All questions in this multiple-choice test are worth 5 points.
When preparing an income statement, the proper order for income statement components can be one of the following options:
a. Comprehensive income, Other comprehensive income items, irregular items, Net income
b. Net income, irregular items, Comprehensive income, Other comprehensive income items
c. Irregular items, Net income, Other comprehensive income items, Comprehensive income
d. Irregular items, Net income, Comprehensive income, Other comprehensive income items
2. Which statement below is not true regarding changes in accounting principles? a. Most changes in accounting principles are only reported in current periods when the principle change takes place. b. Changes in accounting principles are allowed when new principles are preferable to old ones. c. Most changes in accounting principles are retroactively reported. d. Consistency is one of the biggest concerns when a change in accounting principle is undertaken.
3. Management accountants would not assist in budget planning, prepare reports primarily for external users, determine cost behavior, or be concerned with the impact of cost and volume on profits.
4. Which of the following statements about internal reports is false? a. The content of internal reports may go beyond the double-entry accounting system. b. Internal reports may display all amounts at market values.
c.Internal reports may discuss prospective events. Most internal reports are summarized rather than detailed.
5. The flow of costs in a job order cost system involves accumulating manufacturing costs incurred and assigning the accumulated costs to work done. It cannot be measured until all jobs are complete and measures product costs for a set time period, generally following a LIFO cost flow assumption.
6. A job cost sheet is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job. It is also used to track manufacturing overhead costs to specific jobs and by management to understand how direct costs affect profitability. Additionally, it is a daily form that management uses for tracking worker productivity, on which employee raises are based.
7. In a process cost system, there are several ways in which a Work in Process account is managed. Firstly, there is a separate Work in Process account for each product being produced. Secondly, when materials are requested, the requisition form must specify the job for which the materials will be utilized. Additionally, there is also a separate Work in Process account for each individual process involved in production. Lastly, there is an option to use a single Work in Process account that covers all the processes, similar to how it is done in a job order cost system.
8. A process cost accounting system is suitable for situations where multiple products are created, each with varying material, labor, and overhead requirements. Additionally, it is used when the attention is directed towards a specific job or order.
c. Similar products are produced in large quantities.
d. Individual products are tailored to customer specifications.
9. Activity-based costing is a method that involves the allocation of overhead to activity cost pools. The allocated overhead is then assigned to products and services using cost drivers. This method differs from others in that it accumulates overhead in one cost pool and assigns it to products and services by means of a cost driver. Additionally, it assigns activity cost pools to products and services and then allocates overhead back to the activity cost pools. Another approach is to allocate overhead directly to products and services based on activity levels.
10. A well-designed activity-based costing system begins by:
- a) identifying the activity-cost pools.
- b) computing the activity-based overhead rate.
- c) assigning overhead costs to products.
- d) analyzing the activities performed to manufacture a product.
Each problem is worth 30 points.
Norton Brooks, PSC is an architectural firm that employs activity-based costing. The firm utilizes three activity cost pools, which include Salaries and Wages, Travel Expense, and Plan Reproduction Expense. Norton Brooks has provided the following details regarding activity and costs:
Salaries and wages: $390,000
Travel expense: $100,000
Plan reproduction expense: $120,000
Total: $610,000
Activity Cost Pools
ProjectBusiness
AssignmentDevelopmentOther
Salaries and wages60%30%10%
Travel expense40%40%20%
Plan reproduction expense35%40%25%
Instructions
Calculate the total cost to be allocated to the (a) Project Assignment, (b) Business Development, and (c) Other activity cost pools.
Seasonal Delights manufactures a diverse range of holiday and seasonal decorative items. The overhead rates for Seasonal Delights’ activity-based costing are as follows:
Purchasing: $380 per order
Storing: $2 per square foot/days
Machining: $100 per machine hour
Supervision: $5 per direct labor hour
The Snow Man project consisted of three purchase orders, totaling 4,000 square feet/days, 60 machine hours, and 40 direct labor hours. The job incurred $19,000 in direct material costs and had a direct labor rate of $30 per hour.
Instructions
Determine the total cost of the Snow Man project.
Crenshaw Company inputs materials at the start of each process. The Work in Process (WIP) inventories, containing the conversion work percentage, and production data for its Painting Department during specific months are provided below:
Beginning Work In ProcessEnding Work In Process
PercentageUnits CompletedPercentage
MonthUnitsCompletedand Transferred OutUnitsCompleted
July-0-—11,00050090%
Sept.2,50020%9,0004,00070%
Instructions
(a) Calculate the physical units for July.
(b) Determine the equivalent units of production for materials and conversion costs for September.
In May 2013, Nitz Company’s Assembly Department began manufacturing 25,000 units. Of these, 20,000 units were transferred out while 5,000 units were fully completed in terms of materials and partially completed by 40% in terms of conversion costs.
Manufacturing Costs: The overall costs of manufacturing amount to $90,000 for materials, $72,000 for labor, and $60,000 for overhead expenses.
Instructions:
Please generate a production cost report for the month of May.
Garnder Company began operating on July 1, 2013. The job cost sheets display the manufacturing costs assigned for each month with their respective job numbers and amounts.
Job No. July August September
100 $12,000 $8,800
101 $8,800 $9,700 $12,000
102 $5,000
103 $11,800 $6,000
104 $5,800 $7,000
Job 102, completed in July, Job 100, completed in August, and Jobs 101 and 103, completed in September
were each sold for 80% above their respective costs in the month following completion.
Instructions
In the month after completion, Job 102 (completed in July), Job 100 (completed in August), and both Jobs 101 and 103 (both completed in September) were all sold at a price that was 80% higher than their individual costs.
Compute the balance in Work in Process Inventory at the end of July, the balance in Finished Goods Inventory at the end of September, and the gross profit for August.
