TEST BANK FOR MANAGERIAL ACCOUNTING AND THE BUSINESS ENVIRONMENT - GARRISON, MANAGERIAL ACCOUNTING, 12TH EDITION

TEST BANK FOR MANAGERIAL ACCOUNTING AND THE BUSINESS ENVIRONMENT -GARRISON, MANAGERIAL ACCOUNTING, 12TH EDITION True/False Questions 1. When materials are purchased in a process costing system, a work in process account is debited with the cost of the materials. Answer: False Level: Easy LO: 1 2. Any difference in the equivalent units calculated under the weighted-average and the FIFO methods is due to the units in the ending work in process inventory. Answer: False Level: Easy LO: 2,6 Appendix: 4 3. The equivalent units in beginning work in process inventory plus the equivalent units for the work done during the period equals the units transferred out plus the equivalent units in ending work in process inventory. Answer: True Level: Hard LO: 2 4. There is no difference in the unit costs computed under the weighted-average and FIFO methods of process costing if there are no beginning work in process inventories. Answer: True Level: Hard LO: 4,8 Appendix: 4 5. Under the weighted-average method of process costing, costs from the prior period are averaged with those of the current period in computing unit costs. Answer: True Level: Medium LO: 4 6. In a process costing production report, the “Cost to be accounted for” will be the same whether the weighted-average or the FIFO method is used. Answer: True Level: Medium LO: 5,9 Appendix: 4 7. Under the FIFO method of product costing, equivalent units of production consider units in the beginning inventory as if they were started and completed during the current period. Answer: False Level: Medium LO: 6 Appendix: 4 Chapter 4 Systems Design: Process Costing 126 Garrison, Managerial Accounting, 12th Edition 8. The production report of a company using the FIFO cost method likely would show goods transferred from a department in two parts--one part consisting of units from the beginning inventory completed and transferred, and the other part consisting of units that were both started and completed during the month. Answer: True Level: Medium LO: 7 Appendix: 4 9. In computing the cost per equivalent unit on the production report, costs in the beginning work in process inventory are kept separate from current period costs when the FIFO method is used. Answer: True Level: Medium LO: 8 Appendix: 4 10. A major advantage of the FIFO method is that it allows managers to judge the performance of the current period independently of the performance of the prior period. Answer: True Level: Medium LO: 9,10 Appendix: 4 11. Under a JIT inventory system, the differences between FIFO and weighted-average costing methods are reduced. Answer: True Level: Easy LO: 9,10 Appendix: 4 12. When the FIFO method is used to prepare a production report, costs to the next department are accounted for in two separate blocks. Answer: True Level: Easy LO: 9 Appendix: 4 13. Costs are accumulated by department in a process costing system. Answer: True Level: Easy LO: 10 14. Operation costing is a hybrid system that employs certain aspects of both job-order and process costing. Answer: True Level: Easy LO: 10 15. Under job-order costing, costs are accumulated by department and are assigned equally to all units passing through the department during the period. Answer: False Level: Easy LO: 10 Chapter 4 Systems Design: Process Costing Garrison, Managerial Accounting, 12th Edition 127 Multiple Choice Questions 16. Which of the following journal entries would be used to record direct labor costs in a company having two processing departments (Department A and Department B)? A) Work in Process XXX Salaries and Wages Payable XXX B) Salaries and Wages Expense XXX Salaries and Wages Payable XXX C) Work in Process-Department A XXX Work in Process-Department B XXX Salaries and Wages Payable XXX D) Salaries and Wages Payable XXX Work in Process XXX Answer: C Level: Medium LO: 1 17. Which of the following journal entries would be used to record application of manufacturing overhead to work in process in a process costing system with two processing departments, department A and department B? A) Manufacturing Overhead XXX Work in Process–Department A XXX Work in Process–Department B XXX B) Work in Process–Department A XXX Work in Process–Department B XXX Manufacturing Overhead XXX C) Work in Process–Department B XXX Work in Process–Department A XXX Manufacturing Overhead XXX D) Work in Process–Department A XXX Work in Process–Department B XXX Manufacturing Overhead XXX Answer: B Level: Easy LO: 1 18. Costs in an operation costing system are accumulated by: A) department. B) by individual job. C) by both job and departments. D) by neither job nor department. Answer: C Level: Easy LO: 1 Chapter 4 Systems Design: Process Costing 128 Garrison, Managerial Accounting, 12th Edition 19. A process costing system was used for a department that began operations in January. Approximately the same number of physical units, at the same degree of completion were in work in process at the end of both January and February. Monthly conversion costs are allocated between ending work in process and units completed. Compared to the FIFO method, would the weighted-average method use the same or a greater number of equivalent units to calculate the monthly allocations? Equivalent units for weighted average compared to FIFO January February A) Same Same B) Greater number Greater number C) Greater number Same D) Same Greater number Answer: D Level: Hard LO: 2,6 Source: CPA, adapted Appendix: 4 20. The FIFO method provides a major advantage over the weighted-average method in that: A) the calculation of equivalent units is less complex under the FIFO method. B) the FIFO method treats units in the beginning inventory as if they were started and completed during the current period. C) the FIFO method provides measurements of work done during the current period. D) the weighted-average method ignores units in the beginning and ending work in process inventories. Answer: C Level: Medium LO: 2,6 Appendix: 4 21. The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method: A) can be used under any cost flow assumption. B) does not require the use of predetermined overhead rates. C) keeps costs in the beginning inventory separate from current period costs. D) does not consider the degree of completion of units in the beginning work in process inventory when computing equivalent units of production. Answer: D Level: Medium LO: 2,6 Appendix: 4 Chapter 4 Systems Design: Process Costing Garrison, Managerial Accounting, 12th Edition 129 22. Which of the following statements about process costing system is incorrect? A) In a process costing system, each processing department has a work in process account. B) In a process costing system, equivalent units are separately computed for materials and for conversion costs. C) In a process costing system, overhead can be under- or overapplied just as in joborder costing. D) In a process costing system, materials costs are traced to units of products. Answer: D Level: Hard LO: 2,1 82. During February, the cost of goods manufactured was $83,000. The beginning finished goods inventory was $14,000 and the ending finished goods inventory was $13,000. What was the cost of goods sold for the month? A) $83,000 B) $110,000 C) $82,000 D) $84,000 Answer: D Level: Easy LO: 3 83. During March, the cost of goods manufactured was $62,000. The beginning finished goods inventory was $11,000 and the ending finished goods inventory was $19,000. What was the cost of goods sold for the month? A) $70,000 B) $92,000 C) $54,000 D) $62,000 Answer: C Level: Easy LO: 3 84. The following information is taken from the records of CL Company for last year: Direct materials .......................................................... $5,000 Manufacturing overhead............................................. $6,000 Total manufacturing costs........................................ $17,000 Beginning work in process inventory......................... $1,000 Cost of goods manufactured..................................... $15,000 What are the correct amounts for direct labor and ending work in process inventory? Direct Labor Ending Work in Process A) $12,000 $2,000 B) $11,000 $2,000 C) $6,000 $1,000 D) $6,000 $3,000 Answer: D Level: Hard LO: 4 Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 37 85. The following information is taken from the records of DW Company for last year: Direct materials..................................................$8,000 Direct labor ........................................................$3,000 Manufacturing overhead ..................................$11,000 Ending work in process inventory .....................$5,000 Cost of goods manufactured ............................$19,000 The amount of beginning work in process inventory is: A) $24,000 B) $2,000 C) $22,000 D) $3,000 Answer: B Level: Hard LO: 4 86. Using the following data for February, calculate the cost of goods manufactured: Direct materials.........................................................$36,000 Direct labor ...............................................................$20,000 Manufacturing overhead ...........................................$19,000 Beginning work in process inventory .......................$10,000 Ending work in process inventory ............................$13,000 The cost of goods manufactured was: A) $78,000 B) $85,000 C) $72,000 D) $75,000 Answer: C Level: Medium LO: 4 Chapter 2 Cost Terms, Concepts, and Classifications 38 Garrison, Managerial Accounting, 12th Edition 87. Using the following data for March, calculate the cost of goods manufactured: Direct materials.........................................................$29,000 Direct labor ...............................................................$19,000 Manufacturing overhead ...........................................$27,000 Beginning work in process inventory .......................$11,000 Ending work in process inventory ............................$12,000 The cost of goods manufactured was: A) $74,000 B) $86,000 C) $76,000 D) $75,000 Answer: A Level: Medium LO: 4 88. Jacobs is employed as a machinist for an aircraft manufacturer. She is paid $15 per hour for regular time and time and a half for all work in excess of 40 hours per week. During the past week, Jacobs was idle for two hours due to machine breakdowns and was idle four hours due to materials shortages. Jacobs worked 40 hours last week with no overtime. The allocation of Jacobs' wages for the past week between direct labor cost and manufacturing overhead cost would be: Direct Labor Manufacturing Overhead A) $600 $0 B) $570 $30 C) $540 $60 D) $510 $90 Answer: D Level: Medium LO: 8 Appendix: 2A Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 39 89. Johnson is employed on the assembly line of a manufacturing company where he assembles a component part for one of the company's products. He is paid $14 per hour for regular time and time and a half for all work in excess of 40 hours per week. During the past week, Johnson worked a total of 50 hours and had no idle time. The allocation of Johnson's wages for the past week between direct labor cost and manufacturing overhead cost would be: Direct Labor Manufacturing Overhead A) $770 $0 B) $700 $70 C) $560 $210 D) $560 $0 Answer: B Level: Medium LO: 8 Appendix: 2A Use the following to answer questions 90-91: Clyde Company has provided the following data for the month of November: Inventories November 1 November 30 Raw materials...................... $17,000 ? Work in process................... $14,000 $12,000 Finished goods .................... ? $9,000 Additional Data: Sales revenue............................................. $102,000 Direct labor costs....................................... $10,000 Manufacturing overhead costs .................. $12,000 Selling expenses ........................................ $14,000 Administrative expenses ........................... $16,000 Cost of goods manufactured...................... $40,000 Raw materials purchases ........................... $10,00