Raw materials inventory and direct materials

Raw materials inventory includes only direct materials.

 

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True

False

 

The manufacturing statement is also known as the schedule of manufacturing activities or the schedule of cost of goods manufactured.

 

True

False

 

The manufacturing statement must be prepared monthly as it is a required general-purpose financial statement.

 

True

False

 

A variable cost changes in proportion to changes in the volume in activity.

 

True

False

 

Adopting a lean business model should have no effect on cost in a modern manufacturing environment.

 

True

False

 

The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:

 

Adjusted overhead.

Estimated overhead.

Predetermined overhead.

Underapplied overhead.

Overapplied overhead.

 

A source document that an employee uses to record the number of hours at work and that is used to determine the total labor cost for each pay period is a:

 

Job cost sheet.

Hours-of-production sheet.

Time ticket.

Job order ticket.

Clock card.

 

Materials requisitions and time tickets are cost accounting source documents.

 

True

False

 

A time ticket is a source document an employee uses to record the number of hours at work and that is used each pay period to determine the total labor cost.

 

True

False

 

A company that uses a cost accounting system normally has only two inventory accounts: Finished Goods Inventory and Goods in Process Inventory.

 

True

False

 

One section of the process cost summary describes the equivalent units of production for the department during the reporting period and presents the calculations of the costs per equivalent unit.

 

True

False

 

If the factory labor cost for a month was $123,000 (paid in cash), the following journal entry would be recorded by the process cost accounting system:

 

Factory Payroll ——- $123,000

Cash    ———————— $123,000

 

True

False

 

The FIFO method does not use the beginning inventory costs in computing the cost per equivalent unit for the current period.

 

True

False

 

Which of the following is the best explanation for why it is necessary to calculate equivalent units of production in a process costing environment?

 

In most manufacturing environments, it is not possible to conduct a physical count of units.

Companies often use a combination of a process costing and job order costing systems.

In most process costing systems, direct materials are added at the beginning of the process while conversion costs are added evenly throughout the manufacturing process.

All of the work to make a unit 100% complete and ready to move to the next stage of production or to finished goods inventory may not have been completed in a single time period.

In most cases, there is no difference between physical units and equivalent units of production.

 

A process cost summary for a production department accounts for all costs assigned to that department during the period plus costs that were in the department’s Goods in Process Inventory account at the beginning of the period.

 

True

False

 

The relevant range of operations includes extremely high and low levels of production that are unlikely to occur.

 

True

False

 

When graphing cost-volume-profit data on a CVP chart:

 

Units are plotted on the horizontal axis; costs on the vertical axis.

Units are plotted on the vertical axis; costs on the horizontal axis.

Both units and costs are plotted on the horizontal axis.

Both units and cost are plotted on the vertical axis.

Data points always represent expected future points

 

The contribution margin per unit is equal to the sales price per unit minus the variable costs per unit.

 

True

False

 

A cost-volume-profit chart is also known as a(n)

 

Operating profit chart.

Operating leverage chart.

Break-even chart.

Margin of safety chart.

Sales chart.

 

The margin of safety is the excess of:

 

Break-even sales over expected sales.

Expected sales over variable costs.

Expected sales over fixed costs.

Fixed costs over expected sales.

Expected sales over break-even sales.

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