Principles of Accounting II Exam 1 -2010 Version 1-16. Decentralization refers to: A. reporting for t e compan! as a " ole. #.

focusing reporting on parts of t e compan!. C. t e $elegation of $ecision-ma%ing aut orit! t roug out an organization. D. $ifferences in organizations. 2-21. Dorra &orporation manufactures la"nmo"ers in fi'e "or% stations. Dorra(s "ee%l! $eman$ is )*000 mo"ers +ut Dorra can onl! pro$uce ,*200. Accor$ing to t e t eor! of constraints* to increase pro$uction output Dorra "oul$ +enefit t e most +! concentrating impro'ement efforts on t e: A. first "or% station. #. last "or% station. &. largest "or% station. D. fastest "or% station. E. slo"est "or% station. --2-. .ne of t e steps in t e lean t in%ing mo$el is to organize "or% arrangements aroun$ t e flo" of t e +usiness process. / is is often accomplis e$ +!: A. automating t e +usiness process. #. implementing an enterprise s!stem. &. instituting a six sigma program. D. creating a manufacturing cell. ,-10. 1anagerial accounting: A. as its primar! emp asis on t e future. #. is re2uire$ +! regulator! +o$ies suc as t e 3E&. &. focuses on t e organization as a " ole* rat er t an on t e organization(s segments. D. 4esponses a* +* an$ c are all correct. )-20. 5 ic of t e follo"ing I3 a c aracteristic of financial accounting6 A. not man$ator! B. must follo" 7AAP &. emp asis on rele'ance of $ata* rat er t an precision D. +ot A an$ & a+o'e 6-21. / e corporate controller(s salar! "oul$ +e consi$ere$ a8n9: A. manufacturing cost. #. pro$uct cost. C. a$ministrati'e cost. D. selling expense.

:-22. / e costs of $irect materials are classifie$ as:

A. & #. & &. & D. &

oice A oice # oice & oice D

0-2,. / e t ree +asic elements of manufacturing cost are $irect materials* $irect la+or* an$: A. cost of goo$s manufacture$. #. cost of goo$s sol$. &. "or% in process. D. manufacturing o'er ea$. ;-26. 5 ic terms +elo" correctl! $escri+e t e cost of t e +lac% paint use$ to paint t e $ots on a pair of $ice6

A. & B. & &. & D. &

oice A oice # oice & oice D

10-2:. / e cost of fire insurance for a manufacturing plant is generall! consi$ere$ to +e a: A. pro$uct cost. #. perio$ cost. &. 'aria+le cost. D. all of t ese.

11-2;. /ransportation costs incurre$ +! a manufacturing compan! to s ip its pro$uct to its customers "oul$ +e classifie$ as " ic of t e follo"ing6 A. Pro$uct cost #. 1anufacturing o'er ea$ C. Perio$ cost D. A$ministrati'e cost 12--0. 1icro &omputer &ompan! as set up a toll-free telep one line for customer in2uiries regar$ing computer ar$"are pro$uce$ +! t e compan!. / e cost of t is toll-free line "oul$ +e classifie$ as " ic of t e follo"ing6 A. Pro$uct cost #. 1anufacturing o'er ea$ &. Direct la+or D. Perio$ cost 1----. 5 ic t"o terms +elo" $escri+e t e "ages pai$ to securit! guar$s t at monitor a factor! 2, ours a $a!6 A. 'aria+le cost an$ $irect cost #. fixe$ cost an$ $irect cost &. 'aria+le cost an$ in$irect cost D. fixe$ cost an$ in$irect cost 1,--,. 5it in t e rele'ant range* t e $ifference +et"een 'aria+le costs an$ fixe$ costs is: A. 'aria+le costs per unit fluctuate an$ fixe$ costs per unit remain constant. B. 'aria+le costs per unit are constant an$ fixe$ costs per unit fluctuate. &. +ot total 'aria+le costs an$ total fixe$ costs are constant. D. +ot total 'aria+le costs an$ total fixe$ costs fluctuate. 1)--6. A la"nmo"er manufacturer compute$ a cost per unit of <)- +! a$$ing toget er last mont (s $irect la+or* $irect materials* an$ manufacturing o'er ea$ an$ $i'i$ing t at total +! t e 10*000 units pro$uce$ last mont . 8/ ere "ere no +eginning or en$ing in'entories.9 If ;*000 units are going to +e manufacture$ t is mont * "e "oul$ expect t at t e: A. cost per unit "ill remain t e same. #. cost per unit "ill $ecrease. &. $irection of c ange in unit costs cannot +e $etermine$. D. cost per unit "ill increase.

16-,0. / e follo"ing costs "ere incurre$ in August:

&on'ersion costs $uring t e mont totale$: A. <12:*000 #. <)1*000 C. <)2*000 D. <:)*000 1:-,-. In August $irect la+or "as 60= of con'ersion cost. If t e manufacturing o'er ea$ for t e mont "as <),*000 an$ t e $irect materials cost "as <-,*000* t e $irect la+or cost "as: A. <-6*000 #. <22*66: &. <)1*000 D. <01*000 10-,). 7reen &ompan!(s costs for t e mont of August "ere as follo"s: $irect materials* <2:*000> $irect la+or* <-,*000> selling* <1,*000> a$ministrati'e* <12*000> an$ manufacturing o'er ea$* <,,*000. / e +eginning "or% in process in'entor! "as <16*000 an$ t e en$ing "or% in process in'entor! "as <;*000. 5 at "as t e cost of goo$s manufacture$ for t e mont 6 A. <10)*000 #. <1-2*000 &. <1-0*000 D. <112*000

1;-,6. &onsi$er t e follo"ing costs incurre$ in a recent perio$:

5 at "as t e total amount of t e perio$ costs liste$ a+o'e for t e perio$6 A. <:0*000 #. <:1*000 &. <,6*000 D. <-:*000 20-,:. / e ?!ons &ompan!(s cost of goo$s manufacture$ "as <120*000 " en its sales "ere <-60*000 an$ its gross margin "as <220*000. If t e en$ing in'entor! of finis e$ goo$s "as <-0*000* t e +eginning in'entor! of finis e$ goo$s must a'e +een: A. <20*000 B. <)0*000 &. <110*000 D. <1)0*000 21-,0. ?ast mont a manufacturing compan! a$ t e follo"ing operating results:

5 at "as t e cost of goo$s manufacture$ for t e mont 6 A. <-)0*000 #. <-0)*000 &. <-::*000 D. <-2-*000

22-),. @sing t e follo"ing $ata for August* calculate t e cost of goo$s manufacture$:

/ e cost of goo$s manufacture$ "as: A. <106*000 #. <;2*000 &. <;)*000 D. <0;*000 2--1:. 5 ic of t e follo"ing companies "oul$ +e most li%el! to use a Ao+-or$er costing s!stem rat er t an a process costing s!stem6 A. fast foo$ restaurant B. s ip+uil$ing &. cru$e oil refining D. can$! ma%ing 2,-10. &omputing unit pro$uct costs in'ol'es a'eraging in:

A. & B. & &. & D. &

oice A oice # oice & oice D

2)-1;. Bor " ic situation8s9 +elo" "oul$ an organization +e more li%el! to use a Ao+-or$er costing s!stem of accumulating pro$uct costs rat er t an a process costing s!stem6 A. a steel factor! t at processes iron ore into steel +ars #. a factor! t at processes sugar an$ ot er ingre$ients into +lac% licorice C. a costume ma%er t at ma%es specialt! costumes for figure s%aters D. all of t ese

26-20. In Ao+-or$er costing* all of t e follo"ing statements are correct "it respect to la+or time an$ cost except: A. time tic%ets are %ept +! emplo!ees s o"ing t e amount of "or% on specific Ao+s. #. t e Ao+ cost s eet for a Ao+ "ill contain all $irect la+or c arges to t at particular Ao+. &. la+or cost t at can +e trace$ to a Ao+ onl! "it a great $eal of effort is treate$ as part of manufacturing o'er ea$. D. a mac ine operator performing routine annual maintenance "or% on a piece of e2uipment "oul$ c arge t e maintenance time to a specific Ao+. 2:-2-. In a Ao+-or$er costing s!stem* t e Aournal entr! to recor$ t e application of o'er ea$ cost to Ao+s "oul$ inclu$e: A. a cre$it to t e 1anufacturing .'er ea$ account. #. a cre$it to t e 5or% in Process in'entor! account. &. a $e+it to &ost of 7oo$s 3ol$. D. a $e+it to t e 1anufacturing .'er ea$ account. 20-2,. I'or! &ompan! uses a Ao+-or$er costing s!stem. 5 at !ear-en$ Aournal entr! coul$ I'or! ma%e to $ispose of 8close out9 <,*1)0 of o'erapplie$ manufacturing o'er ea$ cost6 A. #. &. D. 2;-2). In a Ao+-or$er costing s!stem* t e use of in$irect materials "oul$ usuall! +e recor$e$ as a $e+it to: A. 4a" 1aterials. #. 5or% in Process. C. 1anufacturing .'er ea$. D. Binis e$ 7oo$s. -0-26. In a Ao+-or$er costing s!stem* $irect la+or costs usuall! are recor$e$ initiall! "it a $e+it to: A. 1anufacturing .'er ea$. #. Binis e$ 7oo$s in'entor!. &. Direct ?a+or Expense. D. 5or% in Process.

-1--,. / e 5or% in Process in'entor! account of a manufacturing compan! s o"s a +alance of <2*,00 at t e en$ of an accounting perio$. / e Ao+ cost s eets of t e t"o uncomplete$ Ao+s s o" c arges of <,00 an$ <200 for $irect materials* an$ c arges of <-00 an$ <)00 for $irect la+or. Brom t is information* it appears t at t e compan! is using a pre$etermine$ o'er ea$ rate* as a percentage of $irect la+or costs* of: A. 00= B. 12)= &. -00= D. 2,0= -2--). Co+ 60: "as recentl! complete$. / e follo"ing $ata a'e +een recor$e$ on its Ao+ cost s eet:

/ e compan! applies manufacturing o'er ea$ on t e +asis of mac ine- ours. / e pre$etermine$ o'er ea$ rate is <1, per mac ine- our. / e total cost t at "oul$ +e recor$e$ on t e Ao+ cost s eet for Co+ 60: "oul$ +e: A. <,*10: B. <6*-1; &. <-*,-2 D. <,*06----6. / e follo"ing $ata a'e +een recor$e$ for recentl! complete$ Co+ )01 on its Ao+ cost s eet. Direct materials cost "as <-*06:. A total of -0 $irect la+or- ours an$ 10, mac ine- ours "ere "or%e$ on t e Ao+. / e $irect la+or "age rate is <12 per la+or- our. / e compan! applies manufacturing o'er ea$ on t e +asis of mac ine- ours. / e pre$etermine$ o'er ea$ rate is <11 per mac ine- our. / e total cost for t e Ao+ on its Ao+ cost s eet "oul$ +e: A. <,*):1 #. <-*:): &. <-*0;0 D. <-*,2:

-,--0. Darrell &ompan! uses a pre$etermine$ o'er ea$ rate +ase$ on $irect la+or- ours to appl! manufacturing o'er ea$ to Ao+s. At t e +eginning of t e !ear t e compan! estimate$ its total manufacturing o'er ea$ cost at <,00*000 an$ its $irect la+or- ours at 100*000 ours. / e actual o'er ea$ cost incurre$ $uring t e !ear "as <-)0*000 an$ t e actual $irect la+or- ours incurre$ on Ao+s $uring t e !ear "as ;0*000 ours. / e manufacturing o'er ea$ for t e !ear "oul$ +e: A. <10*000 un$erapplie$ B. <10*000 o'erapplie$ &. <)0*000 un$erapplie$ D. <)0*000 o'erapplie$ -)-,1. #ra+o &orporation uses $irect la+or- ours in its pre$etermine$ o'er ea$ rate. At t e +eginning of t e !ear* t e estimate$ $irect la+or- ours "ere 1)*:00 ours. At t e en$ of t e !ear* actual $irect la+or- ours for t e !ear "ere 16*:00 ours* t e actual manufacturing o'er ea$ for t e !ear "as <-)2*;60* an$ manufacturing o'er ea$ for t e !ear "as o'erapplie$ +! <2:*000. / e estimate$ manufacturing o'er ea$ at t e +eginning of t e !ear use$ in t e pre$etermine$ o'er ea$ rate must a'e +een: A. <-2:*12, B. <-):*;60 &. <-00*:60 D. <-,:*;60

-6-,-. Dagnon &orporation uses $irect la+or- ours in its pre$etermine$ o'er ea$ rate. At t e +eginning of t e !ear* t e total estimate$ manufacturing o'er ea$ "as <2;;*1-0. At t e en$ of t e !ear* actual $irect la+or- ours for t e !ear "ere 1:*,00 ours* manufacturing o'er ea$ for t e !ear "as o'erapplie$ +! <1-*0)0* an$ t e actual manufacturing o'er ea$ "as <2;,*1-0. / e pre$etermine$ o'er ea$ rate for t e !ear must a'e +een closest to: A. <1:.:0 #. <1:.1; &. <10.22 D. <16.;0

-:-,,. / e 5atts &ompan! uses pre$etermine$ o'er ea$ rates to appl! manufacturing o'er ea$ to Ao+s. / e pre$etermine$ o'er ea$ rate is +ase$ on la+or cost in Dept. A an$ on mac ine- ours in Dept. #. At t e +eginning of t e !ear* t e compan! ma$e t e follo"ing estimates:

5 at pre$etermine$ o'er ea$ rates "oul$ +e use$ in Dept A an$ Dept #* respecti'el!6 A. )0= an$ <0.00 #. )0= an$ <).00 &. <1) an$ 110= D. 200= an$ <).00 -0-,). 3implex &ompan! as t e follo"ing estimate$ costs for next !ear:

3implex estimates t at 10*000 $irect la+or an$ 16*000 mac ine- ours "ill +e "or%e$ $uring t e !ear. If o'er ea$ is applie$ on t e +asis of mac ine- ours* t e o'er ea$ rate per our "ill +e: A. <0.)6 #. <:.6&. <6.;, D. <-.)0

-;-6-. #ea'er &ompan! use$ a pre$etermine$ o'er ea$ rate last !ear of <2 per $irect la+orour* +ase$ on an estimate of 2)*000 $irect la+or- ours to +e "or%e$ $uring t e !ear. Actual costs an$ acti'it! $uring t e !ear "ere:

/ e un$erapplie$ or o'erapplie$ o'er ea$ last !ear "as: A. <1*000 un$erapplie$ B. <1*000 o'erapplie$ &. <-*000 o'erapplie$ D. <2*000 un$erapplie$ ,0-:. Process costing "oul$ +e appropriate for eac of t e follo"ing except: A. custom furniture manufacturing. #. oil refining. &. grain milling. D. ne"sprint pro$uction. ,1-;. Assume t ere is no +eginning "or% in process in'entor! an$ t e en$ing "or% in process in'entor! is 100= complete "it respect to materials costs. / e num+er of e2ui'alent units "it respect to materials costs un$er t e "eig te$-a'erage met o$ is: A. t e same as t e num+er of units put into pro$uction. #. less t an t e num+er of units put into pro$uction. &. t e same as t e num+er of units complete$. D. less t an t e num+er of units complete$. ,2-11. / e Assem+l! Department starte$ t e mont "it );*000 units in its +eginning "or% in process in'entor!. An a$$itional 2:,*000 units "ere transferre$ in from t e prior $epartment $uring t e mont to +egin processing in t e Assem+l! Department. / ere "ere 21*000 units in t e en$ing "or% in process in'entor! of t e Assem+l! Department. Do" man! units "ere transferre$ to t e next processing $epartment $uring t e mont 6 A. ---*000 #. 2-6*000 &. -),*000 D. -12*000

,--12. ?ucas &ompan! uses t e "eig te$-a'erage met o$ in its process costing s!stem. / e compan! a$$s materials at t e +eginning of t e process in t e Borming Department* " ic is t e first of t"o stages in its pro$uction process. Information concerning operations in t e Borming Department in .cto+er follo"s:

5 at "as t e materials cost of "or% in process at .cto+er -16 A. <-*060 #. <)*)20 &. <6*000 D. <6*120 ,,-1-. De"e! &ompan! uses t e "eig te$-a'erage met o$ in its process costing s!stem. / e first processing $epartment* t e 5el$ing Department* starte$ t e mont "it 1)*000 units in its +eginning "or% in process in'entor! t at "ere 20= complete "it respect to con'ersion costs. / e con'ersion cost in t is +eginning "or% in process in'entor! "as <1;*200. An a$$itional 06*000 units "ere starte$ into pro$uction $uring t e mont . / ere "ere 1-*000 units in t e en$ing "or% in process in'entor! of t e 5el$ing Department t at "ere 60= complete "it respect to con'ersion costs. A total of <):)*-60 in con'ersion costs "ere incurre$ in t e $epartment $uring t e mont . / e cost per e2ui'alent unit for con'ersion costs is closest to: A. <).012 B. <6.206 &. <6.,00 D. <6.6;0

,)-1,. ?uft &ompan! uses t e "eig te$-a'erage met o$ in its process costing s!stem. .perating $ata for t e first processing $epartment for t e mont of Cune appear +elo":

Accor$ing to t e compan!(s recor$s* t e con'ersion cost in +eginning "or% in process in'entor! "as <:;*0;- at t e +eginning of Cune. A$$itional con'ersion costs of <-,-*0-0 "ere incurre$ in t e $epartment $uring t e mont . 5 at "as t e cost per e2ui'alent unit for con'ersion costs for t e mont 6 84oun$ off to t ree $ecimal places.9 A. <0.0:0 B. <:.0;1 &. <).;20 D. <,.)0, ,6-1). @nizat &orporation uses t e "eig te$-a'erage met o$ in its process costing s!stem. / e follo"ing information pertains to one of t e compan!(s processing $epartments for a recent mont :

All materials are a$$e$ at t e +eginning of t e process. / e cost per e2ui'alent unit for materials is closest to: A. <0.06 #. <0.;0 &. <1.10 D. <1.10

,:-1:. Par% &ompan! uses t e "eig te$-a'erage met o$ in its process costing s!stem. / e 1ol$ing Department is t e secon$ $epartment in its pro$uction process. / e $ata +elo" summarize t e $epartment(s operations in Canuar!.

/ e accounting recor$s in$icate t at t e con'ersion cost t at a$ +een assigne$ to +eginning "or% in process in'entor! "as <,0*,0, an$ a total of <21-*0;0 in con'ersion costs "ere incurre$ in t e $epartment $uring Canuar!. / e cost per e2ui'alent unit for con'ersion costs for Canuar! in t e 1ol$ing Department is closest to: A. <,.02#. <,.106 &. <,.6)0 D. <,.);0

,0-21. Cam &ompan! uses t e "eig te$-a'erage met o$ in its process costing s!stem. .perating $ata for t e Painting Department for t e mont of April appear +elo":

5 at "ere t e e2ui'alent units for con'ersion costs in t e Painting Department for April6 A. :0*600 #. ::*)00 &. :2*-00 D. 01*200 ,;-20. 4aulot &orporation uses t e "eig te$-a'erage met o$ in its process costing s!stem. / e 1ol$ing Department is t e secon$ $epartment in its pro$uction process. / e $ata +elo" summarize t e $epartment(s operations in Canuar!.

/ e 1ol$ing Department(s cost per e2ui'alent unit for con'ersion cost for Canuar! "as <1.:2. Do" muc con'ersion cost "as assigne$ to t e en$ing "or% in process in'entor! in t e 1ol$ing Department for Canuar!6 A. <)*--2.00 #. <2*)20.,0 C. <-*1;;.20 D. <2*1-2.00

3umter &ompan! uses t e "eig te$-a'erage met o$ in its process costing s!stem. / e follo"ing $ata pertain to operations in t e first processing $epartment for a recent mont :

)0--2. Do" man! units "ere starte$ into pro$uction $uring t e mont 6 A. 60*000 units #. 0,*000 units C. :2*000 units D. )6*000 units