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Chapter 3-2A

Acct 202
Section __________

Select the best answer.

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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