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

Managerial Accounting: Tools for Business Decision Making, 6th Edition Test Bank makes studying easier with a breakdown of core topics, solved examples, and revision tips.

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    Achievement Test 1: Chapters 1 - 2 Name _________________________ Managerial Accounting, 6 e Instructor ______________________ Section # _______ Date _________ Part I II III IV Total Points 30 20 22 28 100 Score PART 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 month means that a. 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 is not a control account? a. Raw Materials Inventory b. Factory Labor c. Finished Goods Inventory d. Manufacturing Overhead ____ 3. In the current assets section of the balance sheet, in which order are manufacturing inventories listed? a. Raw materials, work in process, finished goods b. Finished goods, work in process, raw materials c. Work in process, finished goods, raw materials d. Finished goods, raw materials, work in process ____ 4 . Which one of the following cost s is a component of both manufacturing overhea d and total manufacturing costs? a. Direct labor b. Direct materials c. Selling and administrative costs d. Factory utilities ____ 5 . Manufacturing costs are typically classified as a. 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, Sixth Edition AT1 - 2 The following data should be used for questions 6 – 9: Raw materials inventory, January 1 $ 12 ,000 Raw materials inventory, December 31 16 ,000 Work in process, January 1 5 ,000 Work in process, December 31 8 ,000 Finished goods, January 1 17 ,000 Finished goods, December 31 12 ,000 Raw materials purchases 118 ,000 Direct labor 165 ,000 Factory utilities 64 ,000 Indirect labor 12 ,000 Factory depreciation 18 ,000 Selling and administrative expenses 2 2 0,000 ____ 6. How much is the cost of the direct materials used? a. $ 118,000 b. $ 114,000 c. $ 122,000 d. $ 130,000 ____ 7. Assume your answer to question 6 above is $ 130 ,000. How much are total manufacturing costs? a. $ 389,000 b. $ 393,000 c. $ 295,000 d. $ 609,000 ____ 8. Assume your answer to question 7 above is $ 40 0,000. How much is cost of goods manufactured? a. $ 400,000 b. $ 389,000 c. $ 397,000 d. $ 403,000 ____ 9. Assume your answer to question 8 above is $ 420 ,000. How much is cost of goods sold? a. $ 420,000 b. $ 408,000 c. $ 295,000 d. $ 425,000 ____ 10. The formula for computing a predetermined overhead rate is a. 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 machines b. Wages of factory workers c. Salesmen's commissions d. Depreciation on the factory building

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    Achievement Test 1 AT1 - 3 ____ 12. When production costs are debited to Work in Process Inventory, which accounts will be credited? a. Raw Materials Inventory, Factory Labor, and Finished Goods Inventory b. Manufacturing Overhead, Factory Labor, and Cost of Goods Sold c. Raw Materials Inventory, Factory Labor, and Manufacturing Overhead b. Accounts Payable, Factory Wages Payable, and Accumulated Depreciation ____ 1 3 . What are t he functions o f management in an organization? a. P lanning, c ontrolling, and decision making b. P lanning, directing, and contr olling c. D irecting, c ontrolling, and decision making d. D irecting , planning, and decision making ____ 1 4 . Which one of the following is not one of the major acti vities of managerial accounting? a. P roviding a basis for controlling costs by comparing actual results with planned objectives b. P reparing financial statements designed primarily for stockholders and creditors c. P reparing internal reports for management d. D etermining the behavior of costs as activity levels change ____ 1 5 . Which of the following would most likely use a job order cost system ? a. Cement manufacturer b. Cat food manufacturer c. Specialty printing company d. Automobile manufacturer

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    Test Bank for Managerial Accounting, Sixth Edition AT1 - 4 PART II — CLASSIFICATION OF COSTS AND EXPENSES (20 points) Instructions: Classify the following manufacturing costs and expenses by using the following code letters: A. Direct materials cost B. Direct labor cost C. Manufacturing overhead cost D. Period cost Wood You Manufacturing Company incurs the following costs and expenses in making furniture: ____ 1. Insurance on delivery equipment ____ 2. Oak and cherry wood 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. Insurance on factory machines ____ 9. Depreciation on factory machinery ____ 10. Wages of factory janitors

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    Achievement Test 1 AT1 - 5 PART III — DETERMINE WORK IN PROCESS AND FINISHED GOODS BALANCES (22 points) Hanover Manufacturing begins operations on April 1. Information from job cost sheets shows the following: Manufacturing Costs Assigned (non - cumulative) Job April May June 15 $1 0 , 2 00 16 5, 1 00 $ 6 , 4 00 18 3, 6 00 5, 9 00 $4, 0 00 19 7, 3 00 7 , 4 00 20 3, 1 00 Job 15 was completed in April . Job 16 was completed in May . Job 18 was completed in June . 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, Sixth Edition AT1 - 6 PART IV — JOB ORDER COST ACCOUNTING ENTRIES (28 points) The ledger accounts of CynaWood Cabinet Company are presented below, with an identification number for each. Instructions: Prepare appropriate job order cost system entries to record the data/events given below. Place the appropriate identification number(s) in the debit and credit columns provided and the dollar amount in the adjoining column. 1. Cash 9. Accumulated Depreciation 2. Accounts Receivable 10. Sales 3. Raw Materials Inventory 11. Depreciation Expense 4. Work in Process Inventory 12. Factory Labor 5. Finished Goods Inventory 13. Wages Expense 6. Manufacturing Overhead 14. Cost of Goods Sold 7. Accounts Payable 15. Other Accounts 8. Factory Wages Payable —————————————————————————————————————————— Account(s) Account(s) Dollar Entry Information Debited Credited Amount —————————————————————————————————————————— 1. Purchased raw materials on account — $ 96 ,000 —————————————————————————————————————————— 2. Incurred factory labor — $ 75 ,000 —————————————————————————————————————————— 3. Charged direct labor to job X43 — $ 68 ,000 —————————————————————————————————————————— 4. Charged direct materials to job X43 — $82 ,000 —————————————————————————————————————————— 5. Incurred manufacturing overhead on account — $ 38 ,000 —————————————————————————————————————————— 6. Recorded the remaining factory labor as indirect labor —————————————————————————————————————————— 7. Recognized depreciation on factory equipment — $ 11 ,000 —————————————————————————————————————————— 8. Charged overhead to job X43 at 8 0% of direct labor cost —————————————————————————————————————————— 9. Recorded completion of job X43 —————————————————————————————————————————— 10. Recorded cost of sales for job X43 —————————————————————————————————————————— 11. Recorded revenue from sale of job X43 on account — $ 33 0,000 —————————————————————————————————————————— 12. Assume total actual overhead was $ 560 ,000 and total applied overhead was $ 547 ,000 for the year. Record the entry to close the manufacturing overhead account.

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    Achievement Test 1 AT1 - 7 Solutions — Achievement Test 1: Chapters 1 - 2 PART I — MULTIPLE CHOICE (30 points) 1. C 6. B 11. C 2. B 7. A 12. C 3. B 8. C 13. B 4. D 9. D 14. B 5. C 10. A 15. C PART II — CLASSIFICATION OF COSTS AND EXPENSES (20 points) 1. D 6. B 2. A 7. D 3. C 8. C 4. D 9. C 5. C 10. C PART III — DETERMINE WORK IN PROCESS AND FINISHED GOODS BALANCES (22 points) 1. $ 8,700 ($5,100 + $3,600) 2. $ 10,200 3. $ 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) Dollar Account(s) Account(s) Dollar Debited Credited Amount Debited Credited Amount 1. 3 7 $ 96,000 7. 6 9 $ 11,000 2. 12 8 75,000 8. 4 6 54,400 3. 4 12 68,000 9. 5 4 204,400 4. 4 3 82,000 10. 14 5 204,400 5. 6 7 38,000 11. 2 10 330,000 6. 6 12 7,000 12. 14 6 13,000 *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 - 4 Name _________________________ Managerial Accounting, 6 e Instructor ______________________ Section # _______ Date _________ Part I II III IV V Total Points 30 10 25 20 15 100 Score PART 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. no manufacturing overhead cost s are incurred . c. a company strives to have the right amount of materials, parts, and products on hand . d. conversion costs are eliminated. ____ 2. The number of purchase orders would be an appropriate cost driver for a. 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 staplers b. 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 to a. 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 operation except a. assembly. b. engineering design. c. inspections. d. machining.

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    Test Bank for Managerial Accounting, Sixth Edition AT2 - 2 ____ 6. ABC costing is an approach for allocating a. 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 to a. 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 the finished product. d. identify and classify the major activities involved in the manufacture of specific products. ____ 8 . Given the following data, compute equivalent units of production for conversion costs: Beginning Work in Process — 8,000 units, 40% complete Units Completed and Transferred Out — 90,000 units Ending Work in Process — 5 ,000 units, 20% complete. a. 95 ,000 b. 91, 0 00 c. 87 , 8 00 d. 94 , 2 00 ____ 9 . When there is beginning work in process, units transferred out can be computed by subtracting a. 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 . Given the following data, compute equivalent un its of production for materials . Materials are added at the beginning of the process. Beginning Work in Process — 8,000 units, 40% complete Units Completed and Transferred Out — 90,000 units Ending Work in Process — 5 ,000 units, 20% complete. a. 9 8, 2 00 b. 91, 0 00 c. 9 0 , 0 00 d. 9 5 ,000 ____ 11 . Which of the following does not describe a characteristic of process costing? a. Job cost sheets must pass from one production department to the next on a daily basis. b. Once production begins, it continues until the finished product emerges. c. All units of production receive precisely the same amount of material, labor, and overhead. d. Work in process accounts are maintained for each production department.

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    Achievement Test 2 AT2 - 3 ____ 12 . Which item is not a calculation performed on a production cost report? a. Number of p hysical units to be accounted for b. Materials cost per equivalent unit c. Cost of goods transferred out of finished good s d. Cost of goods transferred remaining in work in process PART II — TRUE/FALSE (10 points) Instructions: Designate whether each of the following statements is true or false by circling the T or F. T F 1. The flow of costs is essentially the same in a job order and a process cost system. T F 2. The method of assigning costs is essentially the same in a job order and a process cost system. T F 3. The physical units are a measure of the work done during a period, expressed in fully completed units. T F 4. Manufacturing costs in beginning work in process are ignored in computing the cost of units transferred out and the cost of ending work in process. T F 5. A cost reconciliation schedule is prepared to assign total costs to units transferred out and in ending work in process. T F 6. Activity - based costing allocates overhead to multiple activity cost pools and assigns the activity cost pools to products by means of cost drivers. T F 7. The first step in activity - based costing is to identify the cost driver that has a strong correlation to the activity pool. T F 8. An activity - based overhead rate is computed by dividing the estimated overhead per activity by the number of cost drivers expected to be used per activity. T F 9. Non - value - added activities are production - related activities that add cost to a product without increasing its market value. T F 10. Product - level activities are required to support or sustain an entire production process.

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    Test Bank for Managerial Accounting, Sixth Edition AT2 - 4 PART III — PROCESS COSTING (25 points) Instructions: Using the following data, complete the requirements given below. When you are given amounts to assume the answers to previous requirements, be careful to use such assumed amounts rather than your answers (in order to minimize carry - through errors). The Finishing Department of Wayland Fixtures reports the following for January 201 4 : Production : All materials are added at the beginning of the process. Beginning work in process 11 , 0 00 units, 20 % complete. Units started into production 88 ,000 units. Ending work in process 9 ,000 units, 4 0% complete. Manufacturing Costs : Beginning work in process, $ 3 5 , 1 00, comprised of $ 21,1 00 of materials and $ 14 ,000 of conversion costs. Materials added $ 68 ,000; labor and overhead added $ 56 , 2 00. (a) Required: Compute equivalent units of production for (1) materials and (2) conversion costs. Materials Conversion (b) Assume your answers to (a) above were 49,500 units for materials and 46 , 8 00 for conversion costs. Required: Compute the unit costs for the month. Materials Conversion (c) Assume your answers to (b) above were $1.50 for materials and $ 0.80 for conversion costs. Required: Determine the costs to be assigned to the units transferred out. (d) Assume the same unit costs as given in (c) above. Required: Determine the costs assigned to the 9,000 units in ending work in process.

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    Achievement Test 2 AT2 - 5 PART IV — ACTIVITY - BASED COSTING (20 points) Bella Clear Windows designs and builds custom windows for luxury homes. Most of the windows are custom made but occasionally the company does mass production on order. Its budgeted manufacturing overhead costs for the year 201 4 are as follows: Overhead Cost Pools Amount Purchasing $ 26 ,000 Production (cutting, milling, finishing) 176 ,000 Setting up machines 65 ,000 Inspecting 35 ,000 Utilities 75 ,000 Total budget overhead costs $ 377 ,000 For the last three years, the company has been allocat ing overhead to products on the basis of machine hours. For the year 201 4 , 20 ,000 machine hours are budgeted. The operations manager of Bella Clear recently directed her accountant to implement the activity - based costing system she has repeatedly proposed. T he accountant and production foreman identified the following cost drivers and their usage for the previously budgeted overhead co st pools: Overhead Cost Pools Activity Cost Drivers Total Activity Purchasing Number of orders 8 0 Production (cutting, milling, finishing) Direct labor hours 16 ,000 Setting up machines Number of setups 250 Inspecting Number of inspections 1,250 Utilities Square feet occupied 1 5,000 During this month, the company received an order for 80 window s from a housing development contractor. The accountant prepare d cost estimates for producing components for 80 windows t o submit a contract price per window set to the contractor. The following data for the production of 80 window s is accumulated: Direct materials $ 2 2 ,000 Direct labor $ 23 , 1 00 Machine hours 1, 6 00 Direct labor hours 2 , 1 00 Number of purchase orders 8 Number of machine setups 15 Number of inspections 12 Number of square feet occupied 1,200 Instructions (a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis. (b) Compute the manufacturing cost per window under traditional costing. (c) Compute the ma nufacturing cost per window under the proposed activity - based costing system .

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    Test Bank for Managerial Accounting, Sixth Edition AT2 - 6 PART V — ABC COST DRIVERS (15 points) Scoot Motors manufactures motor scooters in its Jacksonville, Florida plant. Instructions Identify an appropriate cost driver that may be used to assign each of the following costs to each line of motor scooters . Cost drivers may be used more than once. Cost Drivers Machine hours Number of parts Number of finished vehicles Engineering hours Number of setups Number of employees/direct labor hours Number of tests Number of orders Square footage Cost Cost Driver 1. Assembling __________________________ 2. Engineering __________________________ 3. Machining __________________________ 4. Ordering and receiving __________________________ 5. Painting scooters __________________________ 6. Machine setup __________________________ 7. Storing materials __________________________ 8. Supervising __________________________ 9. Packing and shipping __________________________ 10. Inspecting and testing __________________________

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    Achievement Test 2 AT2 - 7 Solutions — Achievement Test 2: Chapters 3 - 4 PART I — MULTIPLE CHOICE (30 points) 1. C 5. C 9. A 2. C 6. C 10. D 3. B 7. D 11. A 4. B 8. B 12. C PART II — TRUE/FALSE (10 points) 1. T 6. T 2. F 7. F 3. F 8. T 4. F 9. T 5. T 10. F PART III — PROCESS COSTING (25 points) (a) Materials (Units) Conversion (Units) 9 0,000 90 ,000 + 9 ,000 + 3, 6 00 99 ,000 9 3, 6 00 (b) Materials Conversion $ 89,100 = $ 1.80 $ 70,200 = $ 1.50 49,500 46,800 (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 = $ 18.85 per machine hour (b) Manufacturing cost per window under traditional costing: Direct materials $ 22 ,000 Direct labor 23 , 1 00 Overhead (1 , 6 00 × $1 8 . 8 5) 30 , 16 0 Total cost of 80 windows $ 75 , 260 Cost per window ($ 75 , 26 0 ÷ 8 0) $ 940.75

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    Test Bank for Managerial Accounting, Sixth Edition AT2 - 8 (c) Manufacturing cost per window set under activity - based costing: Computation of Activity - Based Overhead Rate Estimated Total Activity - Based Activity Cost Pool Overhead ÷ Estimated Drivers = Overhead Rate Purchasing $ 26 ,000 8 0 orders $ 325 per order Production 176 ,000 16 ,000 D/L hrs. $ 11 per D/L hr. Setting up machines 65 ,000 250 setups $ 260 per setup Inspecting 35 ,000 1,250 inspections $ 28 per inspection Utilities 75 ,000 1 5,000 sq. ft. $ 5 per sq. ft. $ 377 ,000 Assignment of Overhead to Order of 50 Windows Expected Activity - Based Activity Cost Pool Use of Driver Overhead Rate Cost Assigned Purchasing 8 orders $ 325 $ 2 , 6 00 Production 2 , 1 00 D/L hrs. $ 11 23 , 1 00 Setting up machines 15 setups $ 260 3 , 9 00 Inspecting 12 inspections $ 28 336 Utilities 1 , 2 00 sq. ft. $ 5 6 ,000 $ 35 ,9 36 Total manufacturing cost per window under ABC: Direct materials $ 22 ,000 Direct labor 23 , 1 00 Overhead 35 ,9 36 Total cost of 8 0 window s $ 81,036 Total cost per window: ($ 81,036 ÷ 8 0) $ 1,012.95 PART V — ABC COST DRIVERS (15 points) 1. Number of parts 6. Number of setups 2. Engineering hours 7. Square footage 3. Machine hours 8. Number of employees/direct labor hours 4. Number of orders 9. Number of finished vehicles 5. Number of finished vehicles 10. Number of tests

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