Sample-1 of Account practice’s exam

Self Examination questions

Answer at end chapter

1. The account maintained by a manufacturing business for inventory of goods in the process of manufacture is :

a. Finished Goods

b. Materials

c. Work in Process

d. None of the above

2. For a manufacturing business, finished goods inventory includes:

a. Direct materials costs

b. Direct labor costs

c. Factory overhead costs

d. All of the above

3. An example of a factory overhead cost is:

a. Wages of factory assembly-line workers

b. Salaries for factory plant supervisors

c. Bearing for electric motors being manufactured

d. All of the above

4. For which of the following would the job order cost system be appropriate?

a. Antique furniture repair shop

b. Rubber manufacturer

c. Coal manufacturer

d. All of the above

5. If the factory overhead account has a credit balance, factory overhead is said to be:

a. Underapplied

b. Overhead

c. Underabsorbed

d. None of the above

ILLUSTRATIVE PROBLEM

Shelton signs Inc. specializes in the production of neon signs and uses a job order cost system. The following data summarize the operations related to production for November, the first month of operations:

(a) Materials purchased on account, $21,750

(b) Materials requisitioned and factory labor used:

Materials Factory labor

Job No 1 $2,750 $1,700

Job No 2 3,800 2,000

Job No 3 2,990 1,450

Job No 4 5,950 3,800

Job No 5 3,250 1,900

Job No 6 900 600

For general factory use 595 500

(c) Factory overhead costs incurred on account, $4,300

(d) Depreciation of machinery $1,450

(e) The factory overhead rate is 60% of direct labor cost.

(f) Jobs completed: Nos. 1,2,4 and 5

(g) Job 1,2 and 4 were shipped and customers were billed for $7,900, $10,500, and $18,100, respectively.

Introduction:

1. Prepare entries to record the foregoing summarized operations.

2. Determine the account balances for Work in Process and Finished Goods.

3. Prepare a schedule of unfinished jobs to support the balance in the work in process account.

4. Prepare a schedule of completed jobs on hand to support the balance in the finished goods account.

SOLUTION, Please download save

DISCUSSION QUESTIONS

1. What are two important uses of product cost information by managers?

2. What are the two basic accounting systems commonly used by manufacturers?

3. (a) Name the two principal types of cost accounting system. (b) Which system provides for a separate record of each particular quantity of product that passes through the factory? (c) Which system accumulates the costs for each department or process within the factory?

4. Distinguish between the purchases requisition and the purchase order used in the procurement of materials.

5. Briefly discuss how the purchase invoice, and receiving report can be used to assist in controlling cash disbursements for materials acquired.

6. What document is the source for (a) debiting the accounts I the materials ledger and (b) crediting the accounts in the materials ledger?

7. Briefly discuss how the accounts in the materials ledger can be used as an aid in maintaining appropriate inventory quantities of stock items.

8. How does use of the materials requisition help control the issuance of materials from the storeroom?

9. Discuss the major advantage of a perpetual inventory system over a periodic system for materials.

10. (a) Differentiate between the clock card and the time ticket. (b) Why should the total time reported on an employee’s time tickets for a payroll period be compared with the time reported on the employee’s clock cards for the same period?

11. Which of the following items are properly classified as part of factory overhead?

a. Amortization of factory patents

b. Interest expense

c. Factory supplies used

d. Direct materials

e. Sales commissions

f. Property taxes on factory buildings.

12. Discuss how the predetermined factory overhead rate can be used in job order cost accounting to assist management in pricing jobs.

13. (a) How is a predetermined factory overhead rate calculated? (b) Name three common bases used in calculating the rate.

14. (a) What is (1) overapplied factory overhead and (2) underapplied factory overhead? (b) If the factory overhead account has a debit balance, was factory overhead underapplied or overapplied? (c) If the factory overhead account has a credit balance at the end of the first month of the fiscal year, where will the amount of this balance be reported on the interim balance sheet?

15. At the end of the fiscal year, there was a relatively minor balance in the factory overhead account. What’s the simplest satisfactory procedure for the disposition of the balance in the accont?

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~ by Rithy Pheath on 10/22/2009.

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