An Advanced Level Managerial Accounting Test!
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Below is an advanced level Test on Managerial Accounting! Managerial Accounting helps managers to pursue the organization's various goals. It's a general practice that includes identifying, measuring, analyzing, interpreting, and communicating financial information to managers of an organization in their daily duties. The purpose of this quiz is to test your knowledge on the same, so you could practice and prepare well.
- 1.
The goal of managerial accounting is to provide the information that managers need for all of the following EXCEPT:
- A.
Planning
- B.
Control
- C.
Decision Making
- D.
Review
Correct Answer
D. ReviewExplanation
Managerial accounting provides information to managers for planning, control, and decision making. However, it does not specifically aim to provide information for the purpose of review. Reviewing performance and outcomes is typically the responsibility of financial accounting, which focuses on providing information for external stakeholders such as investors, creditors, and regulators.Rate this question:
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- 2.
Managerial accounting is designed for use by:
- A.
Internal users
- B.
Stockbrokers
- C.
External users
- D.
Clients
Correct Answer
A. Internal usersExplanation
Managerial accounting is a branch of accounting that focuses on providing financial information and analysis to internal users within an organization. These internal users include managers, executives, and other decision-makers who need financial information to make informed business decisions. Managerial accounting helps these internal users in planning, controlling, and evaluating the performance of the organization. Therefore, the correct answer is internal users.Rate this question:
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- 3.
Which of the following are associated with Planning?
- A.
Specifies the resources needed to achieve the company goals
- B.
Communicate's a company's goals to employees
- C.
Evaluating managers to determine how their performance should be rewarded or punished
- D.
Evaluating operations to provide information as to whether they should be changed or not
Correct Answer(s)
A. Specifies the resources needed to achieve the company goals
B. Communicate's a company's goals to employeesExplanation
The correct answer choices, "Specifies the resources needed to achieve the company goals" and "Communicate's a company's goals to employees," are both associated with the planning process. Planning involves determining the resources, such as manpower, finances, and materials, required to achieve the company's goals. It also includes effectively communicating these goals to employees, ensuring that everyone is aligned and working towards the same objectives.Rate this question:
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- 4.
Which of the following are associated with Control?
- A.
Specifies the resources needed to achieve the company goals
- B.
Communicate's a company's goals to employees
- C.
Evaluating managers to determine how their performance should be rewarded or punished
- D.
Evaluating operations to provide information as to whether they should be changed or not
Correct Answer(s)
C. Evaluating managers to determine how their performance should be rewarded or punished
D. Evaluating operations to provide information as to whether they should be changed or notExplanation
The two options "Evaluating managers to determine how their performance should be rewarded or punished" and "Evaluating operations to provide information as to whether they should be changed or not" are associated with control because they involve assessing and monitoring performance to ensure that goals are being achieved and making necessary changes or adjustments if needed. These actions help in maintaining control over the company's operations and resources to ensure effectiveness and efficiency.Rate this question:
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- 5.
Budgets for Planning: Which is Profit Budget?
- A.
Indicates planned income
- B.
Indicates planned cash inflows and outflows
- C.
Indicates the planned quantity of production and expected costs
Correct Answer
A. Indicates planned incomeExplanation
The profit budget is a budget that indicates the planned income for a specific period. It helps the organization to forecast and plan their expected revenue and determine the profitability of their operations. By estimating the planned income, the organization can make informed decisions regarding their expenses, investments, and overall financial strategy. This budget is crucial for setting financial goals and evaluating the financial performance of the organization.Rate this question:
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- 6.
Budgets for Planning: Which is Cash Flow Budget?
- A.
Indicates planned income
- B.
Indicates planned cash inflows and outflows
- C.
Indicates the planned quantity of production and expected costs
Correct Answer
B. Indicates planned cash inflows and outflowsExplanation
A cash flow budget is a financial tool that outlines the expected cash inflows and outflows for a specific period. It helps in forecasting and managing the cash flow of a business by estimating the timing and amount of cash that will be received and spent. This budget is essential for planning and ensuring that there is enough cash available to cover expenses and meet financial obligations. It provides a clear picture of the company's financial health and helps in making informed decisions regarding investments, expenses, and financing options.Rate this question:
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- 7.
Budgets for Planning: Which is Production Budget?
- A.
Indicates planned income
- B.
Indicates planned cash inflows and outflows
- C.
Indicates the planned quantity of production and expected costs
Correct Answer
C. Indicates the planned quantity of production and expected costsExplanation
The production budget is a financial plan that indicates the planned quantity of production and the expected costs associated with it. It helps in determining the resources needed for production, such as raw materials, labor, and overhead expenses. By estimating the quantity of production and the costs involved, the company can make informed decisions regarding pricing, resource allocation, and overall profitability. Therefore, the production budget plays a crucial role in the planning and control of production activities.Rate this question:
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- 8.
Which are true about Managerial Accounting?
- A.
Is directed at internal users
- B.
Must comply with GAAP standards
- C.
Presents very detailed information
- D.
Presents only monetary information
- E.
Places emphasis on future
Correct Answer(s)
A. Is directed at internal users
C. Presents very detailed information
E. Places emphasis on futureExplanation
It may deviate with GAAP standards, and its can present non-monetary information.Rate this question:
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- 9.
Which is Variable Cost?
- A.
Changes in proportion to changes in volume or activity (no change per unit)
- B.
Changes per unit (no changes in proportion to changes in volume or activity)
Correct Answer
A. Changes in proportion to changes in volume or activity (no change per unit)Explanation
Variable costs are costs that change in proportion to changes in volume or activity. This means that as the volume or activity increases or decreases, the variable cost will also increase or decrease accordingly. However, the variable cost per unit remains constant, meaning that there is no change in cost per unit regardless of the volume or activity level.Rate this question:
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- 10.
Which is Fixed Cost?
- A.
Changes in proportion to changes in volume or activity (no change per unit)
- B.
Changes per unit (no changes in proportion to changes in volume or activity)
Correct Answer
B. Changes per unit (no changes in proportion to changes in volume or activity)Explanation
The correct answer is "Changes per unit (no changes in proportion to changes in volume or activity)". This is because fixed costs remain constant regardless of the volume or activity level. They do not change in proportion to changes in volume or activity. Instead, fixed costs are incurred at a fixed amount per unit, meaning that the cost per unit remains the same regardless of the volume or activity level.Rate this question:
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- 11.
Which of the following is most likely to be a variable cost?
- A.
Depreciation
- B.
Cost of Materials
- C.
Rent
- D.
Advertising
Correct Answer
B. Cost of MaterialsExplanation
Cost of materials is most likely to be a variable cost because it varies directly with the level of production. As the production increases, the cost of materials will also increase proportionally. This cost is directly related to the quantity of materials required to produce a unit of product. Unlike fixed costs such as depreciation, rent, and advertising, the cost of materials can be easily adjusted and controlled based on the production needs. Therefore, it is considered a variable cost in most cases.Rate this question:
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- 12.
Which of the following is most likely to be a fixed cost?
- A.
Cost of Materials
- B.
Rent
- C.
Assembly Labor Cost
- D.
Commissions
Correct Answer
B. RentExplanation
Rent is most likely to be a fixed cost because it remains constant regardless of the level of production or sales. Whether the business produces more or less, the rent expense remains the same. This is in contrast to the cost of materials, assembly labor cost, and commissions, which are variable costs that fluctuate based on the level of production or sales.Rate this question:
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- 13.
Sunks Costs are costs to be incurred in near future that are impossible to avoid.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Sunk Costs are costs incurred in the past that are not relevant to present decisions.Rate this question:
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- 14.
Opportunity Costs are the values of benefits foregone when selecting one alternative over another.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Opportunity costs refer to the benefits that are sacrificed or given up when choosing one option over another. This means that when you choose a particular alternative, you are also giving up the potential benefits that could have been gained from the alternative option. Therefore, the statement that opportunity costs are the values of benefits foregone when selecting one alternative over another is true.Rate this question:
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- 15.
Costs incurred in the past are:
- A.
Opportunity Costs
- B.
Sunk Costs
- C.
Direct Costs
- D.
Variable Costs
Correct Answer
B. Sunk CostsExplanation
Sunk costs refer to costs that have already been incurred and cannot be recovered. These costs are irrelevant to decision making because they are in the past and cannot be changed. Therefore, when considering future actions or investments, sunk costs should not be taken into account as they have no impact on the potential benefits or costs of a decision.Rate this question:
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- 16.
Decision making relies on incremental analysis - an analysis of the revenues that increase (decrease) and the costs that increase (decrease) if a decision alternative is selected.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Decision making relies on incremental analysis because it involves evaluating the potential changes in revenues and costs that would result from selecting a particular decision alternative. This analysis helps in determining the impact of the decision on the overall profitability and feasibility of the alternative. By comparing the incremental changes in revenues and costs, decision makers can make informed choices and select the alternative that maximizes benefits and minimizes risks. Therefore, the statement is true.Rate this question:
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- 17.
Incremental Analysis: -Differences in revenues and costs between alternatives are incremental. -Incremental revenue minus incremental cost equals incremental profit.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Incremental analysis involves comparing the differences in revenues and costs between different alternatives. This means that only the additional or incremental revenues and costs are taken into consideration when making decisions. The formula for calculating incremental profit is by subtracting the incremental cost from the incremental revenue. Therefore, the statement that incremental revenue minus incremental cost equals incremental profit is true.Rate this question:
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- 18.
Which of the following is NOT a goal of managerial accounting?
- A.
Provide information needed for decision making
- B.
Provide information needed for creditors
- C.
Provide information needed for planning
- D.
Provide information needed for control
Correct Answer
B. Provide information needed for creditorsExplanation
The goal of managerial accounting is to provide information needed for decision making, planning, and control. However, providing information needed for creditors is not a goal of managerial accounting. Managerial accounting focuses on internal decision making and providing information to managers within an organization, rather than external stakeholders like creditors.Rate this question:
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- 19.
Which of the following is part of planning?
- A.
Departmental performance report.
- B.
Incremental analysis
- C.
Cash-flow budget.
- D.
Management by exception.
Correct Answer
C. Cash-flow budget.Explanation
A cash-flow budget is a crucial part of planning as it helps in forecasting and managing the inflow and outflow of cash for a specific period. It allows businesses to estimate their future cash needs, identify potential cash shortfalls or surpluses, and make informed decisions regarding investments, expenses, and financing. By creating a cash-flow budget, organizations can effectively plan their cash resources and ensure they have enough liquidity to meet their financial obligations and achieve their goals.Rate this question:
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- 20.
Comparing actual results to expected results is an example of:
- A.
Decision making.
- B.
Planning
- C.
Incremental analysis.
- D.
Control.
Correct Answer
D. Control.Explanation
Comparing actual results to expected results is an example of control because it involves monitoring and evaluating the performance of a system or process to ensure that it is on track and achieving the desired outcomes. By comparing actual results to expected results, organizations can identify any variances or deviations from the plan and take corrective actions to bring the performance back in line with the desired objectives. Control is an important aspect of management as it helps in maintaining efficiency, effectiveness, and accountability in achieving organizational goals.Rate this question:
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- 21.
Which of the following is not part of the planning and control process?
- A.
Preparing financial statements.
- B.
Deciding whether to reward or punish managers.
- C.
Implementing the plan.
- D.
Comparing actual results to planned results.
Correct Answer
A. Preparing financial statements.Explanation
Preparing financial statements is not part of the planning and control process because it is a separate accounting function that involves recording and summarizing financial transactions. The planning and control process, on the other hand, involves setting goals, developing plans, implementing those plans, and monitoring and comparing actual results to the planned results to ensure that objectives are being met. While financial statements may provide information for decision-making and control, they are not directly involved in the planning and control process itself.Rate this question:
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- 22.
Management by exception is an example of:
- A.
Decision making.
- B.
Incremental analysis.
- C.
Planning
- D.
Control.
Correct Answer
D. Control.Explanation
Management by exception is a control technique where managers only intervene or take action when actual results deviate significantly from planned or expected results. This approach allows managers to focus their attention and resources on areas that require immediate attention or corrective action, rather than micromanaging every aspect of the organization. Therefore, management by exception is an example of control as it helps in monitoring and regulating the performance of the organization.Rate this question:
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- 23.
Which of the following is a characteristic of managerial accounting?
- A.
Must comply with GAAP
- B.
Generates reports primarily for internal users
- C.
Contains monetary information only
- D.
Emphasizes historical transactions
Correct Answer
B. Generates reports primarily for internal usersExplanation
Managerial accounting is a branch of accounting that focuses on providing financial information and reports to internal users within an organization. Unlike financial accounting, which must comply with Generally Accepted Accounting Principles (GAAP) and is primarily concerned with external reporting, managerial accounting is not bound by GAAP and is more concerned with providing relevant and timely information to help managers make informed decisions. Therefore, the characteristic of managerial accounting being the generation of reports primarily for internal users is correct.Rate this question:
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- 24.
Which of the following is not a reason that current period performance results may differ from the company’s budget for that period?
- A.
The plan may not have been followed properly.
- B.
The plan may not have been well thought-out.
- C.
Changing circumstances may have made the plan out of date.
- D.
All of the above are reasons that actual results may differ from the company’s plan.
Correct Answer
D. All of the above are reasons that actual results may differ from the company’s plan.Explanation
The given answer states that all of the options provided are reasons that actual results may differ from the company's plan. This means that if the plan was not followed properly, if it was not well thought-out, or if changing circumstances made the plan out of date, it can lead to differences between the actual results and the budgeted plan. Therefore, all of these factors can contribute to the variance between the company's budget and the actual performance results.Rate this question:
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- 25.
Which of the following is an example of a variable cost?
- A.
Direct labor (labor cost that are directly traceable to a product)
- B.
Depreciation
- C.
Rent
- D.
Salaries
Correct Answer
A. Direct labor (labor cost that are directly traceable to a product)Explanation
Direct labor is an example of a variable cost because it directly varies with the level of production. As more units of a product are produced, the direct labor cost will increase proportionally. This cost includes wages, benefits, and other expenses associated with the workers directly involved in the production process. Depreciation, rent, and salaries are not examples of variable costs as they do not directly vary with the level of production.Rate this question:
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- 26.
Which of the following is an example of a fixed cost?
- A.
Materials
- B.
Commissions
- C.
Depreciation
- D.
Direct Labor
Correct Answer
C. DepreciationExplanation
Depreciation is an example of a fixed cost because it refers to the decrease in value of an asset over time. It is a non-cash expense that is incurred regularly regardless of the level of production or sales. Unlike variable costs, such as materials and commissions, which fluctuate with the level of production, depreciation remains constant. Therefore, it is considered a fixed cost as it does not change with the volume of output.Rate this question:
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- 27.
The wages lost when you give up your job to attend school full-time is an example of a(n):
- A.
Fixed costs.
- B.
Opportunity cost.
- C.
Direct cost.
- D.
Sunk cost.
Correct Answer
B. Opportunity cost.Explanation
The wages lost when you give up your job to attend school full-time represents the value of the next best alternative foregone, which is the opportunity cost. By choosing to attend school full-time, you are sacrificing the income you could have earned by working. This cost is not fixed because it varies depending on the individual's job and salary. It is also not a direct cost as it does not directly contribute to the production of goods or services. Finally, it is not a sunk cost as it is a future cost that can be avoided by not giving up the job.Rate this question:
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- 28.
The cost of a machine purchased last year is an example of a(n):
- A.
Opportunity cost.
- B.
Variable cost.
- C.
Fixed cost.
- D.
Sunk cost.
Correct Answer
D. Sunk cost.Explanation
A sunk cost refers to a cost that has already been incurred and cannot be recovered. In this case, the cost of the machine purchased last year falls under this category as it was already paid for and cannot be reversed or recovered. It is important to consider sunk costs when making decisions, as they should not influence future choices since they are irretrievable.Rate this question:
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- 29.
Assume a company incurs $100,000 for total variable costs and $150,000 for total fixed costs to produce 10,000 units. What would the total cost be to produce 12,000 units?
- A.
$270,000
- B.
$300,000
- C.
$250,000
- D.
$280,000
Correct Answer
A. $270,000Explanation
The total cost to produce 12,000 units can be calculated by finding the cost per unit and multiplying it by the number of units. In this case, the total variable cost per unit is $10 ($100,000 / 10,000 units) and the total fixed cost per unit is $15 ($150,000 / 10,000 units). Therefore, the total cost per unit is $25 ($10 + $15). Multiplying this by 12,000 units gives us a total cost of $300,000.Rate this question:
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- 30.
Direct costs are directly traceable to a product, activity, or department, while indirect costs are not.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Direct costs are costs that can be easily and specifically attributed to a particular product, activity, or department. These costs can be directly traced to the specific item or process they are associated with. On the other hand, indirect costs are costs that cannot be easily or specifically traced to a particular product, activity, or department. They are costs that are incurred for the overall functioning of the organization and are not directly linked to a specific item or process. Therefore, the statement that direct costs are directly traceable while indirect costs are not is true.Rate this question:
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- 31.
Manufacturing overhead is the cost of manufacturing activities other than direct materials and direct labor (all indirect costs).
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because manufacturing overhead includes all indirect costs associated with manufacturing activities, such as factory rent, utilities, depreciation of equipment, and indirect labor costs. These costs cannot be directly traced to a specific product but are necessary for the overall manufacturing process. Therefore, manufacturing overhead is considered a separate category of costs apart from direct materials and direct labor.Rate this question:
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- 32.
Which are nonmanufacturing costs?
- A.
Selling Costs
- B.
General and Administrative Costs
- C.
Product Costs
- D.
Period Costs
Correct Answer(s)
A. Selling Costs
B. General and Administrative CostsExplanation
Selling costs and general and administrative costs are considered nonmanufacturing costs because they are not directly related to the production process. Selling costs include expenses incurred in promoting and selling products, such as advertising and sales commissions. General and administrative costs include expenses related to the overall management and administration of the company, such as salaries of executives and office rent. In contrast, product costs are the costs directly associated with manufacturing a product, such as raw materials and labor, while period costs are expenses not directly related to production or the sale of products, such as rent and utilities.Rate this question:
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- 33.
Which are production of goods costs?
- A.
Selling Costs
- B.
General and Administrative Costs
- C.
Product Costs
- D.
Period Costs
Correct Answer(s)
C. Product Costs
D. Period CostsExplanation
Product costs and period costs are both types of costs associated with the production of goods.
Product costs include all costs directly incurred in the production process, such as direct materials, direct labor, and manufacturing overhead. These costs are necessary to create the finished product and are capitalized as part of the inventory until the product is sold.
Period costs, on the other hand, are not directly related to the production process. They include selling costs, such as advertising and sales commissions, as well as general and administrative costs, such as office rent and salaries. These costs are expensed in the period they are incurred and are not included in the cost of inventory.
Therefore, both product costs and period costs are production costs, but they differ in their timing and nature.Rate this question:
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- 34.
Which is Selling Costs?
- A.
Costs associated with securing and filling customer orders ex. advertising, sales salaries, depreciation of sales equipment
- B.
Costs associated with the firm's general management ex. HR, accounting, corporate headquarters, and other support costs
- C.
Costs assigned to goods produced ex direct materials, direct labor, and manufacturing overhead
- D.
Costs expensed in period incurred identified with accounting periods ex. selling and administrative expenses
Correct Answer
A. Costs associated with securing and filling customer orders ex. advertising, sales salaries, depreciation of sales equipmentExplanation
Selling costs are the costs associated with securing and filling customer orders, such as advertising expenses, salaries of sales personnel, and depreciation of sales equipment. These costs are directly related to the sales function of a company and are incurred in order to generate revenue. They are separate from the costs associated with general management, production, and administrative expenses.Rate this question:
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- 35.
Which is General and Administrative Costs?
- A.
Costs associated with securing and filling customer orders ex. advertising, sales salaries, depreciation of sales equipment
- B.
Costs associated with the firm's general management ex. HR, accounting, corporate headquarters, and other support costs
- C.
Costs assigned to goods produced ex direct materials, direct labor, and manufacturing overhead
- D.
Costs expensed in period incurred identified with accounting periods ex. selling and administrative expenses
Correct Answer
B. Costs associated with the firm's general management ex. HR, accounting, corporate headquarters, and other support costsExplanation
General and administrative costs refer to the expenses incurred by a firm in managing its overall operations and support functions. This includes costs related to human resources, accounting, corporate headquarters, and other administrative support costs. These costs are not directly associated with the production of goods or securing customer orders, but rather with the general management and administration of the organization.Rate this question:
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- 36.
Which is Product Costs?
- A.
Costs associated with securing and filling customer orders ex. advertising, sales salaries, depreciation of sales equipment
- B.
Costs associated with the firm's general management ex. HR, accounting, corporate headquarters, and other support costs
- C.
Costs assigned to goods produced ex direct materials, direct labor, and manufacturing overhead
- D.
Costs expensed in period incurred identified with accounting periods ex. selling and administrative expenses
Correct Answer
C. Costs assigned to goods produced ex direct materials, direct labor, and manufacturing overheadExplanation
The correct answer is costs assigned to goods produced, which includes direct materials, direct labor, and manufacturing overhead. These costs are directly associated with the production of goods and are necessary for the creation of the product. This category does not include costs related to securing and filling customer orders, general management, or selling and administrative expenses.Rate this question:
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- 37.
Which is Period Costs?
- A.
Costs associated with securing and filling customer orders ex. advertising, sales salaries, depreciation of sales equipment
- B.
Costs associated with the firm's general management ex. HR, accounting, corporate headquarters, and other support costs
- C.
Costs assigned to goods produced ex direct materials, direct labor, and manufacturing overhead
- D.
Costs expensed in period incurred identified with accounting periods ex. selling and administrative expenses
Correct Answer
D. Costs expensed in period incurred identified with accounting periods ex. selling and administrative expensesExplanation
Period costs are costs that are expensed in the period they are incurred and are identified with specific accounting periods. These costs are not directly associated with the production of goods or services. Selling and administrative expenses, such as advertising, sales salaries, and depreciation of sales equipment, fall under period costs as they are incurred to secure and fill customer orders. On the other hand, costs assigned to goods produced, such as direct materials, direct labor, and manufacturing overhead, are considered product costs. General management costs, including HR, accounting, and corporate headquarters, are also not classified as period costs.Rate this question:
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- 38.
Which costs are only variable?
- A.
Direct Material
- B.
Direct Labor
- C.
Manufacturing Overhead
- D.
Selling Cost
- E.
General and Administrative Cost
Correct Answer(s)
A. Direct Material
B. Direct LaborExplanation
Direct material and direct labor costs are considered variable costs because they directly vary with the level of production. As production increases, more direct materials and direct labor are required, leading to higher costs. On the other hand, manufacturing overhead, selling costs, and general and administrative costs are typically considered fixed costs, as they do not directly change with the level of production. These costs remain relatively constant regardless of the production volume.Rate this question:
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- 39.
Which costs are only fixed?
- A.
Direct Material
- B.
Direct Labor
- C.
Manufacturing Overhead
- D.
Selling Cost
- E.
General and Administrative Cost
Correct Answer
E. General and Administrative CostExplanation
General and Administrative Cost is the correct answer because these costs are typically fixed and do not vary with the level of production or sales. They include expenses such as salaries of top management, office rent, utilities, and administrative staff wages. These costs are necessary for the overall functioning of the organization and are not directly related to the production process. Therefore, they remain constant regardless of the level of production or sales.Rate this question:
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- 40.
Which costs can be variable or fixed?
- A.
Direct Material
- B.
Direct Labor
- C.
Manufacturing Overhead
- D.
Selling Cost
- E.
General and Administrative Cost
Correct Answer(s)
C. Manufacturing Overhead
D. Selling CostExplanation
Manufacturing overhead and selling costs can be variable or fixed. Manufacturing overhead includes all indirect costs incurred during the production process, such as utilities, rent, and depreciation. These costs can vary depending on the level of production. Selling costs, on the other hand, include expenses related to marketing and selling a product, such as advertising and sales commissions. These costs can also be variable or fixed, depending on factors like sales volume and marketing strategies.Rate this question:
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- 41.
Cost of Goods Manufactured = Beginning Work In Progress + Current Manufacturing Cost - Ending Work In Progress
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The given statement is true. The Cost of Goods Manufactured is calculated by adding the beginning work in progress (the value of partially completed goods at the beginning of the period) to the current manufacturing cost (the cost of materials, labor, and overhead incurred during the period) and then subtracting the ending work in progress (the value of partially completed goods at the end of the period). This formula is commonly used in managerial accounting to determine the total cost of goods produced during a specific period.Rate this question:
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- 42.
Cost of Goods Sold = Beginning Finished Goods + Cost of Goods Manufactured - Ending Finished Goods
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
This statement is true because the formula for calculating the Cost of Goods Sold (COGS) includes the Beginning Finished Goods inventory, the Cost of Goods Manufactured, and subtracts the Ending Finished Goods inventory. This formula is commonly used in accounting to determine the cost of producing goods that were sold during a specific period. By including both the beginning and ending inventory, it ensures that the cost of goods sold accurately reflects the cost of producing the goods that were actually sold.Rate this question:
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- 43.
Cost of Goods Available for Sale = Beginning Finished Goods + Cost of Goods Manufactured
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The given statement is true. The formula for calculating the Cost of Goods Available for Sale is by adding the Beginning Finished Goods with the Cost of Goods Manufactured. This formula helps to determine the total value of goods that are available for sale during a specific period. By adding the beginning inventory with the cost of goods produced, the total cost of goods available for sale can be determined accurately.Rate this question:
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- 44.
Cost of Goods Manufactured is $200,000, beginning Finished Goods is $50,000, ending Finished Goods is $100,000, and ending Work In Process is $10,000. What is the Cost of Goods Sold?
- A.
$100,000
- B.
$250,000
- C.
$50,000
- D.
$150,000
Correct Answer
D. $150,000Explanation
The Cost of Goods Sold can be calculated by adding the beginning Finished Goods inventory to the Cost of Goods Manufactured and subtracting the ending Finished Goods inventory. In this case, the beginning Finished Goods inventory is $50,000, the Cost of Goods Manufactured is $200,000, and the ending Finished Goods inventory is $100,000. Therefore, the Cost of Goods Sold is $150,000.Rate this question:
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- 45.
Which are associated with Job Order Costing?
- A.
Companies produce goods to a customer's unique specifications
- B.
Cost of job accumulated on job cost sheet
- C.
Companies produce large quantities of identical items
- D.
Cost accumulate by each operation
- E.
Unit cost of items determined dividing costs of production by number of units produced
Correct Answer(s)
A. Companies produce goods to a customer's unique specifications
B. Cost of job accumulated on job cost sheetExplanation
Job Order Costing is a costing system used by companies that produce goods to a customer's unique specifications. In this system, the cost of each job is accumulated on a job cost sheet, which helps in tracking the costs associated with a specific job or order. This allows the company to determine the total cost of producing each job and helps in pricing decisions. This method is different from Process Costing, where companies produce large quantities of identical items and the costs are accumulated by each operation. The unit cost of items in Job Order Costing is determined by dividing the costs of production by the number of units produced.Rate this question:
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- 46.
Which are associated with Process Costing?
- A.
Companies produce goods to a customer's unique specifications
- B.
Cost of job accumulated on job cost sheet
- C.
Companies produce large quantities of identical items
- D.
Cost accumulate by each operation
- E.
Unit cost of items determined dividing costs of production by number of units produced
Correct Answer(s)
C. Companies produce large quantities of identical items
D. Cost accumulate by each operation
E. Unit cost of items determined dividing costs of production by number of units producedExplanation
Process costing is a method used by companies that produce large quantities of identical items. In this method, costs accumulate by each operation or process that the item goes through during production. The unit cost of the items is determined by dividing the total costs of production by the number of units produced. This method is different from job costing, where costs are accumulated on a job cost sheet for each unique customer specification.Rate this question:
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- 47.
How do you calculate overhead allocation rate?
- A.
Estimated overhead divided by estimated quantity of the allocation base
- B.
Actual overhead multiplied by estimated overhead
- C.
Estimated overhead divided by actual overhead
- D.
None of the above
Correct Answer
A. Estimated overhead divided by estimated quantity of the allocation baseExplanation
The correct answer is estimated overhead divided by estimated quantity of the allocation base. This is because the overhead allocation rate is calculated by dividing the estimated overhead costs by the estimated quantity of the allocation base. The allocation base is a measure used to allocate overhead costs to different cost objects, such as products or departments. By dividing the estimated overhead by the estimated quantity of the allocation base, we can determine the rate at which overhead costs should be allocated.Rate this question:
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- 48.
What is overapplied overhead and how is it eliminated?
- A.
Applied overhead>actual overhead; if small amount=debit manufacturing overhead and credit cost of goods sold; if large amount=apportion and close work in process, finished goods, and cost of goods sold
- B.
Applied overhead
- C.
Applied overhead>estimated overhead;if small amount=debit manufacturing overhead and credit cost of goods sold; if large amount=apportion cost of goods sold
- D.
Applied overhead
Correct Answer
A. Applied overhead>actual overhead; if small amount=debit manufacturing overhead and credit cost of goods sold; if large amount=apportion and close work in process, finished goods, and cost of goods soldExplanation
Overapplied overhead refers to a situation where the amount of overhead applied to a job or process is greater than the actual overhead incurred. To eliminate overapplied overhead, if the amount is small, the manufacturing overhead account is debited and the cost of goods sold account is credited. This reduces the overapplied amount and adjusts the cost of goods sold. If the overapplied amount is large, it is apportioned and closed by adjusting the work in process, finished goods, and cost of goods sold accounts. This ensures that the overapplied overhead is properly allocated and accounted for in the financial statements.Rate this question:
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- 49.
What is underapplied overhead?
- A.
Actual overhead>applied overhead
- B.
Applied overhead>actual overhead
- C.
Applied overhead
- D.
Actual overhead>estimated overhead
Correct Answer
A. Actual overhead>applied overheadExplanation
Underapplied overhead refers to a situation where the actual overhead costs incurred by a company are greater than the overhead costs allocated or applied to its products or services. This can occur when the estimated overhead costs used for allocation purposes are lower than the actual costs incurred. In such cases, the applied overhead is not sufficient to cover the actual overhead, resulting in underapplied overhead. This can lead to a distortion in the company's financial statements as the costs allocated to products or services may be lower than the actual costs incurred.Rate this question:
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- 50.
How is underapplied overhead eliminated?
- A.
If small amount=debit cost of goods sold and credit manufacturing overhead if large amount=apportion and close work in process, finished goods and cost of goods sold
- B.
If small amount=credit manufacturing overhead if large amount=apportion and close finished goods and cost of goods sold
- C.
If small amount=credit cost of goods sold and credit manufacturing overhead if large amount=apportion and close work in process, finished goods and cost of goods sold
- D.
If small amount=debit cost of goods sold and credit manufacturing overhead if large amount=apportion and close work in process
Correct Answer
A. If small amount=debit cost of goods sold and credit manufacturing overhead if large amount=apportion and close work in process, finished goods and cost of goods soldExplanation
Underapplied overhead is eliminated by adjusting the accounts related to manufacturing overhead. If the underapplied overhead is a small amount, it is debited to the cost of goods sold account and credited to the manufacturing overhead account. This helps to allocate the underapplied overhead to the cost of goods sold. If the underapplied overhead is a large amount, it is apportioned and closed to the work in process, finished goods, and cost of goods sold accounts. This ensures that the underapplied overhead is properly distributed and accounted for in the financial statements.Rate this question:
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Mar 21, 2023Quiz Edited by
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Jan 28, 2013Quiz Created by
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