A Quiz That’ll Add To Your Knowledge Of Accounting

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A Quiz Thatll Add To Your Knowledge Of Accounting - Quiz

Trading, profit and loss account shows the income and expenditure of a company and this will define the financial position on whether the company is making a profit or incurring some losses. This information will help the company or redefine on how to operate. This quiz will add to your knowledge of accounting. Good luck!


Questions and Answers
  • 1. 

    Preparing budgets is an example of the managent function of:

    • A.

      Controlling

    • B.

      Decision-making

    • C.

      Directing

    • D.

      Planning

    Correct Answer
    D. Planning
    Explanation
    Preparing budgets is an example of the management function of planning because it involves setting goals, determining the resources needed to achieve those goals, and creating a roadmap for how those resources will be allocated. Budgets help to outline the financial plan for the organization, including revenue projections, expenses, and investments. By preparing budgets, managers are able to anticipate and allocate resources effectively, make informed decisions, and ensure that the organization's goals and objectives are met.

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  • 2. 

    Which of the following groups are external users of financial information

    • A.

      Customers of the company

    • B.

      Vendors of the company

    • C.

      Potential investors of the company

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    The correct answer is "All of the above" because all three groups mentioned - customers, vendors, and potential investors - are external users of financial information. Customers may be interested in the company's financial information to assess its stability and ability to meet its obligations. Vendors may use financial information to evaluate the company's creditworthiness and ability to pay for goods and services. Potential investors would also require financial information to assess the company's financial health and make informed investment decisions.

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  • 3. 

    Which of the following is TRUE?

    • A.

      Managerial accounting reports are audited by CPAs

    • B.

      Managerial accounting reports provide detailed internal information

    • C.

      Managerial accounting reports aid potential investors

    • D.

      Managerial accounting reports must follow GAAP

    Correct Answer
    B. Managerial accounting reports provide detailed internal information
    Explanation
    Managerial accounting reports provide detailed internal information. This means that these reports are specifically designed to provide information to managers within an organization, helping them make informed decisions about operations, planning, and control. Unlike financial accounting reports, which are prepared for external stakeholders such as investors and creditors, managerial accounting reports focus on providing information that is relevant and useful for internal decision-making. These reports may include information on costs, budgets, performance measures, and other data that managers need to effectively manage the organization.

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  • 4. 

    The primary goal of financial accounting is to provide infomation for:

    • A.

      Potential investors

    • B.

      Creditors

    • C.

      Governmental regulators

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    Financial accounting serves the purpose of providing information to potential investors, creditors, and governmental regulators. Potential investors require financial information to assess the profitability and viability of investing in a company. Creditors need financial information to evaluate the creditworthiness and ability of a company to repay its debts. Governmental regulators rely on financial accounting information to ensure compliance with laws and regulations. Therefore, the primary goal of financial accounting is to cater to the information needs of all these stakeholders, making "all of the above" the correct answer.

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  • 5. 

    Which of the following is an example of overhead in a factory?

    • A.

      Wages of machine operators

    • B.

      Wages of factory maintenance personnel

    • C.

      Wages of administrators in the corporate office

    • D.

      Salaries of salespersons

    Correct Answer
    B. Wages of factory maintenance personnel
    Explanation
    The wages of factory maintenance personnel can be considered as an example of overhead in a factory because they are not directly involved in the production process. Overhead costs are indirect costs that are necessary for the operation of a business but do not directly contribute to the production of goods or services. Factory maintenance personnel are responsible for maintaining and repairing equipment, ensuring the smooth functioning of the factory, and creating a safe working environment. Although their role is essential for the overall operation of the factory, their wages are not directly tied to the production process.

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  • 6. 

    Which of the following statements is true regarding the salary of the manager of a fast food hamburger restaurant?

    • A.

      The salary is a fixed cost that is directly traceable to the cost of making hamburgers

    • B.

      The salary is a fixed cost that is directly traceable to the cost of operating a specific restaurant

    • C.

      The salary is a variable cost that cannot be traced to the cost of operating a specific restaurant

    • D.

      None of the aboce

    Correct Answer
    B. The salary is a fixed cost that is directly traceable to the cost of operating a specific restaurant
    Explanation
    The correct answer states that the salary of the manager of a fast food hamburger restaurant is a fixed cost that is directly traceable to the cost of operating a specific restaurant. This means that the manager's salary remains constant regardless of the number of hamburgers made, but it is directly related to the overall operation of the specific restaurant. The manager's salary is not a variable cost and it is not directly linked to the cost of making hamburgers.

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  • 7. 

    Use the following information for the next three questions: Comfy Furniture Company manufactures furniture at its Akron, Ohio, factory.  Some of its costs from the past year include:   Depreciation on sales office  $      11,000 Depreciation on factory equipment  $      16,000 Factory supervisor salary  $      52,500 Sales commissions  $      23,000 Lubricants used in factory equipment  $        3,000 Insurance costs for factory  $      21,000 Wages paid to maintenance workers  $     115,000 Fabric used to upholster furniture  $        7,000 Costs of delivery to customers  $        9,000 Wages paid to assembly-line workers  $     132,500 Lumber used to build product  $      72,000 Utilities in factory  $      44,500 Utilities in sales office  $      26,500      Manufacturing overhead costs for Comfy Furniture Company totaled:

    • A.

      $324,000

    • B.

      $122,000

    • C.

      $228,000

    • D.

      $252,000

    Correct Answer
    D. $252,000
    Explanation
    The manufacturing overhead costs for Comfy Furniture Company totaled $252,000. This can be calculated by adding up all the costs listed in the information provided, such as depreciation on factory equipment, factory supervisor salary, lubricants used in factory equipment, insurance costs for the factory, wages paid to maintenance workers, fabric used to upholster furniture, costs of delivery to customers, wages paid to assembly-line workers, lumber used to build the product, utilities in the factory, and utilities in the sales office. The sum of these costs is $252,000.

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  • 8. 

    When manufacturing products, which of the following is an example of an inventoriable product cost?

    • A.

      Depreciation on office equipment

    • B.

      Depreciation on store building

    • C.

      Depreciation on factory equipment

    • D.

      Sales salaries exepenses

    Correct Answer
    C. Depreciation on factory equipment
    Explanation
    Depreciation on factory equipment is an example of an inventoriable product cost because it is a cost directly associated with the production process. Depreciation is the allocation of the cost of an asset over its useful life, and in this case, the factory equipment is used in the manufacturing process. The cost of the equipment is considered part of the cost of producing the products, and therefore, it is classified as an inventoriable product cost.

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  • 9. 

    Active Apparel Company reports the following data for its first year of operation (000s omitted).             Cost of goods manufactured    $500,000 Work in process inventory, beginning 0 Work in process inventory, ending 120,000 Direct materials used     85,000 Manufacturing overhead   100,000 Finished goods inventory, ending        72,000               What is the cost of goods sold?

    • A.

      $500,000

    • B.

      $428,000

    • C.

      $685,000

    • D.

      $548,000

    Correct Answer
    B. $428,000
  • 10. 

    When manufacturing products, direct labor and direct materials are classified as:

    • A.

      Period costs and expensed when incurred

    • B.

      Period costs and expensed when the goods are sold

    • C.

      Product costs and expensed when incurred

    • D.

      Product costs and expensed when the goods are sold

    Correct Answer
    D. Product costs and expensed when the goods are sold
    Explanation
    Direct labor and direct materials are classified as product costs because they are directly associated with the production of goods. These costs are incurred during the manufacturing process and are considered as part of the cost of producing the goods. However, they are not immediately expensed when incurred. Instead, they are included in the cost of inventory and expensed when the goods are sold. This is because the costs of direct labor and direct materials are only recognized as expenses when the goods are transferred to the customer and revenue is generated.

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  • 11. 

    Rent on a factory building would be considered to be:

    • A.

      A direct cost

    • B.

      A period cost

    • C.

      A product cost

    • D.

      None of the above

    Correct Answer
    C. A product cost
    Explanation
    Rent on a factory building would be considered a product cost because it is directly associated with the production process. The rent expense is incurred to maintain the factory building, which is necessary for the production of goods. It is directly attributable to the cost of producing the products and is included in the cost of goods sold. Therefore, it is classified as a product cost rather than a period cost, which is incurred for non-production activities.

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  • 12. 

    Which of the following costs would appear on the income statements for both a merchandiser and manufacturer?

    • A.

      Cost of goods manufactured

    • B.

      Direct labor incurred

    • C.

      Direct materials used

    • D.

      Cost of goods sold

    Correct Answer
    D. Cost of goods sold
    Explanation
    The cost of goods sold would appear on the income statements for both a merchandiser and manufacturer because it represents the cost of the products that have been sold during a specific period. This cost includes the direct materials used, direct labor incurred, and any other manufacturing costs associated with producing the goods. Therefore, it is a common expense that both types of businesses would include in their income statements to calculate their gross profit.

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  • 13. 

    Manufacturing overhead would include:

    • A.

      Indirect labor costs only

    • B.

      All manufacturing costs except direct materials and direct labor

    • C.

      All manufacturing costs

    • D.

      Indirect materials only

    Correct Answer
    B. All manufacturing costs except direct materials and direct labor
    Explanation
    Manufacturing overhead refers to all the indirect costs incurred in the production process, excluding direct materials and direct labor. These indirect costs include expenses such as factory rent, utilities, depreciation of equipment, maintenance, and supervision. Including all manufacturing costs except direct materials and direct labor in manufacturing overhead allows for a more accurate calculation of the total cost of production.

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  • 14. 

    Which of the following is most likely NOT to use process costing?

    • A.

      DuPont Chemical

    • B.

      Ashley Custom Furnishings

    • C.

      Exxon-Mobile (gasoline)

    • D.

      General Mills ( cereal)

    Correct Answer
    B. Ashley Custom Furnishings
    Explanation
    Ashley Custom Furnishings is most likely not to use process costing because it is a custom furniture manufacturer. Custom furniture is typically made to order and involves unique designs and specifications for each piece, which would require job costing rather than process costing. Process costing is more commonly used in industries where large quantities of identical or similar products are produced, such as chemical manufacturing (DuPont Chemical), petroleum refining (Exxon-Mobile), and food processing (General Mills).

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  • 15. 

    What type of product costing system would a manufacturer plywood include?

    • A.

      Job Costing

    • B.

      Process Costing

    • C.

      Either job or process

    • D.

      Both job and process

    Correct Answer
    B. Process Costing
    Explanation
    A manufacturer of plywood would include a process costing system. Process costing is used when products are produced in a continuous flow and go through multiple stages or processes. In the case of plywood manufacturing, the production process involves various steps such as cutting, drying, gluing, and pressing. Each process incurs costs, and these costs are accumulated and allocated to the units of plywood produced. Process costing allows for the calculation of the cost per unit of plywood based on the total costs incurred during the entire production process.

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  • 16. 

    Before the year began, Johnson Manufacturing estimated that manufacturing overhead for the year would be $160,000 and that 12,000 direct labor hours would be worked.  Actual results for the year included the following: Actual manufacturing overhead cost $175,000 Actual direct labor hours          15,000       The predetermined manufacturing overhead rate per direct labor hour is closest to:

    • A.

      $13.33

    • B.

      $10.67

    • C.

      $11.67

    • D.

      $14.58

    Correct Answer
    A. $13.33
    Explanation
    The predetermined manufacturing overhead rate per direct labor hour can be calculated by dividing the estimated manufacturing overhead cost by the estimated direct labor hours. In this case, the estimated manufacturing overhead cost is $160,000 and the estimated direct labor hours are 12,000. Therefore, the predetermined manufacturing overhead rate per direct labor hour is $160,000 / 12,000 = $13.33.

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  • 17. 

    Before the year began, Johnson Manufacturing estimated that manufacturing overhead for the year would be $160,000 and that 12,000 direct labor hours would be worked.  Actual results for the year included the following: Actual manufacturing overhead cost $175,000 Actual direct labor hours          15,000     The amount of manufacturing overhead allocated for the year based on direct labor hours would have been:

    • A.

      $160,000

    • B.

      $167,500

    • C.

      $175,000

    • D.

      $200,000

    Correct Answer
    D. $200,000
  • 18. 

    Use the following data to answer the next three questions: Data below pertains to Garrett Company’s most recently completed fiscal year before any adjustments for overallocated or underallocated overhead were made:   Estimated manufacturing overhead  $       240,000   Factory utilities  $      29,100 Estimated labor hours             35,000   Indirect labor  $      23,500 Actual direct labor hours             36,000   Sales commissions                       $      53,700 Estimated direct labor cost  $       300,000   Factory rent  $      49,200 Actual direct labor cost  $       320,000   Factory property taxes  $      28,100 Factory depreciation  $         67,200   Indirect materials  $      33,000      If the company allocates manufacturing overhead based on direct labor cost, what are the allocated manufacturing overhead costs?

    • A.

      $240,000

    • B.

      $256,000

    • C.

      $230,100

    • D.

      $400,000

    Correct Answer
    B. $256,000
    Explanation
    The allocated manufacturing overhead costs are $256,000. This can be calculated by multiplying the estimated manufacturing overhead ($240,000) by the actual direct labor cost ($320,000) divided by the estimated direct labor cost ($300,000). This formula is used because the company allocates manufacturing overhead based on direct labor cost. Therefore, the allocated manufacturing overhead costs are higher than the estimated manufacturing overhead due to the higher actual direct labor cost.

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  • 19. 

    Use the following data to answer the next three questions: Data below pertains to Garrett Company’s most recently completed fiscal year before any adjustments for overallocated or underallocated overhead were made:   Estimated manufacturing overhead  $       240,000   Factory utilities  $      29,100 Estimated labor hours             35,000   Indirect labor  $      23,500 Actual direct labor hours             36,000   Sales commissions                       $      53,700 Estimated direct labor cost  $       300,000   Factory rent  $      49,200 Actual direct labor cost  $       320,000   Factory property taxes  $      28,100 Factory depreciation  $         67,200   Indirect materials  $      33,000     Actual overhead incurred during the year totaled

    • A.

      $230,100

    • B.

      $300,000

    • C.

      $283,800

    • D.

      $240,000

    Correct Answer
    A. $230,100
    Explanation
    The correct answer is $230,100. This is because the question asks for the actual overhead incurred during the year, and the given data shows that the actual overhead cost is $230,100.

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  • 20. 

    Use the following data to answer the next three questions: Data below pertains to Garrett Company’s most recently completed fiscal year before any adjustments for overallocated or underallocated overhead were made:   Estimated manufacturing overhead  $       240,000   Factory utilities  $      29,100 Estimated labor hours             35,000   Indirect labor  $      23,500 Actual direct labor hours             36,000   Sales commissions                       $      53,700 Estimated direct labor cost  $       300,000   Factory rent  $      49,200 Actual direct labor cost  $       320,000   Factory property taxes  $      28,100 Factory depreciation  $         67,200   Indirect materials  $      33,000     At the end fo the period and before any adjustments are made, overhead would be

    • A.

      Underallocated by $25,900

    • B.

      Overallocated by $25,900

    • C.

      Overallocated by $16,000

    • D.

      Underallocated by $9,900

    Correct Answer
    B. Overallocated by $25,900
    Explanation
    Based on the given data, the estimated manufacturing overhead is $240,000 and the actual direct labor cost is $320,000. The actual direct labor hours are 36,000, which is more than the estimated labor hours of 35,000. This indicates that the actual overhead incurred is higher than the estimated overhead. Therefore, the overhead is overallocated by $25,900.

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  • 21. 

    Mountain Made quilts had a predetermined overhead allocation rate of $5.00 per direct labor hour.  If 5 direct laborers worked 1 ½  hours each to make a batch of  10 quilts, how much total overhead would be allocated to the batch of quilts?

    • A.

      $7.50

    • B.

      $37.50

    • C.

      $30.00

    • D.

      $75.00

    Correct Answer
    B. $37.50
    Explanation
    The total overhead allocated to the batch of quilts can be calculated by multiplying the predetermined overhead allocation rate ($5.00) by the total direct labor hours worked (5 direct laborers x 1.5 hours each = 7.5 hours). Therefore, the total overhead allocated to the batch of quilts is $5.00 x 7.5 hours = $37.50.

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  • 22. 

    Assume that the total cost for the batch of 10 quilts made above in #10 was $400.  If Mountain Made wants to earn a gross profit of 40% on each quilt, what price should be charged for each quilt?

    • A.

      $160

    • B.

      $16

    • C.

      $56

    • D.

      $560

    Correct Answer
    C. $56
    Explanation
    To calculate the price that should be charged for each quilt, we need to add the desired gross profit to the cost of each quilt. The gross profit is 40% of the cost, which is 0.4 * $400 = $160. Adding this to the cost, the price that should be charged for each quilt is $400 + $160 = $560. Therefore, the correct answer is $560.

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  • 23. 

    Job 2301 requires $12,000 of direct materials, $5,000 of direct labor, 500 direct labor hours, and 300 machine hours.  Manufacturing overhead is computed at $15 per direct labor hour used and $12 per machine hour used.  The total cost of Job 1547 is:

    • A.

      $28,100

    • B.

      $11,100

    • C.

      $17,000

    • D.

      $24,500

    Correct Answer
    A. $28,100
    Explanation
    The total cost of Job 1547 is $28,100. This can be calculated by adding up the costs of direct materials, direct labor, and manufacturing overhead. The direct materials cost is $12,000, the direct labor cost is $5,000, and the manufacturing overhead cost can be calculated by multiplying the number of direct labor hours (500) by the rate per direct labor hour ($15), and the number of machine hours (300) by the rate per machine hour ($12). Adding these costs together gives a total cost of $28,100.

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  • 24. 

    If manufacturing overhead has been overallocated during the period, and most of the jobs                            produced have been sold, then:

    • A.

      Cost of goods sold should be decreased

    • B.

      Cost of goods sold should be increased

    • C.

      Finished goods inventory should be increased

    • D.

      Work in process inventory should be decreased

    Correct Answer
    A. Cost of goods sold should be decreased
    Explanation
    If manufacturing overhead has been overallocated during the period and most of the jobs produced have been sold, it means that the actual manufacturing overhead costs were lower than the allocated amount. This suggests that the cost of goods sold, which includes the manufacturing overhead costs, should be decreased to reflect the lower actual costs. Since the overallocated manufacturing overhead has already been accounted for in the cost of goods sold, decreasing it would adjust the cost of goods sold to the correct lower amount.

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  • 25. 

    The requisition of direct and indirect materials into production:

    • A.

      Reduced finished goods inventory

    • B.

      Reduces manufacturing overhead

    • C.

      Reduces raw materials inventory

    • D.

      Reduces work in process inventory

    Correct Answer
    C. Reduces raw materials inventory
    Explanation
    The correct answer is "reduces raw materials inventory." When direct and indirect materials are requisitioned into production, it means that they are being used up in the manufacturing process. As a result, the raw materials inventory is reduced because these materials are no longer available for future use. This helps in managing inventory levels and ensures that the company is not holding excess raw materials, which can tie up capital and increase storage costs.

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  • 26. 

    Which of the following represents the flow of costs in a manufacturing firm?

    • A.

      Raw materials inventory, finished goods inventory, cost of goods sold

    • B.

      Raw materials inventory, work in process inventory, finished goods inventory

    • C.

      Finished goods inventory, work in process inventory, cost of goods sold

    • D.

      Work in process inventory, cost of goods sold, finished goods inventory

    Correct Answer
    B. Raw materials inventory, work in process inventory, finished goods inventory
    Explanation
    In a manufacturing firm, the flow of costs starts with the raw materials inventory, where the cost of raw materials is recorded. Then, the raw materials are processed and move to the work in process inventory, where the cost of labor and overhead is added to the raw materials cost. Finally, when the products are completed, they are transferred to the finished goods inventory, where the total cost of production is calculated. When the finished goods are sold, the cost of goods sold is recorded. Therefore, the correct flow of costs in a manufacturing firm is raw materials inventory, work in process inventory, finished goods inventory.

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  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 30, 2012
    Quiz Created by
    AllAmericanOne
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