Test Bank For Cost Accounting A Managerial Emphasis Fifth Canadian 5th Edition By Horngren Foster Datar And Gowing

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1 Test Bank For Cost Accounting A Managerial Emphasis Fifth Canadian 5th Edition By Horngren Foster Datar And Gowing Link full download: TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) "Cost" is defined by accountants as a resource sacrificed or foregone to 1) achieve a specific objective. 2) Costs are typically accounted for in two stages of the cost system: (1) 2) accumulation and (2) payment. 3) An actual cost is a predicted cost. 3) 4) Nearly all accounting systems accumulate forecasted costs. 4) 5) A cost object is anything for which a separate measurement of costs is 5) desired. 6) Indirect costs cannot be economically traced directly to the cost 6) objective. 7) Delivery charges are typically considered to be an indirect cost because 7) it cannot be traced to each customer. 8) A cost is classified as a direct or indirect cost based on the applicable 8) cost object. 9) Cost tracing assigns indirect costs to the chosen cost object. 9) 10) Factors affecting direct/indirect cost classifications are the materiality of 10) the cost in question, the information-gathering technology used, and the design of the accounting system 11) A relevant range is the range of the cost driver in which a specific 11) relationship between cost and driver is valid. 12) Changes in particular cost drivers automatically result in decreases in 12) overall costs. 13) A fixed cost is a cost that changes per unit as a cost driver changes. 13) 14) Variable costs do not change in direct proportion to changes in cost 14) drivers. 15) When defining variable and fixed costs, it is assumed that there is only 15) one cost driver.

2 16) A unit cost is computed by dividing a total cost by some number of 16) units. 17) Unit costs are not considered to be an average cost per unit. 17) 18) When a manager is making a decision based on cost figures, it is 18) preferable that he (she) thinks in terms of unit costs. 19) When 50,000 units are produced the fixed costs are $10 per unit. 19) Therefore when 100,000 units are produced fixed costs will remain at $10 per unit. 20) There are three different sectors of the economy: service, merchandising, 20) and manufacturing. 21) Service Sector companies provide services or intangible products to 21) their customers. 22) Merchandising-sector companies include companies engaged in 22) transporting goods from wholesalers to retailers. 23) Manufacturing-sector companies purchase materials and other 23) resources for conversion into various finished goods. 24) Service-sector companies use employees to produce products and 24) services for their customers. 25) Manufacturing firms have three types of inventory: direct materials, 25) work in process, and merchandise. 26) Direct materials inventory is products held for resale. 26) 27) Work-in-process consists of partially completed goods not yet ready for 27) sale. 28) Rent for the building that contains the manufacturing and engineering 28) departments can all be charged as manufacturing overhead costs. 29) The plant supervisor's salary is a direct labour cost. 29) 30) Inventoriable costs are reported as an asset when incurred and expensed 30) on the income statement when the product is sold. 31) Period costs are never included as part of inventory. 31) 32) Conversion costs include all direct manufacturing costs 32) 33) Overtime premium consists of wages paid to all workers in excess of 33) their straight- time wage rates. 34) Operating income does not include interest expense and income taxes. 34) 35) Prime costs consist of direct and indirect manufacturing labour. 35) 36) Conversion costs are all manufacturing costs other than direct materials. 36)

3 37) Overtime premium is always a component of direct labour. 37) 38) Product costs are the sum of the costs assigned to a product for a 38) specific purpose. 39) For purposes of calculating inventory costs under GAAP, only 39) production costs can be used. 40) When producing for a government contract, all costs allowed by the 40) producer will be paid by the government. 41) When producing to sell in the marketplace, all costs in the value chain 41) for getting the product to the customer are included in determining the selling price. 42) Management accountants help managers identify what information is 42) relevant and what information can be ignored. 43) Obtaining information for performance evaluation is not one of the 43) features of cost and management accounting. 44) Budgeting is the most commonly used tool for planning and control. 44) 45) Relevant information analysis is a key aspect of making decisions. 45) 46) Cost items that do not change between the alternative choices involved 46) in the decision are not relevant to the decision to be made as they will be incurred no matter which alternative is chosen. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 47) Anything for which a separate measurement of costs is desired is 47) known as: A) a fixed cost item B) a cost item C) a cost driver D) a variable cost object E) a cost object 48) All of the following are cost objects EXCEPT 48) A) activities or processes. B) departments. C) outputs of processes. D) cost assignments. E) customers. 49) The collection of accounting data in some organized way is 49) A) cost accumulation. B) cost allocation C) cost assignment. D) cost tracing. E) cost conversion

4 51) The term used to identify both the tracing of accumulated costs and the 51) allocation of those costs to a cost object is A) cost management B) cost assignment. C) cost accumulation. D) cost allocation E) cost tracing. 52) Which one of the following items is typically an example of an indirect 52) cost of a cost object? A) manufacturing plant electricity B) wood used for furniture manufacture C) direct manufacturing labour D) courier charges for shipment delivery E) refundable sales tax on direct materials 53) Cost tracing is 53) A) the process of tracking both direct and indirect costs associated with a cost object. B) the process of determining the actual cost of the cost object. C) a function of cost allocation. D) the process of comparing budgeted to actual costs. E) the assignment of direct costs to the chosen cost object. 54) Which one of the following examples could be classified as a direct cost? 54) A) The costs incurred for electricity in the office: Accounting department is the cost object. B) The costs of an entire factory's electricity related to a product; the product line is the cost object. C) The salary of a maintenance supervisor in the manufacturing plant: Product A is the cost object. D) advertising costs E) The printing costs incurred for payroll cheque processing: the payroll cheque processing is the cost object. 55) The determination of a cost as being either direct or indirect depends 55) upon A) only the cost object chosen to determine its individual costs. B) the cost tracing system. C) the allocation system. D) the accounting system. E) the choice of the cost object, and the materiality of the cost in question. 56) Competition places an increased emphasis on cost reductions. For an 56) organization to reduce costs it must focus on A) reporting non-value added costs separately from value-added costs.

5 B) reducing the number of cost drivers. C) the cost allocation process. D) maximizing the cost allocation system. E) efficiently managing the use of the cost drivers in those value-added activities. 57) All the following statements about cost management are TRUE EXCEPT A) it requires efficient management of the use of the cost drivers in the value-added activities B) it requires that managers actively strive to reduce costs. C) it focuses on value-added activities. D) changes in a cost driver doesn't necessarily change total costs. E) it is not affected by the organization's customers. 58) Which one of the following is a variable cost in an insurance company? A) property taxes B) president's salary C) administrative salaries D) rent E) sales commissions 59) Which of the following statements is a fixed cost in an automobile manufacturing plant? A) machine electricity for each assembly line B) parts used in assembly of the cars C) sales commissions D) windows for each car produced E) administrative salaries 60) If each furnace required a hose that costs $20 and 2,000 furnaces are produced for the month, the $40,000 total cost for hoses: A) is considered to be a direct variable cost. B) is considered to be an indirect fixed cost. C) is considered to be a direct fixed cost. D) is considered variable or fixed, depending on the relevant range. E) is considered to be an indirect variable cost. 57) 58) 59) 60) Use the information below to answer the following question(s): Macadamia Co. produced and sold 40,000 units last year. Per unit revenue and costs were as follows: Revenue $ Cost of Goods Sold: Direct Materials $15.00 Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Total Cost of Goods Sold $75.00 Gross Margin $25.00 Selling and Administrative Costs: Sales Commissions (10% of Sales) $10.00

6 Administrative Salaries Total Selling and Administrative $30.00 Operating Income <Loss> <$5.00> The Fixed Manufacturing Overhead provides a capacity of 50,000 units. 61) Calculate last year's operating income when the company produced and 61) sold 40,000 units. A) $ <200,000> B) $ <500,000> C) $0 D) $ <800,000> E) None of the above. 62) Calculate this year's operating income if the company plans to produce 62) and sell 50,000 units. A) $50,000 B) $0 C) $ <550,000> D) $<250,000> E) None of the above. 63) Calculate this year's operating income if the company plans to produce 63) and sell 60,000 units. A) $ <250,000> B) $ <550,000> C) $0 D) $50,000 E) None of the above. 64) All of the following statements are CORRECT EXCEPT 64) A) costs may be indirect and fixed. B) costs may be direct and variable. C) costs may be indirect and variable. D) costs may not be indirect and fixed. E) costs may be direct and fixed. Consider the following data of the Vancouver Company for the year 20x4: Sandpaper-Plant $ 10,000 Leasing costs - plant $ 120,000 Materials handling-plant 100,000 Amortization- equip. 70,000 Coolants-Plant 7,000 Property taxes - equip. 10,000 Indirect manufacturing labour 86,000 Fire insurance - equip. 5,000 Direct manufacturing labour 680,000 Direct materialspurchases 980,000 Direct materials, 1/1/x4 120,000 Direct materials 12/31/x4 86,000 Finished goods, 1/1/x4 210,000 Sales 4,000,000 Finished goods, 12/31/x4 400,000 Sales commissions 200,000 WIP, 1/1/x4 30,000 Sales salaries 180,000 WIP, 12/31/x4 20,000 Advertising costs 150,000 Administration costs 250,000

7 65) What is the unit cost for the direct materials for 20x4 assuming direct 65) materials costs are for the production of 1,014,000 units? A) $0.95 B) $0.80 C) $1.00 D) $1.11 E) $ ) What is the unit cost for the plant leasing costs for 20x4 assuming plant 66) leasing costs are for the production of 1,014,000 units? A) $0.118 B) $0.119 C) $0.110 D) $0.943 E) $ ) What is the unit cost for the direct materials for 20x4 assuming 2,000,000 67) units are produced (direct materials costs are $1.00 per unit when 1,014,000 units are produced)? A) $1.00 B) $0.80 C) $1.10 D) $0.95 E) $ ) What is the unit cost for the plant leasing cost for 20x4 assuming 68) 2,000,000 units are produced (plant leasing costs are $0.118 per unit when 1,014,000 units are produced)? A) 0.18 B) 0.12 C) 0.04 D) 0.35 E) 0.06 The following information pertains to Payton's Shoe Manufacturing: Manufacturing costs $1,000,000 Shoes manufactured 100,000 Beginning inventory 0 pairs 99,500 pairs of shoes are sold during the year for $18. 69) What is the manufacturing cost per pair of shoes? A) $10.05 B) $ C) $18.00 D) $10.00 E) $ ) When making decisions, it is best to use A) total cost, rather than unit cost. B) unit cost, rather than total cost. C) variable costs that would be incurred. D) fixed costs that would be incurred. E) average costs. 71) The following information pertains to the Stratford Company: Beginning finished goods inventory $60,000 Cost of goods manufactured 410,000 Ending finished goods inventory 34,000 69) 70) Wh ds at is sold? the cost of goo

8 71) A) $384,000 B) $376,000 C) $444,000 D) $316,000 E) $436,000 Montreal Industries, Inc. had the following activities during the year:: Direct materials: Beginning inventory $ 50,000 Purchases 154,000 Ending inventory 26,000 Direct manufacturing labour 40,000 Manufacturing overhead 30,000 Ending work in process inventory 10,000 Beginning work in process inventory 2,000 Ending finished goods inventory 40,000 Beginning finished goods inventory 60,000 72) What is Montreal's cost of direct materials used during the year? 72) A) $218,000 B) $204,000 C) $128,000 D) $24,000 E) $178,000 73) Which of the following is part of the service sector of our economy? 73) A) a jeweller B) a shoe producer C) a florist D) a shoe store E) a bank 74) Manufacturing-sector companies 74) A) purchase materials and convert them to finished goods. B) provide services or intangible products. C) buy goods and resell them. D) do all of the above. E) do none of the above. 75) Merchandising-sector companies 75) A) provide services or intangible products. B) buy goods and resell them. C) purchase materials and convert them to finished goods. D) do all of the above. E) do none of the above. 76) Service-sector companies 76) A) provide services or intangible products.

9 B) buy goods and resell them. C) purchase materials and convert them to finished goods. D) do all of the above. E) do none of the above. 77) Manufacturing-sector companies report 77) A) only work in progress inventory. B) only finished goods inventory. C) no inventory accounts. D) only merchandise inventory. E) direct materials inventory, work-in-process inventory, and finished goods inventory accounts. The following information pertains to Payton's Shoe Manufacturing: Manufacturing costs $1,000,000 Shoes manufactured 100,000 Beginning inventory 0 pairs 99,500 pairs of shoes are sold during the year for $18. 78) What is the amount of ending finished goods inventory? A) $8,000 B) $5,000 C) $500 D) $99,500 E) $0 79) For a manufacturing company, direct material costs may be included in A) direct materials inventory only. B) both work-in-process inventory and finished goods inventory. C) merchandise inventory only. D) direct materials inventory, work-in-process inventory, and finished goods inventory accounts. E) none of the above. 80) Which of the following statements would be INCORRECT in a manufacturing plant? A) There would be no merchandising inventory B) Completed goods are included in the finished goods inventory. C) Work in process may also be called "work in progress." D) Materials put into production are included in the direct materials category. E) Partially completed goods are part of the work in process category. 78) 79) 80) Montreal Industries, Inc. had the following activities during the year:: Direct materials: Beginning inventory $ 50,000

10 Purchases Ending inventory Direct manufacturing labour Manufacturing overhead Ending work in process inventory Beginning work in process inventory Ending finished goods inventory Beginning finished goods inventory 154,000 26,000 40,000 30,000 10,000 2,000 40,000 60,000 81) What is Montreal's cost of goods manufactured during the year? A) $268,000 B) $248,000 C) $240,000 D) $260,000 E) $238,000 82) Wages paid to machine operators on an assembly line are an example of which type of cost? A) direct manufacturing overhead costs B) direct materials costs C) indirect manufacturing overhead costs D) indirect material costs E) direct manufacturing labour costs 83) Which of the following is true concerning Prime Costs? A) They equal the sum of fixed manufacturing costs plus conversion costs. B) They are indirect manufacturing costs. C) They include direct manufacturing labour, in a two-part classification. D) They equal the sum of direct manufacturing costs plus conversion costs. E) Prime costs are direct manufacturing costs. 81) 82) 83) The following information pertains to Payton's Shoe Manufacturing: Manufacturing costs $1,000,000 Shoes manufactured 100,000 Beginning inventory 0 pairs 99,500 pairs of shoes are sold during the year for $18. 84) What is the amount of gross profit? A) $1,000,000 B) $796,000 C) $1,791,000 D) $995,000 E) none of the above 84)

11 Montreal Industries, Inc. had the following activities during the year:: Direct materials: Beginning inventory $ 50,000 Purchases 154,000 Ending inventory 26,000 Direct manufacturing labour 40,000 Manufacturing overhead 30,000 Ending work in process inventory 10,000 Beginning work in process inventory 2,000 Ending finished goods inventory 40,000 Beginning finished goods inventory 60,000 85) What is Montreal's cost of goods sold during the year? 85) A) $232,000 B) $240,000 C) $260,000 D) $200,000 E) $220,000 86) Goods available for sale that are not in ending inventory 86) A) are included in beginning inventory. B) are included in goods available for sale at the end of the year. C) are included in the work in process inventory at the end of the year. D) are not accounted for until the next year. E) are incorporated in the cost of goods sold amount. Consider the following data of the Vancouver Company for the year 20x4: Sandpaper-Plant $ 10,000 Leasing costs - plant $ 120,000 Materials handling-plant 100,000 Amortization- equip. 70,000 Coolants-Plant 7,000 Property taxes - equip. 10,000 Indirect manufacturing labour 86,000 Fire insurance - equip. 5,000 Direct manufacturing labour 680,000 Direct materialspurchases 980,000 Direct materials, 1/1/x4 120,000 Direct materials 12/31/x4 86,000 Finished goods, 1/1/x4 210,000 Sales 4,000,000 Finished goods, 12/31/x4 400,000 Sales commissions 200,000 WIP, 1/1/x4 30,000 Sales salaries 180,000 WIP, 12/31/x4 20,000 Advertising costs 150,000 Administration costs 250,000 87) What is the amount of direct materials used for the year 20x4? 87) A) $894,000 B) $946,000 C) $860,000 D) $1,031,000 E) $1,014,000 88) What is the manufacturing cost incurred in 20x4? 88)

12 A) $2,352,000 B) $1,088,000 C) $2,132,000 D) $2,097,000 E) $2,102,000 89) What is the cost of goods manufactured in 20x4? 89) A) $2,112,000 B) $2,102,000 C) $2,132,000 D) $2,082,000 E) $2,097,000 90) What is the cost of goods sold in 20x4? 90) A) $2,302,000 B) $1,922,000 C) $2,322,000 D) $1,502,000 E) $1,712,000 Frazer, Inc. had the following activities in the year: Direct materials: Beginning inventory $100,000 Purchases 308,000 Ending inventory 52,000 Direct manufacturing labour 80,000 Manufacturing overhead 60,000 Ending work in process inventory 20,000 Beginning work in process inventory 4,000 Ending finished goods inventory 80,000 Beginning finished goods inventory 120,000 91) What is Frazer's cost of goods manufactured? 91) A) $512,000 B) $496,000 C) $536,000 D) $480,000 E) $476,000 92) What is Frazer's cost of goods sold? 92) A) $400,000 B) $464,000 C) $520,000 D) $440,000 E) $516,000 93) Which statement about conversion costs is CORRECT using the 93) two-part classification of costs? A) They include indirect manufacturing labour costs but not

13 manufacturing overhead costs. B) They include only indirect manufacturing costs. C) They include only direct manufacturing labour costs. D) They include indirect manufacturing costs and direct manufacturing labour costs. E) They include both direct manufacturing labour costs and manufacturing overhead costs. 94) Service organizations in our economy 94) A) have a finished goods inventory account. B) have a work in process inventory account. C) do not have a direct materials inventory account. D) have a raw materials account. E) do not have a supply inventory account. 95) Which of the following formulae would determine costs of goods sold in 95) a merchandising entity? A) Beginning inventory - Purchases + Ending inventory B) Ending Inventory - Beginning inventory - Purchases C) Purchases - Ending inventory D) Beginning inventory + Purchases - Ending inventory E) Beginning inventory - Ending inventory - Purchases 96) Which of the following formulae would determine cost of goods sold in 96) a manufacturing entity? A) Cost of goods manufactured - Ending inventory + Beginning inventory B) Cost of goods manufactured + Ending inventory + Beginning inventory C) Beginning inventory + Ending inventory - Cost of goods manufactured D) Beginning inventory - Ending inventory - Cost of goods manufactured. E) Ending inventory - Beginning inventory - Cost of goods manufactured 97) The following information pertains to Tom's Country Wood Shop: 97) Beginning finished goods, 1/1/x4 $15,000 Ending finished goods, 12/31/x4 9,500 Cost of goods sold 56,000 Sales 112,500 Operating expenses 25,000 What is the cost of goods manufactured for 20x4? A) $31,500 B) $61,500 C) $50,500 D) $66,500 E) $56,500 98) Generally, costs which are initially recorded as an asset and sub sequent

14 A) manufacturing costs. B) non-manufacturing costs. C) non-inventoriable costs. D) inventoriable costs. E) non-capitalized costs. 99) Which of the following is NOT TRUE of Period Costs? A) For manufacturing sector companies they include all nonmanufacturing costs. B) They are also called operating costs. C) They are expected to benefit future periods. D) For merchandising sector companies they include all costs not related to the cost of goods purchased for resale. E) They are all of the costs on the income statement except cost of goods sold. 100) The components of prime costs and conversion costs include all of the following EXCEPT A) direct materials costs. B) direct manufacturing labour costs plus indirect manufacturing costs. C) indirect materials costs. D) indirect manufacturing costs. E) direct manufacturing labour costs. 99) 100)

15 1) TRUE 2) FALSE 3) FALSE 4) FALSE 5) TRUE 6) TRUE 7) FALSE 8) TRUE 9) FALSE 10) FALSE 11) TRUE 12) FALSE 13) TRUE 14) FALSE 15) TRUE 16) TRUE 17) FALSE 18) FALSE 19) FALSE 20) TRUE 21) TRUE 22) FALSE 23) TRUE 24) FALSE 25) FALSE 26) FALSE 27) TRUE 28) FALSE 29) FALSE 30) TRUE 31) TRUE 32) FALSE 33) TRUE 34) TRUE 35) FALSE 36) TRUE 37) FALSE 38) TRUE 39) TRUE 40) FALSE 41) TRUE 42) TRUE 43) FALSE 44) TRUE 45) TRUE 46) TRUE 47) E 48) D 49) A 50) E 51) B ANSWER KEY

16 52) A 53) E 54) E 55) E 56) E 57) E 58) E 59) E 60) A 61) A 62) A 63) E 64) D 65) C 66) A 67) A 68) E 69) D 70) A 71) E 72) E 73) E 74) A 75) B 76) A 77) E 78) B 79) D 80) D 81) C 82) E 83) E 84) B 85) C 86) E 87) E 88) E 89) A 90) B 91) D 92) C 93) B 94) C 95) D 96) A 97) C 98) D 99) C 100) C