Ch09 Tb Hoggetta8e

Testbank to accompany

Accounting 8th Edition by John Hoggett, Lew Edwards, John Medlin, Matthew Tilling Tilling & Evelyn Hogg

Prepared by

Barbara Burns

© John iley & !ons "ustralia, Ltd #$%#

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Testbank to accompany Accounting 8e

Chapter 9: Cost accounting systems Multiple Choice

% The costing costing system system used when when entities entities provide provide goods or services services in response response to to customer customer orders and speci'ications is (nown as) a *rocess costing b Job costing costing c E+uivalent unit costing d onversion co costing "-!E. B !ection /%

# Match the business business with the most most li(ely li(ely type o' o' costing costing system system % 0il re'inery # "utomotive br bra(e re repairer 1 Bathroom renovator 2 ommercial pr printer 3 Management consultant 4 44

Job costing *rocess costing

a b c d

% and 4, 4, # and 44, 1 and 4, 2 and 44, 3 and 4 % and 44, 44, # and and 4, 1 and 4, 4, 2 and and 4, 3 and 4 % and 4, 4, # and 4, 1 and 4, 2 and 44, 3 and 44 % and 44 44, # an and 44, 1 an and 4, 4, 2 an and 4, 4, 3 an and 4

"-!E. B !ection /% 1 The stateme statement nt concerning concerning the 5ob 5ob cost order that is is incorrect incorrect is) a 4t prov provid ides es an an ite itemi mise sed d list list o' o' all all cost costss char charge ged d to a par parti ticu cula larr 5ob 5ob b 0rders 'or incomplet incompletee 5obs serve serve as a subsidiary subsidiary ledger ledger 'or the wor( wor( in process account c 4t traces all costs to 5obs d Thee con Th contr trol ol num numbe berr ass assig igne ned d to to eac each h 5ob 5ob is is rec recor orde ded d on the the 5ob 5ob ord order er "-!E.  !ection /# 2 hich best best describes describes the set o' costs costs that are debited debited directly directly to wor( wor( in process process inventory6 inventory6







Chapter 9: Cost accounting systems

"-!E. 7 !ection /1 3 8or #$% #$%% The 4ron 4ron or(s or(s plann planned ed the 'ollo 'ollowin wing) g) 8actory overhead costs 9%:$ $$$ 7irect labour cost ;9:$$ an hour< = ;%3 $$$ hrs< 9%#$ $$$ Machine hours 2: $$$ 7irect material cost 9%$: $$$ The predetermined overhead rate is based on direct labour hours and planned production during #$%% is %# $$$ units The estimated cost per unit produced is) a 912 b 9#:>$ c 9#3 d 9%/ "-!E. " ;7irect materials 9/ ? 7irect labour 9%$ ? 0@H 9%3A The or( or( in *rocess *rocess account account o' Cillage Cillage Manu'actur Manu'acturing ing shows a balance balance o' 92# 92# $$$ at the end o' an accounting period The 5ob cost orders o' the two uncompleted 5obs show charges o' 9%3 $$$ and 9D$$$ 'or materials used and charges o' 9%$ $$$ and 93$$$ 'or direct labour used 8rom this in'ormation it appears that the company is using a predetermined overhead rate as a percentage o' direct labour costs, o') a %13 b 3$$ c 111 d 1$$ "-!E.  92# $$$ F ;9%3 $$$?9D$$$?9%$,$$$?93$$$<@;%$ $$$ ? 3$$$< G 93$$$@9%3 $$$ G 111 !ection /1 D Manu'acturing Manu'acturing costs costs assigned assigned to inventory inventory should should appear appear on the the income income statement statement in the period in which) a The goods are completed b ash is collected 'or the goods sold c The sale o' goods is recorded d The purchase order to manu'acture manu'acture the goods is received "-!E.  !ection /1 :  .epair .epair !ervices !ervices uses 5ob order order costing costing "t the end end o' the month month the 'ollowing 'ollowing in'ormation in'ormation was available)








"ctual overhead costs are 9%$$ 0verhead is applied on the basis o' #$$ o' direct labour costs Jobs I% and I# have been completed and sold Job I1 is not yet complete "t monthend the wor( in process inventory balance is) a 91#$ b 9#>$ c 9>$ d 92$ "-!E.  ;91$ ? 9%$ ? 0H ;#$$  9%$< !ection /1 / hich most most accurately accurately describe describess the 'low o' costs through the the accounting accounting system6 system6 a *urc *urcha hase ses, s, to 8in 8inis ishe hed d oo oods ds,, to to or or( ( in in *ro *roccess ess b or( in *rocess, *rocess, to ost o' o' sales sales c 8act 8actor ory y ove overh rhea ead d appl applie ied, d, to to or or( ( in in *ro *roce cess ss,, to to 8in 8inis ishe hed d oo oods ds d *urc *urcha hase ses, s, to 8ac 8acto tory ry over overhe head ad,, to to os ostt o' sale saless "-!E.  !ection /1 %$ *redetermined *redetermined overhead overhead rates are necessary 'or how many o' the 'ollowing reasons6 "ctual overheads are not incurred evenly over the period *roduct costs need to be calculated promptly 'or decision ma(ing 0verhead cannot be traced directly to products because o' its indirect nature a $ b % c # d 1   

"-!E. 7 !ection /1 %% The *i(e !upply !upply ompany ompany distributes distributes overhead overhead based on direct labour labour dollars dollars The estimated manu'acturing overhead 'or the year was 92:2,$$$ and the estimated direct labour dollars 'or the year were 9%%$,$$$ 9%%$,$$$ 4ndicate the amount o' underapplied or overapplied overhead i' actual direct labour was 9%%:,$$$ and actual manu'acturing overhead was 92/D,2$$) a 9#%,:$$ underapplied b 9#%,:$$ overapplied overapplie d c 9%3,$$$ overapplied d 9%3,$$$ underapplied "-!E. B .ate is 92:2,$$$ @ 9%%$,$$$ G 922$ per labour dollar 922$ = 9%%:,$$$ G 93%/,#$$ applied  actual 92/D,2$$ overhead G 9#%,:$$ overapplied








%# *etlyn *ty Ltd applies applies overhead to completed 5obs using a predetermined predetermined rate o' >$ o' direct labour costs 4' Job -o ## shows 9/,$$$ o' 'actory overhead applied, how much was the direct labour cost o' the 5ob6 a 93,2$$ b 9%#,$$$ c 9%3,$$$ d 9%2,2$$ "-!E.  9/,$$$@>$ G 9%3,$$$ !ection /1 %1 4n #$%%, #$%%, Brunswic( Brunswic( *lumbing *lumbing !upplies !upplies planned planned the 'ollowing) 'ollowing) 8actory overhead costs 9%:$,$$$ 7irect labour costs ;%3,$$$ hours at 9:$$ per hour< 9%#$,$$$ Machine Hours 2:,$$$ 7irect material costs 9%$:,$$$ The predetermined overhead rate is based on direct labour hours and planned production during #$%% is %#,$$$ units The estimated cost per unit produced is) a 9#2$$ b 922$$ c 912$$ d 9#>$$ "-!E.  osts o' 9%:$,$$$ ? 9%#$,$$$ ? 9%$:,$$$ G 92$:,$$$@%#,$$$ units G 912$$ !ection /1 %2 hich o' these is not a source document document 'or 5ob costing6 costing6 a Materials re+uisition record b Labour hours@time sheets shee ts record c 4nvoice 'or 'actory e=pense d The mar(eting managerKs e=pense sheet "-!E. 7 !ection /1 %3 !mall Budget Budget *roduction uses a predetermined predetermined overhead rate based upon direct labour hours hours The 'irm has the 'ollowing budgeted and actual data 'or the current year) Budgeted 'actory overhead cost 93,$$$ "ctual 'actory overhead cost 9>,$$$ Budgeted direct labour hours %,$$$ "ctual direct labour hours %,%$$ hat was the amount o' underor overapplied overhead 'or the year6 a 93$$ overapplied








"-!E. B "ctual overhead  applied overhead G 9>,$$$ F ;93  %,%$$ 7LH< G 93$$ underapplied !ection /1 %> Magenta Ltd Ltd uses a 5ob order costing system and applies applies 'actory overhead, overhead, based on direct labour hours, at a rate o' 9# per direct labour hour The data relating to production 'or last period is) 7irect materials 9%1 $$$ 4ndirect materials # 1$$ 7irect labour ;%: $$$ hours< 32 $$$ *roduction *roduction supervisor supervisor salaries salaries %1 D$$ Maintenance costs D $$$ 8actory rent : %$$ 8actory utilities % :$$ 7epreciation on machinery # #$$ The overhead under or overapplied a'ter overhead has been charged to production is) a 9/$$ ov overapplied b 9/$$ undera underapplied pplied c 9#D$$ overapplied d 9#D$$ underapplied "-!E. " ;"ctual overhead F applied overhead G 913 %$$  91> $$$< !ection /1 %D Blac( at Limited Limited supplies supplies the 'ollowing 'ollowing in'ormation in'ormation Manu'acturing Manu'acturing overhead is applied applied on the basis o' direct labour hours Estimated manu'acturing overhead costs 9#,#/3,$$$ Estimated direct labour hours 12$,$$$ "ctual direct labour hours 12:,$$$ "ctual manu'acturing overhead costs 9#,13D,$$$ ompute the amount o' overapplied or underapplied overhead a 9:,:$$ underapplied b 9:,$$$ overapplied c 9:,$$$ underapplied d 9: :$$ overapplied "-!E.  .ate is 9#,#/3,$$$ @ 12$,$$$hours G 9>D3 per hour 9>D3 = 12:,$$$ hours G 9#,12/,$$$ applied  9#,13D,$$$ actual G 9:,$$$ underapplied !ection /1 %: a b

E+uivalent un units are) Thee numb Th number er o' o' whol wholee unit unitss repre represen sente ted d by the the 'ini 'inishe shed d unit unitss plus plus the the par partl tly y comp comple lete ted d units The number number o' o' whole whole units represented represented by the 'inished 'inished units










!ection /2 %/ hich o' these is not a section section o' a cost o' production production report6 a *hysical 'low schedule b osts to be accounted accounted 'or c osts accounted 'or d !T summary "-!E. 7 !ection /2 #$ Beginning Beginning balance Job -o 3: 7irect Materials issued to 5ob in the current period 7irect Labour charged to 5ob in the current period Manu'acturing overhead applied in the current period Total number o' units produced by Job 3: hat is the unit cost 'or Job 3:6 a 91:3 b 91:$ c 92$$ d 91/%

9%:,:$$ 91$,>$$ 9#2,3$$ 9 2$,%$$ 1$,$$$

"-!E. B osts o' 9%:,:$$ ? 91$,>$$ ? 9#2,3$$ ? 92$,%$$ G 9%%2,$$$ @1$,$$$ units G 91:$ !ection /2 #%

a b c d

!mith !mith o o start started ed 2$ 2$ $$$ $$$ units units into into produc production tion during during the the curr current ent period period and and comp complete leted d #: $$$ The other %# $$$ units were 1$ complete as to conversion costs at the end o' the period Total costs were 9>$ $$$ 'or material and 91> $$$ 'or conversion costs Material is added at the beginning o' the production process nit raw material and conversion costs 'or the period were) .aw materials cost onversion cost 93$$ 9%$$$ 9%3$ 9%$$$ 93$$ 9 /$ 9%3$ 9 %%2








"-!E. " ompleted units ? ;>$  ending 4* ;3$$$ units< ?%1 $$$ units G %>,$$$ E !ection /3 #1 hich o' these di''ers di''ers between between 5ob order and process costing6 costing6 a Basic purpose b 8ocal point 'or 'or cost accumulation accumulation c Traci racing ng o' dire direct ct cost costss and and allo alloca cati tion on o' indi indire rect ct cost costss d ost 'lows "-!E. B !ection /> #2 The correct statement statement concerning concerning process costing costing is) a The type o' production is heterogeneous b The 'low o' products is separated separ ated by 5obs c The control document is a cost o' production report d .ecord (eeping is more more detailed than 'or 5ob costing "-!E.  !ection /> #3 a b c d

The correct correct statem statement ent concern concerning ing cost accounti accounting ng 'or 'or servi service ce type type business businesses es is) is) ost ost in'o in'orm rmat atio ion n is needed needed 'or di'' di''er erent ent reas reasons ons in a ser servic vicee busi busines nesss than than in a manu'acturing business The cost cost ob5ect ob5ect is normally normally activities activities "ctua "ctuall cost costss rathe ratherr than than budg budget eted ed cos costs ts are are used used to det deter ermi mine ne over overhe head ad app appli licat catio ion n rate ratess To dete determ rmin inee the the rate rate at at whic which h dire direct ct labo labour ur cos costs ts are are appl applie ied d to a par parti ticul cular ar 5ob 5ob a lab labour our cost per hour is developed 'or each employee

"-!E. 7 !ection /D #> 4n an NidealK 5ustinti 5ustintime me processing plant, plant, the inventories held are) a 7irect materials b or( in process








!ection /: #: 4t is incorrect concerning "ctivityBased "ctivityBased osting osting O"BP that) a *rod *roduc ucti tion on proc proces esse sess are are bro( bro(een dow down n int into o act activ ivit itie iess b ost drivers drivers are used used to assign assign costs costs between between activities activities c Thee use Th use o' cost cost drive drivers rs allo allows ws mana managem gemen entt to to app apply ly overh overhea ead d more more accu accurat ratel ely y to to products with di''erent di''erent production production re+uirements re+uirements d 4t is now now use used d by by 'irm 'irmss muc much h mor moree com commo monl nly y than than tra tradi diti tion onal al cos costi ting ng "-!E. 7 !ection // #/ The statement statement concerning concerning cost drivers that is incorrect incorrect is) a "s dire direct ct lab labour our shrin shrin(s (s as as a propo proport rtion ion o' manu manu'a 'act cturi uring ng cost costss it it bec becom omes es a mor moree accurate 'actor by which to apply overhead to products b " cost driver driver is is a measure measure o' o' the activity activity that causes overhead overhead costs c 4n mo mode dern rn day day manu' manu'ac actu turi ring ng the there re has has bee been n a decl decline ine in labou labourr cos costs ts and and an incr increa ease se in in 'actory overheads as a percentage o' product costs d 4nac 4naccu curat ratee appl applic icat ation ion o' ove overhe rhead ad to prod produc ucts ts can can lea lead d to to wrong wrong concl conclusi usions ons about about which products are pro'itable "-!E. " !ection // 1$ The statement concerning concerning "ctivitybase "ctivitybased d costing ;"B< that is not true is) a 4t has been introduced introduced to to overcome overcome distortions distortions in in costing costing multiple multiple products products which which occur when a single base is used to apply overhead to products b "B is cheaper and less time consuming cons uming to implement than traditional tradition al costing systems c 0verhead costs are accumulated by activities and then assigned to cost ob5ects using a di''erent cost driver 'or each activity d "B can be applied in service businesses as well as in manu'acturing businesses "-!E. B !ection // 1% 4t is true that Justintim Justintimee ;J4T< processing) processing) a 4s mo most su suitable 'o 'or sm small bu businesses








"-!E.  !ection /3 11 The 'low o' goods in a 'irm that uses process costing costing is, wor( in process at the start 3$$$ units Q complete, units started 32,$$$, units 'inished 3$,$$$, wor( in process end o' period /$$$ units %@1 complete .aw materials are issued at the end o' the production process sing the weighted average method, the e+uivalent units as to conversion cost 'or the period are) a 31,$$$ units b 3$,$$$ units c 32,$$$ units d 3D,$$$ units "-!E. " 3$,$$$ completed units 'or materials and conversion costs and 1,$$$ partly completed units ;/$$$ = %@1< 'or conversion costs G 31,$$$ e+uivalent units 'or conversion costs !ection /> 12 hich o' these inputs are debited debited to a wor( Finprocess account account with a process costing costing system6 a 7irect materials an and di direct labour b 7irect labour and 'actory 'actory overhead overhead applied applied c 7ire 7irect ct mate materi rial als, s, dire direct ct labo labour ur and and 'ac 'acto tory ry over overhe head ad appl applie ied d d 7ire 7irect ct mater ateria ialls and and 'act 'actor ory y over overhe head ad appl appliied "-!E.  !ection /2 13 The method o' calculating calculating e+uivalent units where the costs assigned assigned to the beginning beginning inventory o' wor(inprocess are combined with the current periods costs o' production and the degree o' completion o' the beginning units is ignored is the) a 'irstin'irstout me method b lastinlastou lastinlastoutt method method c lastin'irstout method d weighted av average me method







Chapter 9: Cost accounting systems Fill-in the blanks

%

Thee two Th two types types o' cost cost acc accou ounti nting ng sys syste tems ms are are 5RRR 5RRRRR RRR R cost costin ing g and and pRRR pRRRRR RRRRR RRR costi costing ng

"-!E. 5ob process !ection /% #

Thee contr Th control ol docum documen entt used used in 5ob 5ob order order cost costing ing is the the 5RRR 5RRRRR RR cRRRR cRRRRRRR RRR order order

"-!E. 5ob cost !ection /# 1

hen hen a 5ob 5ob is comp comple lete ted, d, the the cost costss reco recorde rded d on its its 5ob 5ob cost cost orde orderr are are tota totall lled ed and and the the amount ;debited@credited< RRRRRRRRRR to 'inished goods inventory

"-!E. debited !ection /# 2

7ire 7irect ct mat mater erial ialss are are issue issued d to wor( wor( in in proce process ss upon upon rece receip iptt o' a prope properl rly y prep prepar ared ed and and authorised mRRRRRRRRRRR rRRRRRRRRRRRRRR

"-!E. materials re+uisition !ection /1 3

8act 8actory ory overh overhea ead d is charg charged ed to to 5obs 5obs by mea means ns o' o' a pre prede dete term rmin ined ed oRR oRRRRR RRRRRR RRRRRR RRRRRR RRR rate rate

"-!E. overhead !ection /1 >

The com The combi bine ned d cost cost o' direct direct labo labour ur and and 'ac 'acto tory ry over overhea head d incur incurre red d in conve convert rtin ing g raw raw materials into 'inished goods is (nown as cRRRRRRRRRRRRRRRR cost

"-!E. conversion !ection /2 D

The appl The applie ied d 'act 'actor ory y overhe overhead ad is is ;deb ;debit ited ed@c @cre redit dited ed<< RRRRR RRRRRRR RRRRR RRRRRR RRRRRR RRRRRR RRRR R to the the 'ac 'acto tory ry overhead account










"-!E. *rocess !ection /2 %$ %$

ERRRRRRR ERRRR RRRRRR RRRRR RR uRRRR uRRRRRR RRRRR RRRRR RR are are a measur measuree o' how how many many whole whole uni units ts o' prod produc ucti tion on are represented by the units 'inished, plus the units partially 'inished, in a process costing operation

"-!E. E+uivalent units !ection /2 %% %%

"RRRRRR "RRRRRRRRR RRRRRRR RRRRRRR RRR costing costing is a syst system em in which which overh overhead ead costs costs are are accumu accumulate lated d by activities and the cost pools 'or each activity are assigned to the cost ob5ect by means o' individual cost drivers

"-!E. activitybased !ection // Eam type !uestions "#E$T%&' 9()

The Hutton Manu'acturing ompany distributes manu'acturing overhead based on direct labour hours The estimated manu'acturing overhead 'or the year was 92:2,$$$ and the estimated direct labour hours 'or the year were 9%%$,$$$ .ES4.E7) a< alcula alculate te the charge charge out rate 'or overhe overhead ad








.ES4.E7) a< ompute e+uivalent e+uivalent units 'or direct materials materials and and conversion conversion costs ;se the the weighted weighted average method< b< alculate cost per e+uivalent e+u ivalent unit 'or direct materials materi als and conversion costs c< *repare *repare a cost cost o' producti production on repor report t $olutions eam type !uestions $&+#T%&' "#E$T%&' 9() a, harge out rate G Estimated manu'acturing overhead costs @ estimated direct labour hour G 92:2,$$$ @ %%$,$$$ G 922$ per direct labour hour

b< i "pplied overhead) 922$ = /:,$$$ direct labour hours G 921%,#$$ applied 921%,#$$ applied manu'acturing overhead 92%:,:$$ less actual manu'acturing overhead 9 %#,2$$ overapplied manu'acturing overhead b< ii "pplied overhead) 922$ = %%:,$$$ direct labour hours G 93%/,#$$ applied








or( in progress beginning !tarted during current period To account 'or ompleted and trans'erred out or( in progress end

: 3$ 3: 2> %#

"ccounted 'or 3: or( done to date  units to be used in the cost o' production report

2>

2>

 D# ;%# = >$<

 1> ;%# = 1$<

 31#

 2/>

b< ost per e+uivalent unit direct materials 9>/:,$$$ ost per e+uivalent unit conversion cost 9#//,$$$ c< !tanley "erospace, "ssembly 7ivision, ost o' *roduction .eport 8or the month ended 1% May #$%% Total production costs or( in progress  beginning osts added  current period osts incurred to date 7ivide by e+uivalent units

9 3,:22,$$$ 2>,%#$,$$$

Direct materials

9 2,/11,>$$ 1#,#$$,$$$ 1D,%11,>$$ 31# units

onversion costs

9 / % $ ,2 $$ %1,/#$,$$$ %2,:1$,2$$ 2/> units

Ch09 Tb Hoggetta8e

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