The beginning balance of Raw Material Inventory was $4,500; raw material purchases of $29,600 were made during the month. At month end, $7,700 of raw material was on hand. Raw material used during the month was
    A. $26,400.
    B. $34,100.
    C. $37,300.
    D. $29,600.

 

  1. McCoy Company manufactures tables. The beginning balance of Raw Material Inventory was $5,500; raw material purchases of $31,500 were made during the month. At month end, $8,200 of raw material was on hand. Raw material used during the month was
    A. $28,800
    B. $31,500
    C. $37,000.
    D. $39,200

 

  1. Parker Company manufactures tables. If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $17,000 and $21,000, what was amount of raw material was purchased?
    A. $76,000
    B. $118,000
    C. $84,000
    D. $101,000

 

  1. Petrie Company manufactures chairs. If raw material used was $100,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $27,000 and $31,000, what was amount of raw material was purchased?
    A. $  96,000
    B. $104,000
    C. $158,000
    D. $131,000

 

  1. Denson Company manufactures computer stands. What is the beginning balance of Finished Goods Inventory if Cost of Goods Sold is $107,000; the ending balance of Finished Goods Inventory is $20,000; and Cost of Goods Manufactured is $50,000 less than Cost of Goods Sold?
    A. $70,000
    B. $77,000
    C. $157,000
    D. $127,000

 

  1. Wyman Enterprises

Inventories: March 1 March 31
Raw material $18,000 $15,000
Work in process 9,000 6,000
Finished goods 27,000 36,000
Additional information for March:    
Raw material purchased $42,000  
Direct labor payroll $30,000  
Direct labor rate per hour $  7.50  
Overhead rate per direct labor hour $ 10.00  
     

Refer to Wyman Enterprises. For March, prime cost incurred was
A. $75,000.
B. $69,000.
C. $45,000.
D. $39,000.

 

  1. Wyman Enterprises

Inventories: March 1 March 31
Raw material $18,000 $15,000
Work in process 9,000 6,000
Finished goods 27,000 36,000
Additional information for March:    
Raw material purchased $42,000  
Direct labor payroll $30,000  
Direct labor rate per hour $  7.50  
Overhead rate per direct labor hour $ 10.00  
     

Refer to Wyman Enterprises. For March, conversion cost incurred was
A. $30,000.
B. $40,000.
C. $70,000.
D. $72,000.

 

  1. Wyman Enterprises

Inventories: March 1 March 31
Raw material $18,000 $15,000
Work in process 9,000 6,000
Finished goods 27,000 36,000
Additional information for March:    
Raw material purchased $42,000  
Direct labor payroll $30,000  
Direct labor rate per hour $  7.50  
Overhead rate per direct labor hour $ 10.00  
     

Refer to Wyman Enterprises. For March, Cost of Goods Manufactured was
A. $118,000.
B. $115,000.
C. $112,000.
D. $109,000.

 

  1. Stayton Enterprises

Inventories: April 1 April 30
Raw material $20,000 $17,000
Work in process 12,000 8,000
Finished goods 30,000 39,000
Additional information for April:    
Raw material purchased $45,000  
Direct labor payroll $36,000  
Direct labor rate per hour $  8.00  
Overhead rate per direct labor hour $ 10.00  
     

Refer to Stayton Enterprises. For April, prime cost incurred was
A. $78,000.
B. $84,000
C. $51,000.
D. $45,000.

 

  1. Stayton Enterprises

Inventories: April 1 April 30
Raw material $20,000 $17,000
Work in process 12,000 8,000
Finished goods 30,000 39,000
Additional information for April:    
Raw material purchased $45,000  
Direct labor payroll $36,000  
Direct labor rate per hour $  8.00  
Overhead rate per direct labor hour $ 10.00  
     

Refer to Stayton Enterprises. For April, conversion cost incurred was
A. $36,000
B. $45,000.
C. $81,000.
D. $84,000.

 

  1. Stayton Enterprises

Inventories: April 1 April 30
Raw material $20,000 $17,000
Work in process 12,000 8,000
Finished goods 30,000 39,000
Additional information for April:    
Raw material purchased $45,000  
Direct labor payroll $36,000  
Direct labor rate per hour $  8.00  
Overhead rate per direct labor hour $ 10.00  
     

Refer to Stayton Enterprises. For April, Cost of Goods Manufactured was
A. $141,000
B. $133,000.
C. $125,000.
D. $121,000.

 

  1. Define the relevant range and explain its significance.

 

 

 

 

 

  1. Define a variable cost and a fixed cost. What causes changes in these costs? Give two examples of each.

 

 

 

 

 

  1. What is the difference between a product cost and a period cost? Give three examples of each. What is the difference between a direct cost and indirect cost? Give two examples of each.

 

 

 

 

 

  1. What are three reasons that overhead must be allocated to products?

 

 

 

 

 

  1. Why should predetermined overhead rates be used?

 

 

 

 

 

  1. List and explain three types of quality costs.

 

 

 

 

 

  1. Given the following information for Simpson Corporation, prepare the necessary journal entries, assuming that the Raw Material Inventory account contains both direct and indirect material.
a. Purchased raw material on account $28,500.
b. Put material into production: $15,000 of direct material and $3,000 of indirect material.
c. Accrued payroll of $90,000, of which 70 percent was direct and the remainder was indirect.
d. Incurred and paid other overhead items of $36,000.
e. Transferred items costing $86,500 to finished goods.
f. Sold goods costing $71,300 on account for $124,700.
   

 

 

 

 

 

 

  1. Given the following information for Gregg Corporation, prepare the necessary journal entries, assuming that the Raw Material Inventory account contains both direct and indirect material.

 

Chapter 11Allocation of Joint Costs and Accounting for By-Products

Student: ___________________________________________________________________________

  1. Joint costs occur after the split-off point in a production process.
    True    False

 

  1. Joint costs occur before the split-off point in a production process.
    True    False

 

  1. Joint costs may be allocated to by-products as well as primary products.
    True    False

 

  1. The primary distinction between by-products and scrap is the difference in sales value.
    True    False

 

  1. The primary distinction between by-products and scrap is the difference in volume produced.
    True    False

 

  1. The point at which individual products are first identifiable in a joint process is referred to as the split-off point.
    True    False

 

  1. Joint costs include all materials, labor and overhead that are incurred before the split-off point.
    True    False

 

  1. Two methods of allocating joint costs to products are physical measure allocation and monetary allocation.
    True    False

 

  1. A decision that must be made at split-off is to sell a product or process it further.
    True    False

 

  1. Allocating joint costs based upon a physical measure ignores the revenue-generating ability of individual products.
    True    False

 

  1. Allocating joint costs based upon a physical measure considers the revenue-generating ability of individual products.
    True    False

 

  1. Monetary allocation measures recognize the revenue generating ability of each product in a joint process.
    True    False

 

  1. The relative sales value method requires a common physical unit for measuring the output of each product.
    True    False

 

  1. Joint costs may be allocated to main products, but not to by-products.
    True    False

 

  1. Net realizable value equals product sales revenue at split-off plus any costs necessary to prepare and dispose of the product.
    True    False

 

  1. Net realizable value equals product sales revenue at split-off minus any costs necessary to prepare and dispose of the product.
    True    False

 

  1. If incremental revenues beyond split-off are less than incremental costs, a product should be sold at the split-off point.
    True    False

 

  1. If incremental revenues beyond split-off exceed incremental costs, a product should be processed further.
    True    False

 

  1. The net realizable value approach requires that the net realizable value of by-products and scrap be treated as a reduction in joint costs allocated to primary products.
    True    False

 

  1. Net realizable value is considered to be the best measure of the expected contribution of each product to the coverage of joint costs.
    True    False

 

  1. The net realizable value approach is used to account for scrap and by-products when the net realizable value is insignificant.
    True    False

 

  1. The net realizable value approach is used to account for scrap and by-products when the net realizable value is significant.
    True    False

 

  1. Under the realized value approach, no value is recognized for by-products or scrap until they are actually sold.
    True    False

 

  1. Under the net realizable value approach, no value is recognized for by-products or scrap until they are actually sold.
    True    False

 

  1. Not-for-profit entities are required to allocate joint costs among fund-raising, program, and administrative functions.
    True    False

 

  1. A single process in which one product cannot be manufactured without producing others is referred to as a _________________________.
    ________________________________________

 

  1. Costs that are incurred in the manufacture of two or more products from a common process are referred to as _________________________.
    ________________________________________

 

  1. Costs that are incurred after the split-off point in a production process are referred to as ______________________________.
    ________________________________________

 

  1. Three types of products that result from a joint process are _________________________, ____________________, and ____________________.
    ________________________________________

 

  1. Two incidental products of a joint process are ____________________ and ____________________.
    ________________________________________

 

  1. The point at which individual products are first identifiable in a joint process is referred to as the _________________________.
    ________________________________________

 

  1. Two methods of allocating joint costs to individual products are ________________________________________ and ________________________________________.
    ________________________________________

 

  1. Three monetary measures used to allocate joint costs to products are ________________________________________, ________________________________________, and ____________________________________________________________.
    ________________________________________

 

  1. Sales revenue at split-off less disposal costs equals ______________________________.
    ________________________________________

 

  1. If a company obtains two salable products from the refining of one ore, the refining process should be accounted for as a(n)
    A. mixed cost process.
    B. joint process.
    C. extractive process.
    D. reduction process.

 

  1. Joint costs are allocated to joint products to
    A. obtain a cost per unit for financial statement purposes.
    B. provide accurate management information on production costs of each type of product.
    C. compute variances from expected costs for each joint product.
    D. allow the use of high-low analysis by the company.

 

  1. Joint costs are allocated to which of the following products?
By-products Scrap
   
  1. yes       yes
    B. yes       no
    C. no        no
    D. no        yes

 

  1. Joint cost allocation is useful for
    A. decision making.
    B. product costing.
    C. control.
    D. evaluating managers performance.

 

  1. Joint costs are useful for
    A. setting the selling price of a product.
    B. determining whether to continue producing an item.
    C. evaluating management by means of a responsibility reporting system.
    D. determining inventory cost for accounting purposes.

 

  1. Which of the following components of production are allocable as joint costs when a single manufacturing process produces s

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