Managerial Accounting: Tools for Business Decision Making, 6th Edition Test Bank

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Achievement Test 1: Chapters 1-2Name_________________________Managerial Accounting,6eInstructor______________________Section #_______Date_________PartIIIIIIIVTotalPoints30202228100ScorePART I—MULTIPLE CHOICE(30 points)Instructions:Designate the best answer for each of the following questions.____1.A debit balance in the Manufacturing Overhead account at the end of an interim monthmeans thata.the balance should be reported as an asset in the monthly balance sheet.b.corrective action by management is necessary.c.overhead has been underapplied.d.cost of goods sold should be credited on the monthly income statement.____2.In a job order cost system, which of the following accounts isnota control account?a.Raw Materials Inventoryb.Factory Laborc.Finished Goods Inventoryd.Manufacturing Overhead____3.In the current assets section of the balance sheet, in which order are manufacturinginventories listed?a.Raw materials, work in process, finished goodsb.Finished goods, work in process, raw materialsc.Work in process, finished goods, raw materialsd.Finished goods, raw materials, work in process____4.Which one of the following costsis a componentof both manufacturing overhead andtotal manufacturing costs?a.Direct laborb.Direct materialsc.Selling and administrative costsd.Factory utilities____5.Manufacturing costs are typically classified asa.product costs or period costs.b.direct materials or direct labor.c.direct materials, direct labor, or manufacturing overhead.d.direct materials, direct labor, or selling and administrative.

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Test Bank for Managerial Accounting,SixthEditionAT1-2The following data should be used for questions 6–9:Raw materials inventory, January 1$12,000Raw materials inventory, December 3116,000Work in process, January 15,000Work in process, December 318,000Finished goods, January 117,000Finished goods, December 3112,000Raw materials purchases118,000Direct labor165,000Factory utilities64,000Indirect labor12,000Factory depreciation18,000Selling and administrative expenses220,000____6.How much is the cost of the direct materials used?a.$118,000b.$114,000c.$122,000d.$130,000____7.Assumeyouranswertoquestion6aboveis$130,000.Howmucharetotalmanufacturing costs?a.$389,000b.$393,000c.$295,000d.$609,000____8.Assume your answer to question 7 above is $400,000.How much is cost of goodsmanufactured?a.$400,000b.$389,000c.$397,000d.$403,000____9.Assume your answer to question 8 above is $420,000.How much iscost of goodssold?a.$420,000b.$408,000c.$295,000d.$425,000____10.The formula for computing a predetermined overhead rate isa.estimated annual overhead costs ÷ estimated annual operating activity.b.estimated annual overhead costs ÷ actual annual operating activity.c.actual annual overhead costs ÷ actual annual operating activity.d.actual annual overhead costs ÷ estimated annual operating activity.____11.Which one of the following is an example of a period cost?a.Maintenance on factory machinesb.Wages of factory workersc.Salesmen's commissionsd.Depreciation on the factory building

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Achievement Test 1AT1-3____12.When production costs are debited to Work in Process Inventory, which accounts willbe credited?a.Raw Materials Inventory, Factory Labor, and Finished Goods Inventoryb.Manufacturing Overhead, Factory Labor, and Cost of Goods Soldc.Raw Materials Inventory, Factory Labor, and Manufacturing Overheadb.Accounts Payable, Factory Wages Payable, and Accumulated Depreciation____13.What are the functions of management in an organization?a.Planning, controlling, and decision makingb.Planning, directing, and controllingc.Directing, controlling, and decision makingd.Directing, planning, and decision making____14.Which one of the following isnotone of themajor activities of managerial accounting?a.Providing a basis for controlling costs by comparing actualresults with plannedobjectivesb.Preparing financial statements designed primarilyfor stockholders and creditorsc.Preparinginternal reports for managementd.Determining the behavior ofcosts as activity levels change____15.Which of the following would most likely use ajob order cost system?a.Cement manufacturerb.Cat food manufacturerc.Specialty printing companyd.Automobile manufacturer

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Test Bank for Managerial Accounting,SixthEditionAT1-4PART II—CLASSIFICATION OF COSTS AND EXPENSES(20 points)Instructions:Classify the following manufacturing costs and expenses by using the followingcode letters:A.Direct materials costB.Direct labor costC.Manufacturing overhead costD.Period costWood YouManufacturing Company incurs the following costs and expenses in making furniture:____1.Insurance ondelivery equipment____2.Oak andcherrywood used in desks and chairs____3.Lubricants, rosin, and polishing compounds used in manufacturing____4.Advertising in trade magazines____5.Rent on leased factory machinery____6.Wages of assembly line workers____7.Salesperson's commissions____8.Insuranceonfactory machines____9.Depreciation on factory machinery____10.Wages of factoryjanitors

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Achievement Test 1AT1-5PART III—DETERMINE WORK IN PROCESS AND FINISHED GOODS BALANCES(22 points)HanoverManufacturing begins operations onApril1. Information from job cost sheets shows thefollowing:Manufacturing Costs Assigned (non-cumulative)JobAprilMayJune15$10,200165,100$6,400183,6005,900$4,000197,3007,400203,100Job15was completed inApril. Job16was completed inMay. Job18was completed inJune.Each job was sold in the month following completion.Instructions:Determine the following amounts:1.Work in process inventory,April 30$_______________2.Finished goods inventory,April 30$_______________3.Work in process inventory,May 31$_______________4.Finished goods inventory,May 31$_______________5.Work in process inventory,June 30$_______________6.Finished goods inventory,June 30$_______________

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Test Bank for Managerial Accounting,SixthEditionAT1-6PART IV—JOB ORDER COST ACCOUNTING ENTRIES(28 points)The ledger accounts ofCynaWood CabinetCompany are presented below, with an identificationnumber for each.Instructions:Prepare appropriate job order cost system entries to record the data/events givenbelow. Place the appropriate identification number(s) in the debit and credit columns providedand the dollar amount in the adjoining column.1.Cash9.Accumulated Depreciation2.Accounts Receivable10.Sales3.Raw Materials Inventory11.Depreciation Expense4.Work in Process Inventory12.Factory Labor5.Finished Goods Inventory13.Wages Expense6.Manufacturing Overhead14.Cost of Goods Sold7.Accounts Payable15.Other Accounts8.Factory Wages Payable——————————————————————————————————————————Account(s)Account(s)DollarEntry InformationDebitedCreditedAmount——————————————————————————————————————————1.Purchased raw materials on account—$96,000——————————————————————————————————————————2.Incurred factory labor—$75,000——————————————————————————————————————————3.Charged direct labor to jobX43—$68,000——————————————————————————————————————————4.Charged direct materials to jobX43—$82,000——————————————————————————————————————————5.Incurred manufacturing overhead on account—$38,000——————————————————————————————————————————6.Recorded the remaining factory labor as indirectlabor——————————————————————————————————————————7.Recognized depreciation on factory equipment—$11,000——————————————————————————————————————————8.Charged overhead to jobX43 at 80% of direct laborcost——————————————————————————————————————————9.Recorded completion of jobX43——————————————————————————————————————————10.Recorded cost of sales for jobX43——————————————————————————————————————————11.Recorded revenue from sale of jobX43onaccount—$330,000——————————————————————————————————————————12.Assume total actual overhead was $560,000 andtotal applied overhead was $547,000 for the year.Record the entry to close the manufacturingoverhead account.

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Achievement Test 1AT1-7Solutions—Achievement Test 1:Chapters 1-2PART I—MULTIPLE CHOICE(30 points)1.C6.B11.C2.B7.A12.C3.B8.C13.B4.D9.D14.B5.C10.A15.CPART II—CLASSIFICATION OF COSTS AND EXPENSES(20 points)1.D6.B2.A7.D3.C8.C4.D9.C5.C10.CPART III—DETERMINE WORK IN PROCESS AND FINISHED GOODS BALANCES(22 points)1.$8,700 ($5,100 + $3,600)2.$10,2003.$16,800 ($3,600 + $5,900 + $7,300)4.$11,500 ($5,100 + $6,400)5.$17,800 ($7,300 + $7,400 + $3,100)6.$13,500 ($3,600 + $5,900 + $4,000)*Four points each,except for item 2 (2 points).PART IV—JOB ORDER COST ACCOUNTING ENTRIES(28 points)*Account(s)Account(s)DollarAccount(s)Account(s)DollarDebitedCreditedAmountDebitedCreditedAmount1.37$96,0007.69$11,0002.12875,0008.4654,4003.41268,0009.54204,4004.4382,00010.145204,4005.6738,00011.210330,0006.6127,00012.14613,000*One point for each account title and one point for computed amounts (Entries 6, 8, 9, and 12).

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Achievement Test 2: Chapters 3-4Name_________________________Managerial Accounting,6eInstructor______________________Section #_______Date_________PartIIIIIIIVVTotalPoints3010252015100ScorePART I—MULTIPLE CHOICE(30 points)Instructions:Designate the best answer for each of the following questions.____*1.In a JIT cost accounting system,a.no inventories are kept on hand.b.nomanufacturing overheadcostsare incurred.c.acompany strives to have the right amount of materials, parts, and products onhand.d.conversion costs are eliminated.____2.The number of purchase orders would be an appropriate cost driver fora.inspecting and testing cost.b.machining cost.c.ordering and receiving materials cost.d.supervising cost.____3.Which one of the following is a product-level activity?a.Assembly of staplersb.Every tenth stapler produced is tested to be sure it meets quality standards.c.The factory janitor is paid.d.A setup is undertaken when the model of staplers to be produced changes.____4.The primary benefit of activity-based costing is that it leads toa.more cost pools used to assign overhead costs to products.b.more accurate product costing.c.enhanced control over overhead costs.d.better management decisions.____5.All of the following are value-added activities in a manufacturing operationexcepta.assembly.b.engineering design.c.inspections.d.machining.

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Test Bank for Managerial Accounting,SixthEditionAT2-2____6.ABC costing is an approach for allocatinga.direct materials to products.b.direct labor to products.c.manufacturing overhead to products.d.direct materials and direct labor to products.____7.The first step in activity-based costing is toa.assign overhead costs for each activity cost pool to products.b.compute the activity-based overhead rate.c.identify cost drivers that accurately measure each activity's contribution to thefinished product.d.identify and classify the major activities involved in the manufacture of specificproducts.____8.Given the following data, compute equivalent units of production for conversion costs:Beginning Work in Process—8,000 units, 40% completeUnits Completed and Transferred Out—90,000 unitsEnding Work in Process—5,000 units, 20% complete.a.95,000b.91,000c.87,800d.94,200____9.When there is beginning work in process, units transferred out can be computed bysubtractinga.ending work in process units from the units accounted for.b.ending work in process units from the units started into production.c.beginning work in process units from the units to be accounted for.d.beginning work in process units from the units started into production.____10.Giventhefollowingdata,computeequivalentunitsofproductionformaterials.Materials are added at the beginning of the process.Beginning Work in Process—8,000 units, 40% completeUnits Completed and Transferred Out—90,000 unitsEnding Work in Process—5,000 units, 20% complete.a.98,200b.91,000c.90,000d.95,000____11.Which of the following doesnotdescribe a characteristic of process costing?a.Job cost sheets must pass from one production department to the next on a dailybasis.b.Once production begins, it continues until the finished product emerges.c.All units of production receive precisely the same amount of material, labor, andoverhead.d.Work in process accounts are maintained for each production department.

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Achievement Test 2AT2-3____12.Which item is not a calculation performed on a production cost report?a.Number of physical unitsto be accounted forb.Materials cost perequivalentunitc.Cost of goods transferred out of finished goodsd.Cost of goods transferred remaining in work in processPART II—TRUE/FALSE(10 points)Instructions:Designate whether each of the following statements is true or false by circling the Tor F.TF1.The flow of costs is essentially the same in a job order and a process cost system.TF2.The method of assigning costs is essentially the same in a job order and a processcost system.TF3.The physical units are a measure of the work done during a period, expressed infully completed units.TF4.Manufacturing costs in beginning work in process are ignored in computing the costof units transferred out and the cost of ending work in process.TF5.A cost reconciliation schedule is prepared to assign total costs to units transferredout and in ending work in process.TF6.Activity-based costing allocates overhead to multiple activity cost pools and assignsthe activity cost pools to products by means of cost drivers.TF7.The first step in activity-based costing is to identify the cost driver that has a strongcorrelation to the activity pool.TF8.An activity-based overhead rate is computed by dividing the estimated overheadper activity by the number of cost drivers expected to be used per activity.TF9.Non-value-addedactivitiesareproduction-relatedactivitiesthataddcosttoaproduct without increasing its market value.TF10.Product-level activities are required to support or sustain an entire productionprocess.

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Test Bank for Managerial Accounting,SixthEditionAT2-4PART III—PROCESS COSTING(25 points)Instructions:Using the following data, complete the requirements given below. When you aregiven amounts to assume the answers to previous requirements, be careful to use such assumedamounts rather than your answers (in order to minimize carry-through errors).The Finishing Department ofWayland Fixturesreports the following for January 2014:Production: All materials are added at the beginning of the process. Beginning work in process11,000 units,20% complete. Units started into production88,000 units. Ending work in process9,000 units,40% complete.Manufacturing Costs: Beginning work in process, $35,100, comprised of $21,100 of materials and$14,000 of conversion costs. Materials added $68,000; labor and overhead added $56,200.(a)Required:Compute equivalent units of production for (1) materials and (2) conversioncosts.MaterialsConversion(b)Assumeyouranswersto(a)abovewere49,500unitsformaterialsand46,800forconversion costs.Required:Compute the unit costs for the month.MaterialsConversion(c)Assumeyour answers to (b) above were$1.50for materials and $0.80for conversion costs.Required:Determine the costs to be assigned to the units transferred out.(d)Assumethe same unit costs as given in (c) above.Required:Determine the costs assigned to the9,000units in ending work in process.

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Achievement Test 2AT2-5PART IV—ACTIVITY-BASED COSTING(20 points)Bella ClearWindowsdesigns and builds custom windows for luxury homes. Most of the windowsare custom made but occasionally the company does mass production on order.Its budgetedmanufacturing overhead costs for the year 2014are as follows:Overhead Cost PoolsAmountPurchasing$ 26,000Production (cutting, milling, finishing)176,000Setting up machines65,000Inspecting35,000Utilities75,000Total budget overhead costs$377,000For the last three years, the company has beenallocating overhead to products on the basis ofmachine hours. For the year 2014,20,000 machine hours are budgeted.The operations managerofBella Clearrecently directed her accountant to implement the activity-based costing system she has repeatedly proposed.The accountantand production foremanidentifiedthe following cost drivers and their usage for the previously budgeted overhead costpools:Overhead Cost PoolsActivity Cost DriversTotalActivityPurchasingNumber of orders80Production (cutting, milling, finishing)Direct labor hours16,000Setting up machinesNumber of setups250InspectingNumber of inspections1,250UtilitiesSquare feet occupied15,000During this month, the company received an order for80windowsfrom a housing developmentcontractor. The accountant preparedcost estimates for producing components for80 windows tosubmit a contract price per window set to the contractor. The following data for the production of80 windows is accumulated:Direct materials$22,000Direct labor$23,100Machine hours1,600Direct labor hours2,100Number of purchase orders8Number of machine setups15Number of inspections12Number of square feet occupied1,200Instructions(a)Compute the predetermined overhead rate using traditional costing with machine hours asthe basis.(b)Compute themanufacturing cost per windowunder traditional costing.(c)Compute the manufacturing cost per windowunder the proposed activity-based costingsystem.

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Test Bank for Managerial Accounting,SixthEditionAT2-6PART V—ABC COST DRIVERS(15 points)Scoot Motorsmanufacturesmotor scootersin itsJacksonville, Floridaplant.InstructionsIdentify an appropriate cost driver that may be used to assign each of the following costs to eachline ofmotor scooters. Cost drivers may be used more than once.Cost DriversMachine hoursNumber of partsNumber of finished vehiclesEngineering hoursNumber of setupsNumber of employees/direct labor hoursNumber of testsNumber of ordersSquare footageCostCost Driver1.Assembling__________________________2.Engineering__________________________3.Machining__________________________4.Ordering and receiving__________________________5.Paintingscooters__________________________6.Machine setup__________________________7.Storingmaterials__________________________8.Supervising__________________________9.Packing and shipping__________________________10.Inspecting and testing__________________________

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Achievement Test 2AT2-7Solutions—Achievement Test 2:Chapters 3-4PART I—MULTIPLE CHOICE(30 points)1.C5.C9.A2.C6.C10.D3.B7.D11.A4.B8.B12.CPART II—TRUE/FALSE(10 points)1.T6.T2.F7.F3.F8.T4.F9.T5.T10.FPART III—PROCESS COSTING(25 points)(a)Materials (Units)Conversion (Units)90,00090,000+9,000+ 3,60099,00093,600(b)MaterialsConversion$89,100=$1.80$70,200=$1.5049,50046,800(c)$207,000((90,000×$1.50)+ (90,000×$0.80))(d)$16,380(($1.50×9,000)+($0.80×3,600))PART IV—ACTIVITY-BASED COSTING(20 points)(a)Predetermined overhead rate using machine hours:$377,000 ÷20,000 hours = $18.85per machine hour(b)Manufacturing cost per window under traditional costing:Direct materials$22,000Direct labor23,100Overhead (1,600 × $18.85)30,160Total cost of80 windows$75,260Cost per window ($75,260 ÷80)$940.75

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Test Bank for Managerial Accounting,SixthEditionAT2-8(c)Manufacturing cost per window set under activity-based costing:Computation of Activity-Based Overhead RateEstimatedTotalActivity-BasedActivity Cost PoolOverhead÷Estimated Drivers=Overhead RatePurchasing$26,00080 orders$325per orderProduction176,00016,000 D/L hrs.$11per D/L hr.Setting up machines65,000250setups$260per setupInspecting35,0001,250inspections$28per inspectionUtilities75,00015,000 sq. ft.$5per sq. ft.$377,000Assignment ofOverhead to Order of 50 WindowsExpectedActivity-BasedActivity Cost PoolUse of DriverOverhead RateCost AssignedPurchasing8orders$325$2,600Production2,100 D/L hrs.$1123,100Setting up machines15setups$2603,900Inspecting12inspections$28336Utilities1,200 sq. ft.$56,000$35,936Total manufacturing cost per window under ABC:Direct materials$22,000Direct labor23,100Overhead35,936Total cost of80 windows$81,036Total cost per window: ($81,036÷80)$1,012.95PART V—ABC COST DRIVERS(15 points)1.Number of parts6.Number of setups2.Engineering hours7.Square footage3.Machine hours8.Number of employees/direct labor hours4.Number of orders9.Number of finished vehicles5.Number offinished vehicles10.Number of tests

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