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web.groovymark@gmail.com
- December 8, 2024
Question 21
What is the purpose of using a time ticket in job order costing?
a) To track the number of units produced
b) To track direct labor hours worked on a specific job
c) To allocate indirect labor costs to jobs
d) To record overhead costs
Answer: b) To track direct labor hours worked on a specific job
Explanation: A time ticket is used to track the amount of time an employee spends on a specific job, which helps assign direct labor costs to that job.
Question 22
What happens when manufacturing overhead is overapplied?
a) Actual overhead costs exceed applied overhead
b) The cost of goods sold is understated
c) Applied overhead exceeds actual overhead
d) Direct materials costs are overestimated
Answer: c) Applied overhead exceeds actual overhead
Explanation: Overapplied overhead means that the overhead allocated to jobs is greater than the actual overhead incurred. This leads to an adjustment at the end of the period to reduce the cost of goods sold.
Question 23
Which of the following is an example of a variable cost?
a) Factory rent
b) Depreciation on machinery
c) Direct materials
d) Salaries of factory supervisors
Answer: c) Direct materials
Explanation: Variable costs change with the level of production, and direct materials are an example since the amount of materials used increases as more units are produced.
Question 24
What is the journal entry to apply overhead to a job?
a) Debit work-in-process inventory, credit manufacturing overhead
b) Debit finished goods inventory, credit work-in-process inventory
c) Debit manufacturing overhead, credit work-in-process inventory
d) Debit raw materials inventory, credit work-in-process inventory
Answer: a) Debit work-in-process inventory, credit manufacturing overhead
Explanation: When overhead is applied to a job, work-in-process inventory is debited (increased) and manufacturing overhead is credited (decreased).
Question 25
Which cost is considered a direct cost?
a) Factory rent
b) Indirect materials
c) Direct labor
d) Utilities
Answer: c) Direct labor
Explanation: Direct labor is a cost that can be directly traced to a specific job or product, unlike indirect costs such as factory rent and utilities.
Question 26
What is the break-even point in dollars if fixed costs are $60,000 and the contribution margin ratio is 30%?
a) $180,000
b) $200,000
c) $120,000
d) $150,000
Answer: b) $200,000
Explanation: The break-even point in dollars is calculated by dividing total fixed costs by the contribution margin ratio. In this case, $60,000 / 0.30 = $200,000.
Question 27
What type of cost is factory utilities in a manufacturing environment?
a) Direct cost
b) Fixed cost
c) Indirect cost
d) Period cost
Answer: c) Indirect cost
Explanation: Factory utilities are considered an indirect cost because they cannot be directly traced to individual products but are part of the overall manufacturing overhead.
Question 28
What is the correct journal entry to record factory depreciation?
a) Debit depreciation expense, credit accumulated depreciation
b) Debit manufacturing overhead, credit accumulated depreciation
c) Debit work-in-process inventory, credit depreciation expense
d) Debit cost of goods sold, credit accumulated depreciation
Answer: b) Debit manufacturing overhead, credit accumulated depreciation
Explanation: Factory depreciation is recorded as a manufacturing overhead cost. The debit goes to manufacturing overhead, and the credit goes to accumulated depreciation.
Question 29
In process costing, what is the primary focus when assigning costs?
a) Assigning costs to individual jobs
b) Assigning costs to each department or process
c) Allocating fixed costs evenly
d) Tracing direct costs to specific units
Answer: b) Assigning costs to each department or process
Explanation: In process costing, costs are accumulated by department or process, as it is used for industries that produce large quantities of identical products.
Question 30
Which of the following is an example of a fixed cost?
a) Direct materials
b) Factory rent
c) Sales commissions
d) Direct labor
Answer: b) Factory rent
Explanation: Fixed costs, such as factory rent, remain constant regardless of production levels, while variable costs, such as direct materials, fluctuate with production.
Question 31
What is the journal entry to record indirect labor costs in a manufacturing environment?
a) Debit work-in-process inventory, credit salaries payable
b) Debit manufacturing overhead, credit salaries payable
c) Debit finished goods inventory, credit work-in-process inventory
d) Debit cost of goods sold, credit salaries payable
Answer: b) Debit manufacturing overhead, credit salaries payable
Explanation: Indirect labor costs are part of manufacturing overhead and are recorded by debiting manufacturing overhead and crediting salaries payable.
Question 32
What is the predetermined overhead rate if estimated overhead costs are $400,000 and the estimated labor hours are 50,000?
a) $6 per labor hour
b) $8 per labor hour
c) $7 per labor hour
d) $10 per labor hour
Answer: b) $8 per labor hour
Explanation: The predetermined overhead rate is calculated by dividing estimated overhead costs by the estimated labor hours. In this case, $400,000 / 50,000 = $8 per labor hour
Question 33
In job order costing, what does the cost of goods manufactured represent?
a) Total cost of goods sold during the period
b) Total costs transferred to finished goods inventory
c) Total direct materials used in production
d) Total applied overhead
Answer: b) Total costs transferred to finished goods inventory
Explanation: The cost of goods manufactured represents the total costs of jobs completed during the period and transferred from work-in-process to finished goods inventory.
Question 34
What is the journal entry to record the purchase of raw materials on account?
a) Debit raw materials inventory, credit cash
b) Debit work-in-process inventory, credit accounts payable
c) Debit raw materials inventory, credit accounts payable
d) Debit cash, credit raw materials inventory
Answer: c) Debit raw materials inventory, credit accounts payable
Explanation: When raw materials are purchased on account, raw materials inventory is debited to reflect the increase in materials, and accounts payable is credited to reflect the liability.
Question 35
In process costing, what is an equivalent unit of production?
a) A completed unit transferred to finished goods inventory
b) A partially completed unit expressed in terms of a fully completed unit
c) A unit that has been started but not completed
d) A unit that is fully completed but not yet sold
Answer: b) A partially completed unit expressed in terms of a fully completed unit
Explanation: An equivalent unit of production represents a partially completed unit converted into the amount of work required to produce a fully completed unit.
Question 36
What is the formula to calculate the margin of safety?
a) Fixed costs / contribution margin per unit
b) Current sales – break-even sales
c) Total sales / total costs
d) Total variable costs / total fixed costs
Answer: b) Current sales - break-even sales
Explanation: The margin of safety measures how much sales can drop before reaching the break-even point, calculated by subtracting break-even sales from current sales.
Question 37
What type of cost is the salary of a factory supervisor?
a) Direct cost
b) Indirect cost
c) Variable cost
d) Period cost
Answer: b) Indirect cost
Explanation: The salary of a factory supervisor is considered an indirect cost because it cannot be traced directly to a specific product but is part of the overall manufacturing overhead.
Question 38
What is the formula to calculate the contribution margin ratio?
a) Sales revenue – variable costs
b) Contribution margin / sales revenue
c) Fixed costs / contribution margin per unit
d) Sales revenue – fixed costs
Answer: b) Contribution margin / sales revenue
Explanation: The contribution margin ratio expresses the proportion of sales revenue that exceeds variable costs and is available to cover fixed costs and generate profit.
Question 39
In a job order costing system, what happens when a job is sold?
a) The cost is transferred to work-in-process inventory
b) The cost is transferred to cost of goods sold
c) The cost is transferred to manufacturing overhead
d) The cost is transferred to direct materials
Answer: b) The cost is transferred to cost of goods sold
Explanation: When a job is sold, the cost of the job is transferred from finished goods inventory to cost of goods sold, representing the expense of the job.
Question 40
In process costing, what is the purpose of calculating equivalent units of production?
a) To determine the number of units sold
b) To allocate fixed costs to products
c) To account for partially completed units
d) To track direct labor costs
Answer: c) To account for partially completed units
Explanation: Equivalent units of production are used to measure the work done on partially completed units, allowing accurate allocation of costs in a process costing system.
