Acct. 107 Exam 1

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Under a just-in-time manufacturing system, large quantities of inventory are accumulated throughout the factory to be certain that needed components are available each time that they are needed.

False

Both financial and managerial accounting report monetary information; managerial accounting also reports considerable nonmonetary information.

True

Product costs can be classified as one of three types: direct materials, direct labor, or overhead.

True

An out-of-pocket cost requires a future cash outlay and is relevant for decision making.

True

Selling and administrative expenses are normally product costs.

False

Managerial accounting information:

Involves gathering information about costs for planning and control decisions.

An opportunity cost is:

A cost of potential benefit lost.

Costs that are first assigned to inventory are called:

Product costs.

Costs that flow directly to the current income statement are called:

Period costs.

Another title for goods in process inventory is:

Work in process inventory.

A manufacturing company that uses a cost accounting system normally has only two inventory accounts: Finished Goods Inventory and Goods in Process Inventory.

False

A company's file of job cost sheets for finished but unsold jobs equals the balance in the Finished Goods Inventory account.

True

The predetermined overhead allocation rate is used to apply overhead cost to products.

True

Any material amount of under- or overapplied factory overhead must always be closed to Cost of Goods Sold at the end of an accounting period.

False

A manufacturing firm that produces a large numbers of standardized units would normally use a job order cost accounting system.

False

A type of manufacturing that produces customized products or services for each customer is called:

Job order manufacturing.

Large aircraft manufacturers such as McDonnell Douglas normally use:

Job order costing.

A perpetual record of a raw materials item that records data on the quantity and cost of units purchased, units issued for use in production, and units that remain in the raw materials inventory, is called a(n):

Materials ledger card.

The rate established prior to the beginning of a period that relates estimated overhead to an allocation factor such as estimated direct labor, and that is used to assign overhead cost to jobs, is the:

Predetermined overhead allocation rate.

The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:

Overapplied overhead.

Process manufacturing usually reflects a manufacturer that produces large quantities of identical products.

True

Equivalent units of production are always the same as the total number of physical units finished during the period.

False

The process cost summary is an important managerial accounting report produced by a process cost accounting system.

True

Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products.

True

In the same time period, it is possible that a production department can produce 1,000 equivalent finished units with respect to direct materials and 1,200 equivalent finished units with respect to direct labor.

True

Which of the following five types of products is least likely to be produced in a process manufacturing system?

Oil paintings.

An organizational unit of a factory that has the responsibility for partially manufacturing or producing a product is called a:

Production department.

After posting all actual factory overhead and applying factory overhead to production departments in a process costing system:

There may be over or underapplied overhead.

A company that applies process costing is most frequently characterized by:

Homogeneous product and high production volume.

The plantwide overhead rate is determined by using volume-related measures.

True

The departmental overhead rate method uses a different overhead rate for each production department.

True

The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

True

A cost pool is a collection of costs that are related to the same or similar activity.

True

Allocated overhead costs vary depending upon the allocation methods used.

True

Overhead costs:

Cannot be traced to units of product in the same way that direct labor can.

Which of the following statements is true with regard to activity-based costing rates?

The premise of ABC is that activities are what cause costs to be incurred.

K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?

$46.25 per direct labor hour.

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