(Test Bank) Principles Of Cost Accounting

Vanderbeck, 17

Business

Test Bank

17th Edition

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Test Bank for Principles Of Cost Accounting, The downloadable file consists of 434 pages, and the total size of the file is 5.15 MB. Purchase now only for highly discounted price.

Author(s): Vanderbeck

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CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 1 1. The business entity that converts purchased raw materials into finished goods by using labor, technology, and facilities is a: a. Manufacturer. b. Merchandiser. c. Service business. d. Not-for-profit service agency. ANSWER: a RATIONALE: The business entity that converts purchased raw materials into finished goods by using labor, technology, and facilities is a manufacturer. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Business Applications OTHER: Bloom's: Remembering 2. The business entity that purchases finished goods for resale is a: a. Manufacturer. b. Merchandiser. c. Service business. d. Wholesaler. ANSWER: b RATIONALE: The business entity that purchases finished goods for resale is a merchandiser. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Business Applications OTHER: Bloom's: Remembering 3. The type of merchandiser who purchases goods from the producer and sells them to retailers that sell them to the consumer is a: a. Manufacturer. b. Retailer. c. Wholesaler. d. Service business. ANSWER: c RATIONALE: A wholesaler purchases goods from the producer and sells them to the retailer. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction ACCREDITING STANDARDS: AACSB Analytic CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 2 ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Business Applications OTHER: Bloom's: Remembering 4. Examples of service businesses include: a. Airlines, accountants, and hair stylists. b. Department stores, poster shops, and wholesalers. c. Aircraft producers, home builders, and machine tool makers. d. None of these are correct. ANSWER: a RATIONALE: Examples of service businesses include airlines, architects, and hair stylists. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Business Applications OTHER: Bloom's: Understanding 5. ISO 9000 is a set of international standards for: a. determining the selling price of a product. b. cost control. c. quality management. d. delivering product, ANSWER: c RATIONALE: ISO 9000 is a set of international standards for quality management. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Strategic Planning OTHER: Bloom's: Remembering 6. Unit cost information is important for making all of the following marketing decisions except : a. Determining the selling price of a product. b. Bidding on contracts. c. Determining the amount to spend on social media to promote the product. d. Determining the amount of profit that each product earns. ANSWER: c RATIONALE: Unit cost information is used in determining selling price, bidding on contracts and determining product profitability, but would not have a bearing on determining how much the product would need to be advertised. CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 3 POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA. FN.03 - Measurement BUSPROG.03 - Analytic IMA -Strategic Marketing TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Remembering 7. The process of establishing objectives or goals for the firm and determining the means by which they will be met is: a. controlling. b. analyzing profitability. c. planning. d. assigning responsibility. ANSWER: c RATIONALE: The process of establishing goals and objectives for a firm is planning. Controlling, analyzing profitability and assigning responsibility are functions that take place after the planning process to determine whether or how successfully goals have been obtained. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Budget Preparation TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Remembering 8. Effective control of a company's operations is achieved through all of the following except : a. periodically measuring and comparing company results. b. assigning responsibility for costs to employees responsible for those costs. c. constantly monitoring employees to ensure they do exactly as they are told. d. taking necessary corrective action when variances suggest it is needed. ANSWER: c RATIONALE: While periodically measuring and comparing company results, assigning responsibility for those results to employees and taking necessary corrective action are all part of control; it does not include constantly monitoring employees to make sure they are following directions. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Performance Measurement CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 4 TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Remembering 9. Dan Louis is the supervisor of the Assembly Department of Wiggerman Corporation. He has control over and is responsible for manufacturing costs traced to the department. The Assembly Department is an example of a(n): a. cost center. b. inventory center. c. supervised work center. d. worker’s center. ANSWER: a RATIONALE: The criteria for a cost center are 1) a reasonable basis on which manufacturing costs may be traced and 2) a person who has control over and is accountable for many of the costs charged to that center. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Performance Measurement TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Understanding 10. Which of the following costs would be least likely to appear on a responsibility accounting report for the supervisor of an assembly line in a large manufacturing situation? a. Direct labor b. Indirect materials c. Selling expenses d. Repairs and maintenance ANSWER: c RATIONALE: Selling expenses would be least likely to appear on a performance report, because the supervisor would not have responsibility for the sales function. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Performance Measurement TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Understanding 11. Which of the following costs would be least likely to appear on a responsibility accounting report for the supervisor of an assembly line in a large manufacturing situation? a. Direct labor b. Supervisor's salary c. Materials CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 5 d. Repairs and maintenance ANSWER: b RATIONALE: A supervisor's salary would be least likely to appear on a performance report, because that person's salary is determined by the company and is not controllable by the supervisor. POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Performance Measurement TOPICS: Uses of Cost Accounting Inform ation OTHER: Bloom's: Understanding 12. Responsibility accounting would most likely hold a manager of a manufacturing unit responsible for: a. cost of raw materials. b. quantity of raw materials used. c. the number of units ordered. d. amount of taxes incurred. ANSWER: b RATIONALE: In responsibility accounting the manager of a cost center is only responsible for those costs and activities that manager controls. A manufacturing manager would not likely be responsible for the cost of the materials (the purchasing manager would have that responsibility), the number of units ordered (that would be driven by demand) or the taxes incurred. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16 .2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Performance Measurement TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Understanding 13. Which of the following statements characterizes a performance report prepared for use by a production line department head? a. The costs in the report should include only those controllable by the department head. b. The report should be stated in dollars rather than in physical units so the department head knows the financial magnitude of any variances. c. The report should include information on all costs chargeable to the department, regardless of their origin or control. d. It is more important that the report be precise than timely. ANSWER: a RATIONALE: The performance report should include only those costs controllable by the department head. It should also be timely and should include production data as well as dollar amounts. CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 6 POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Performance Measurement TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Understanding 14. A budget: a. is a monthly financial statement issued to a company’s shareholders. b. is management’s operating plan expressed in units and dollars. c. documents the production department’s schedule. d. is the basis for the annual sales forecast. ANSWER: b RATIONALE: A budget is management’s operating plan expressed in quantitative terms. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurem ent BUSPROG.03 - Analytic IMA -Budget Preparation TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Remembering 15. Joshua Company prepares monthly performance reports for each department. The budgeted amounts of wages for the Finishing Department for the month of August and for the eight -month period ended August 31 were $12,000 and $100,000, respectively. Actual wages paid through July were $91,500, and wages for the month of August were $11,800. The month and year-to-date variances, respectively, for wages on the August performance report would be: a. $200 F; $8,500 F b. $200 F; $3,300 U c. $200 U; $3,300 U d. $200 U; $8,500 F ANSWER: b RATIONALE: Calculation of monthly variance: Budgeted wages for August $12,000 Actual wages for August 11,800 Variance for August $ 200 F Calculation of year-to-date variance: Budgeted wages for the eight -month period ended August 31 $100,000 Actual wages for the eight -month period ended August 31 (91,500 + 11,800) 103,300 Variance for eight -month period ended August 31 $ 3,300 U POINTS: 1 DIFFICULTY: Moderate CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 7 LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Performance Measurement TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Applying 16. The January performance report for cab no. 52 of Teri’s Taxi Service was as follows: Expense Budgeted Actual Variance Driver’s wages $2,000 $1,800 $200 F Gasoline 300 270 30 F Maintenance 200 400 200 U Insurance 100 110 10 U Total $2,600 $2,580 $ 20 F Possible reason(s) for the variance in the driver’s wages could be: a. A new driver was assigned to cab no. 52 on January 5, replacing one who retired after 30 years of service. b. The cab was in the shop for repairs for a few days. c. Business was slow so cab no. 52 was idled for two days. d. All of the above are possible reasons. ANSWER: d RATIONALE: The decrease in driver’s wages could be due to the driver working less time (as in options b or c) or for less wages as in option a where a less experienced driver would likely be working for a lower rate. POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Performance Measurement TOPICS: Uses of Cost Accounting Information OTHER: Bloom's: Analyzing 17. As a result of recent accounting scandals involving companies such as Enron and World Com, the Sarbanes -Oxley Act of 2002 was written to protect shareholders of public companies by improving a. management accounting. b. corporate governance. c. professional competence. d. the corporate legal process. ANSWER: b RATIONALE: The Sarbanes -Oxley act was written primarily to improve the corporate governance of publicly held companies. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance. CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 8 ACCREDITING STANDARDS: AACSB Ethics ACCT.AICPA.FN.03 - Measurement BUSPROG.02 - Ethics IMA -Business Applications TOPICS: Professional Ethics, CMA Certification and Corporate Governance OTHER: Bloom's: Remembering 18. Which of the following is not a key element of the Sarbanes Oxley Act? a. The establishment of the Public Company Accounting Oversight Board b. Requiring a company’s annual report to contain an internal control report that includes management’s opinion on the effectiveness of internal control c. Severe criminal penalties for retaliation against “whistleblowers” d. Requiring that the company’s performance reports are prepared in accordance with generally accepted accounting principles ANSWER: d RATIONALE: The Sarbanes -Oxley Act does not require that companies prepare performance reports in accordance with generally accepted accounting principles. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.3 - LO2: Describe the ethical responsibilities and certification requirements for management accountants, as well as corporate governance. ACCREDITIN G STANDARDS: AACSB Ethics ACCT.AICPA.FN.03 - Measurement BUSPROG.02 - Ethics IMA -Business Applications TOPICS: Professional Ethics, CMA Certification and Corporate Governance OTHER: Bloom's: Remembering 19. Cost accounting differs from financial accounting in that financial accounting: a. Is mostly concerned with external financial reporting. b. Is mostly concerned with individual departments of the company. c. Provides the additional information required for special reports to management. d. Puts more emphasis on future operations. ANSWER: a RATIONALE: Items (b) through (d) are characteristics of cost accounting, whereas Item (a) is a feature of financial accounting. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA-Reporting TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Understanding CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 9 20. Taylor Logan is an accountant with the Tanner Corporation. Taylor’s duties include preparing reports that focus on both historical and estimated data needed to conduct ongoing operations and do long-range planning. Taylor is a(n) a. certified financial planner. b. management accountant. c. financial accountant. d. auditor. ANSWER: b RATIONALE: A management accountant prepares reports that focus on both historical and estimated data that are used to conduct ongoing operations and do long-range planning. Financial accountants prepare financial statements needed by external users to evaluate a business, while auditors conduct examinations on those financial statements. A certified financial planner is a consultant that helps individuals with financial planning, including investment advice. POINTS: 1 DIFFICULTY: Easy LEARNING OBJE CTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Business Application s TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Understanding 21. The following data were taken from Mansfield Merchandisers on January 31: Merchandise inventory, January 1 $ 100,000 Sales salaries 35,000 Merchandise inventory, January 31 65,000 Purchases 560,000 What was the Cost of goods sold in January? a. $595,000 b. $660,000 c. $630,000 d. $545,000 ANSWER: a RATIONALE: Merchandise Inventory, January 1 $100,000 Plus Purchases 560,000 Merchandise Available for Sale $660,000 Less Merchandise Inventory, January 31 65,000 Cost of Goods Sold $595,000 POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Management CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 10 TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Applying 22. Umberg Merchandise Company’s cost of goods sold last month was $1,450,000. Merchandise Inventory at the beginning of the month was $250,000 and $325,000 at the end of the month. Umberg’s merchandise purchases were: a. $1,450,000 b. $1,375,000 c. $1,525,000 d. $1,775,000 ANSWER: c RATIONALE: Merchandise purchases added to Merchandise Inventory at the beginning of the month results in the merchandise available for sale. At the end of the month, these goods either remain in Merchandise Inventory or are sold, which results in Cost of Goods Sold, so the total of ending Merchandise Inventory and Cost of Goods Sold is also the merchandise availa ble for sale. Therefore, the equation can be rearranged to compute the merchandise purchases as follows: Cost of Goods Sold $1,450,000 Plus Ending Merchandise Inventory 325,000 Merchandise Available for Sale 1,775,000 Less Beginning Merchandise Inventory 250,000 Merchandise Purchases $1,525,000 POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Management TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Applying 23. Chen Corp. had finished goods inventory of $60,000 and $70,000 at May 1 and May 31, respectively, and cost of goods manufactured of $175,000. Cost of goods sold in May was: a. $165,000 b. $175,000 c. $185,000 d. $225,000 ANSWER: a RATIONALE: Finished Goods Inventory, May 1 $ 60,000 Plus Cost of Goods Manufactured 175,000 Finished Goods Available for Sale 225,000 Finished Goods Inventory, May 31 70,000 Cost of Goods Sold $165,000 POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 11 ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Management TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Applying 24. The balance in Electric Industries’ Finished Goods account at December 31 was $325,000. Its December cost of goods manufactured was $1,350,000, its total manufacturing costs were $1,500,000 and its cost of goods sold in December was $1,455,000. What was the balance in Electric’s Finished Goods at December 1? a. $280,000 b. $220,000 c. $370,000 d. $430,000 ANSWER: d RATIONALE: Cost of goods manufactured added to Finished Goods at the beginning of the month results in the finished goods available for sale. At the end of the month, these goods either remain in Finished Goods or are sold, which results in Cost of Goods Sold, so the total of ending Finished Goods and Cost of Goods Sold is also the finished goods available for sale. Therefore, the equation can be rearranged to compute the beginning balance in Finished Goods as follows: Cost of Good s Sold $1,455,000 Plus Finished Goods Inventory, December 30 325,000 Finished Goods Available for Sale 1,780,000 Less Cost of Goods Manufactured 1,350,000 Finished Goods Inventory, December 1 $ 430,000 POINTS: 1 DIFFICULTY: Challenging LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Management TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Applying 25. Inventory accounts for a manufacturer include all of the following except : a. Merchandise Inventory. b. Finished Goods. c. Work in Process. d. Raw Materials. ANSWER: a RATIONALE: Inventory accounts for a manufacturer include Raw Materials, Work in Process, and Finished Goods. Merchandise Inventory is the inventory account for a merchandiser. POINTS: 1 DIFFICULTY: Easy CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 12 LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Mana gement TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Remembering 26. For a manufacturer, the total cost of manufactured goods completed but still on hand is: a. Merchandise Inventory. b. Finished Goods. c. Work in Process. d. Raw Materials. ANSWER: b RATIONALE: Merchandise Inventory refers to inventory held by a merchandising operation. Finished goods are goods completed, but still on hand, while Work in Process are goods which have been started and are in various stages of production, but are not yet completed. Raw materials are items which have been purchased and on hand to be used in the manufacturing process, but have not yet been issued into production. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Management TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Remembering 27. For a manufacturer, manufacturing costs incurred to date for goods in various stages of production, but not yet completed is: a. Merchandise Inventory. b. Finished Goods. c. Work in Process. d. Raw Materials. ANSWER: c RATIONALE: Merchandise Inventory refers to inventory held by a merchandising operation. Finished goods are goods completed, but still on hand, while Work in Process are goods which have been started and are in various stages of production, but are not yet completed. Materials are items which have been purchased and on hand to be used in the manufacturing process, but have not yet been issued into production. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 13 ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Management TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Remembering 28. For a manufacturer, the cost of all materials purchases and on hand to be used in the manufacturing process is: a. Merchandise Inventory. b. Finished Goods. c. Work in Process. d. Raw Materials. ANSWER: d RATIONALE: Merchandise Inventory refers to inventory held by a merchandising operation. Finished goods are goods completed, but still on hand, while Work in Process are goods which have been started and are in various stages of production, but are not yet completed. Raw materials are items which have been purchased and on hand to be used in the manufacturing process, but have not yet been issued into production. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTI VES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Management TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Remembering 29. In the financial statements, Materials should be categorized as: a. Revenue. b. Expenses. c. Assets. d. Liabilities. ANSWER: c RATIONALE: Materials are included in inventory, which is an asset on the balance sheet because it has a future benefit. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Reporting TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Understanding CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 14 30. A(n) __________ requires estimating inventory balances during the year for interim financial statements and a formal count of all inventory items at the end of the year. a. periodic inventory system b. inventory control account c. perpetual inventory system d. inventory cost method ANSWER: a RATIONALE: A periodic inventory system requires a company to make estimates of inventory balances throughout the year, and a complete physical count of inventory at the end of the year. A perpetual inventory system provides a continuous record of purchases, issues and inventory balances. The inventory balances are verified with periodic counts of selected inventory items through out the year. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Analytic ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA -Cost Management TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Remembering 31. Witt Company maintains a continuous record of purchases, materials issued into production and balances of all goods in stock, so that inventory valuation data is available at any time. This is an example of a(n) a. perpetual inventory system. b. inventory control account. c. periodic inventory system. d. inventory cost method. ANSWER: a RATIONALE: A perpetual inventory system maintains a continuous record of purchases, issues and inventory balances. A periodic inventory system requires a physical count of all inventory at the end of the year and estimates of inventory balances throughout the year when preparing interim financial statements. POINTS: 1 DIFFICULTY: Easy LEARNING OBJECTIVES: PRIN.EDWA.16.4 - LO3: Describe the relationship of cost accounting to financial and management accounting ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Cost Management TOPICS: Relationship of Cost Accounting to Financial and Management Accounting OTHER: Bloom's: Remembering 32. Which of the following is most likely to be considered an indirect material in the manufacture of a sofa? a. Lumber CHAPTER 1: INTRODUCTION TO COST ACCOUNTING Cengage Learning Testing, Powered by Cognero Page 15 b. Glue c. Fabric d. Foam rubber ANSWER: b RATIONALE: While glue would be included in the finished product, its cost would be relatively insignificant, therefore, it would not be cost effective to trace its cost to specific products. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Cost Management TOPICS: Elements of Manufacturing Costs OTHER: Bloom's: Understanding 33. The Lauren Company’s payroll summary showed the following in November: Sales department salaries $10,000 Supervisor salaries 20,000 Assembly workers’ wages 45,000 Machine operators’ wages 35,000 Maintenance workers’ wages 15,000 Accounting department salaries 5,000 What amount would be included in direct labor in November? a. $25,000 b. $80,000 c. $45,000 d. $140,000 ANSWER: b RATIONALE: Assembly workers and machine operators would be considered direct labor. Assembly workers’ wages $45,000 Machine operators’ wages 35,000 Total direct labor $80,000 The supervisors and maintenance workers would be included in overhead, while the sales and accounting department salaries would be included in selling and administrative expense. POINTS: 1 DIFFICULTY: Moderate LEARNING OBJECTIVES: PRIN.EDWA.16.5 - LO4: Identify the three basic elements of manufacturing costs ACCREDITING STANDARDS: AACSB Reflective Thinking ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA -Cost Management TOPICS: Elements of Manufacturing Costs OTHER: Bloom's: Understanding 34. The wages of which of the following employees would not be included in the product cost for a manufacturer of