Question 1

Which of the following best describes the primary difference between financial accounting and managerial accounting?

Accepted Answer

Financial accounting is governed by GAAP and intended for external users, while managerial accounting is not required to follow GAAP and is intended for internal users.

Question 2

A company incurs $5,000 in rent for its office building. How should this cost be classified?

Accepted Answer

Period cost, because it is not directly related to inventory production.

Question 3

Which of the following is an example of a direct cost for a manufacturer?

Accepted Answer

Wages paid to assembly line workers

Question 4

A company estimates its total overhead costs for the year to be $120,000 and expects to use 8,000 direct labor hours. What is the predetermined overhead rate (PDOH)?

Accepted Answer

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

Question 5

Which of the following costs would NOT be included in the calculation of Cost of Goods Sold for a manufacturer?

Accepted Answer

Sales department salaries

Question 6

If a company has $$10,000 in beginning raw materials inventory, purchases 50$$,000 of raw materials, and ends the period with $8,000 in raw materials inventory, what is the cost of materials used in production?

Accepted Answer

$$ 10,000 + 50,000 - 8,000 = 52,000 $$

Question 7

Which of the following best describes the flow of product costs through inventory accounts for a manufacturer?

Accepted Answer

Raw Materials Inventory → Work-in-Process Inventory → Finished Goods Inventory → Cost of Goods Sold

Question 8

A company uses a predetermined overhead rate based on direct labor hours. If the rate is $25 per direct labor hour and a job used 12 direct labor hours, how much overhead is allocated to the job?

Accepted Answer

$$ 25 	imes 12 = 300 $$

Question 9

Which of the following is a characteristic of period costs?

Accepted Answer

They are expensed in the period incurred.

Question 10

A company manufactures custom furniture. Which costing system is most appropriate for this company?

Accepted Answer

Job-order costing

Question 11

If a company’s actual overhead costs are $$200,000, but only 180$$,000 was allocated to jobs during the year, what is the result?

Accepted Answer

Underallocated overhead of $20,000

Question 12

Which of the following is an example of an indirect material?

Accepted Answer

Glue used in furniture assembly

Question 13

A company’s total cost for a job includes $$2,000 in direct materials, 1$$,500 in direct labor, and $1,200 in allocated overhead. What is the total cost of the job?

Accepted Answer

$$ 2,000 + 1,500 + 1,200 = 4,700 $$

Question 14

Which of the following statements about product costs is TRUE?

Accepted Answer

Product costs are recorded as assets until the product is sold.

Question 15

A company has the following balances: Beginning Finished Goods Inventory $$10,000, Cost of Goods Manufactured 50$$,000, Ending Finished Goods Inventory $8,000. What is the Cost of Goods Sold?

Accepted Answer

$$ 10,000 + 50,000 - 8,000 = 52,000 $$

Question 16

Which of the following would be classified as an indirect labor cost?

Accepted Answer

Salary of the factory supervisor

Question 17

A company produces 5,000 units of a product. Direct materials cost $$3 per unit, direct labor cost 2 $$per unit, and allocated overhead is $1 per unit. What is the total cost of production?

Accepted Answer

$$ (3 + 2 + 1) 	imes 5,000 = 30,000 $$

Question 18

Which of the following is NOT a reason for classifying costs as either product or period costs?

Accepted Answer

To comply with tax regulations for payroll taxes

Question 19

A paint manufacturer that mass produces identical cans of paint would most likely use which costing system?

Accepted Answer

Process costing

Question 20

If a company’s actual activity is higher than estimated, but total overhead costs remain the same, what is the likely effect on the allocated overhead per unit?

Accepted Answer

Allocated overhead per unit will decrease.

Fundamentals of Managerial Accounting: Cost Classification and Flow

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