Q: A company uses direct labor hours as its cost driver. If total estimated manufacturing overhead is $120,000 and total estimated direct labor hours are 15,000, what is the pre-determined overhead rate?

$$\frac{120,000}{15,000} = 8 \text{ per direct labor hour} $$

Q: Gross profit is calculated as:

$$\text{Net Sales} - \text{Cost of Goods Sold} $$

Question 1

Which of the following best describes the purpose of the Sarbanes-Oxley Act (SOX)?

Accepted Answer

To improve the accuracy and reliability of corporate disclosures and strengthen internal controls.

Question 2

A company uses direct labor hours as its cost driver. If total estimated manufacturing overhead is $120,000 and total estimated direct labor hours are 15,000, what is the pre-determined overhead rate?

Accepted Answer

$$\frac{120,000}{15,000} = 8 	ext{ per direct labor hour} $$

Question 3

Which of the following is NOT considered a component of internal controls?

Accepted Answer

Maximizing gross profit

Question 4

Which of the following best defines 'Prime Costs' in manufacturing?

Accepted Answer

Direct materials plus direct labor

Question 5

A company has the following inventory balances: Raw Materials $$10,000, Work-in-Process 15$$,000, Finished Goods $20,000. Which inventory is reported as an asset on the balance sheet?

Accepted Answer

Raw Materials, Work-in-Process, and Finished Goods

Question 6

Which of the following is an example of a sunk cost?

Accepted Answer

The depreciation expense on equipment already purchased

Question 7

A company has total manufacturing costs of $$50,000, beginning work-in-process inventory of 5$$,000, and ending work-in-process inventory of $7,000. What is the cost of goods manufactured?

Accepted Answer

$$50,000 + 5,000 - 7,000 = 48,000 $$

Question 8

Which of the following is a benefit of using secondary data in financial accounting?

Accepted Answer

It reduces the time and cost required for data collection.

Question 9

Which of the following costs is classified as an indirect cost in manufacturing?

Accepted Answer

Factory supervisor's salary

Question 10

A company has beginning finished goods inventory of $$8,000, cost of goods manufactured of 25$$,000, and ending finished goods inventory of $6,000. What is the cost of goods sold?

Accepted Answer

$$8,000 + 25,000 - 6,000 = 27,000 $$

Question 11

Which of the following best describes a cost driver?

Accepted Answer

A factor that causes a change in the cost of an activity

Question 12

Gross profit is calculated as:

Accepted Answer

$$	ext{Net Sales} - 	ext{Cost of Goods Sold} $$

Question 13

Which of the following would NOT appear on the Income Statement?

Accepted Answer

Finished Goods Inventory (ending balance)

Question 14

A company estimates total manufacturing overhead at $200,000 and total machine hours at 40,000. If actual machine hours used are 42,000, what is the pre-determined overhead rate and how much overhead is applied?

Accepted Answer

Pre-determined rate: $$\frac{200,000}{40,000} = 5$$ per machine hour; Applied overhead: $$5 	imes 42,000 = 210,000$$

Question 15

Which of the following is included in manufacturing overhead?

Accepted Answer

Factory rent

Question 16

Which of the following statements about organizational charts is correct?

Accepted Answer

They illustrate the hierarchy and reporting relationships among employees.

Question 17

A company has net sales of $$100,000 and cost of goods sold of 60$$,000. Operating expenses are $25,000. What is the net profit?

Accepted Answer

$$100,000 - 60,000 - 25,000 = 15,000 $$

Question 18

Which of the following is true regarding the listing of inventories on financial statements?

Accepted Answer

Raw materials, work-in-process, and finished goods are listed as assets on the balance sheet.

Question 19

Which of the following is NOT a benefit of internal controls?

Accepted Answer

Increasing the speed of production

Question 20

A company has beginning inventory of $$12,000, purchases of 30$$,000, and ending inventory of $10,000. What is the cost of goods available for sale?

Accepted Answer

$$12,000 + 30,000 = 42,000 $$

Key Concepts in Managerial Accounting: Organizational Structure, Costs, and Inventory

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