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Chapter 3-3A

Name_________________________
Acct 202
Section __________

Select the best answer.

1. As production takes place, all manufacturing costs are added to the: 
A) Work-in-Process Inventory account. 
B) Manufacturing Overhead Inventory account. 
C) Cost-of-Goods-Sold account. 
D) Finished-Goods Inventory account. 
E) Production Labor account. 

Ans: A

2. Which of the following organizations would be most likely to adopt a process cost system?
A) Hospital.
B) Accounting firm.
C) Chemical manufacturer.
D) Custom home builder.
E) All of the above companies would be likely to adopt a process cost system.

Ans: C

3. Job cost systems:
A) are appropriate for companies that produce a homogeneous product on a continuous basis.
B) are used to accumulate costs for each unit produced.
C) are appropriate for companies that produce a large number of units in a standardized batch.
D) are no longer used by manufacturing companies.
E) none of the above.

Ans: B

4. Fog Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied overhead at month-end if: 
A) suppliers of direct materials have an across-the-board price increase. 
B) the company terminates two production supervisors. 
C) employees are hit hard with a widespread outbreak of the flu. 
D) direct laborers are granted a wage increase. 
E) outlays for advertising expenditures are increased. 

Ans: C

5. Overhead costs generally:

A) are direct in nature.
B) are easily tracked to products.
C) include rent, insurance and utilities.
D) a & b only.
E) all of the above.

Ans: C

6. The following information was provided for by MGM Company for the year just ended:

Beginning work-in-process inventory $130,425
Ending work-in-process inventory 125,770
Total manufacturing costs 400,000
Gross margin 100,000

A) $ 95,345.
B) $395,345.
C) $104,655.
D) $404,655. 
E) None of the above.

Ans: B

7. The salary of the president of a manufacturing company would be classified as which of the following?
A) Manufacturing overhead.
B) Direct labor.
C) Direct material.
D) Period cost.
E) Sunk cost.

Ans: D

8. Which of the following statements about the use of direct labor as a cost driver is false? 
A) Direct labor is the most commonly-used cost driver when calculating a predetermined overhead rate. 
B) Direct labor is gaining in importance in many manufacturing applications with respect to being a significant cost driver. 
C) Direct labor is an inappropriate cost driver to use if a company is highly automated. 
D) If direct labor is a good cost driver, increases in direct labor are matched with increases in manufacturing overhead. 
E) Companies can use either direct labor cost or direct labor hours as a cost driver. 

Ans: B

9. The completion of production would require a company to: 
A) increase Finished-Goods Inventory and decrease Work-in-Process Inventory. 
B) increase Work-in-Process Inventory and decrease Finished-Goods Inventory. 
C) add direct labor to Work-In-Process Inventory. 
D) add direct materials, direct labor, and manufacturing overhead to Work-in-Process Inventory. 
E) add direct materials to Finished-Goods Inventory. 

Ans: A

10. Which of the following manufacturers would most likely use job-order costing? 
A) Chemical manufacturers. 
B) Microchip processors. 
C) Custom-furniture manufacturers. 
D) Gasoline refiners. 
E) Fertilizer manufacturers. 

Ans: C

1. Manufacturing overhead: 
A) includes direct materials, indirect materials, indirect labor, and factory depreciation. 
B) is easily traced to jobs. 
C) includes all selling costs. 
D) should not be assigned to individual jobs because it bears no obvious relationship to them. 
E) is a pool of indirect production costs that must somehow be attached to each unit manufactured. 

Ans: E

2. The salary of the president of a manufacturing company would be classified as which of the following?
A) Manufacturing overhead.
B) Direct labor.
C) Direct material.
D) Period cost.
E) Sunk cost.

Ans: D

3. As production takes place, all manufacturing costs are added to the: 
A) Work-in-Process Inventory account. 
B) Manufacturing Overhead Inventory account. 
C) Cost-of-Goods-Sold account. 
D) Finished-Goods Inventory account. 
E) Production Labor account. 

Ans: A

4. Which of the following organizations would be most likely to adopt a process cost system?
A) Hospital.
B) Accounting firm.
C) Chemical manufacturer.
D) Custom home builder.
E) All of the above companies would be likely to adopt a process cost system.

Ans: C

5. Paper used by a law or accounting firm in the normal course of business, is considered a(n):
A) job-order process cost.
B) a manufacturing cost.
C) an indirect cost.
D) abnormal spoilage cost.
E) normal spoilage cost.

Ans: C

6. Job cost systems:
A) are appropriate for companies that produce a homogeneous product on a continuous basis.
B) are used to accumulate costs for each unit produced.
C) are appropriate for companies that produce a large number of units in a standardized batch.
D) are no longer used by manufacturing companies.
E) none of the above.

Ans: B

7. In a job costing system, product costs are accumulated on a:
A) Certified Management Accountant's Official Statement of Costs.
B) job cost report.
C) balance sheet.
D) departmental report.
E) product cost report.

Ans: B

8. The following information was provided for by MGM Company for the year just ended:

Beginning work-in-process inventory $130,425
Ending work-in-process inventory 125,770
Total manufacturing costs 400,000
Gross margin 100,000

A) $ 95,345.
B) $395,345.
C) $104,655.
D) $404,655. 
E) None of the above.

Ans: B

9. Overhead costs generally:

A) are direct in nature.
B) are easily tracked to products.
C) include rent, insurance and utilities.
D) a & b only.
E) all of the above.

Ans: C

10. Fog Company, which uses labor hours to apply overhead to manufacturing, may have increased amounts of underapplied overhead at month-end if: 
A) suppliers of direct materials have an across-the-board price increase. 
B) the company terminates two production supervisors. 
C) employees are hit hard with a widespread outbreak of the flu. 
D) direct laborers are granted a wage increase. 
E) outlays for advertising expenditures are increased. 

Ans: C

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