Question 1: When a company recognizes depreciation on manufacturing equipment:
a. Total assets increase.
b. Total assets, equity, and net income decrease.
c. Total assets, equity, and net income are not affected.
d. None of the above.
Question 2: Western Company purchased direct materials on account. The materials cost will be recognized as an expense when:
a. The materials are purchased.
b. The goods made with the material are sold.
c. The cash is paid to settle the associated accounts payable.
d. The manufacturing process is complete.
Question 3: If manufacturing overhead is underapplied, the entry to close the overhead account at the end of the accounting will act to:
a. Increase net income.
b. Decrease net income.
c. Not affect net income.
d. Increase cash flow from operating activities
Question 4: In which account is the actual amount of depreciation on manufacturing equipment initially recorded:
a. Depreciation expense.
b. Work in process inventory.
c. Manufacturing overhead.
d. Cost of goods sold.
Use the following information to answer the next two questions
Martin Manufacturing Company (MMC) produced 1000 units of product during 2003. The Company incurred variable production cost amounting to $380 per unit. Fixed manufacturing overhead costs amounted to $130,000. MMC sold 900 units of product at a price of $800 per unit.
Question 5: Assuming MMC uses variable costing, the amount of income recognized on the income statement would be:
a. $248,000.
b. $210,000.
c. $261,000.
d. None of the above
Question 6: Assuming MMC uses absorption costing, the amount of inventory shown on the balance sheet would be:
a. $38,000.
b. $51,000.
c. $13,000.
d. None of the above.
Question 7: Which of the following businesses are most likely to use a job order cost system?
a. A hospital.
b. An auto manufacturing company.
c. A paint manufacturer.
d. The bank.
Question 8: The cost of goods transferred from one department to another is called:
a. Transportation cost.
b. Transfer-in cost.
c. Finished goods cost.
d. None of the above.
Use the following information to answer the last two questions.
The following information was drawn from the accounting records of Glide Manufacturing Company (GMC). As the data suggest, GMC uses a job-order costing system:
Job 101 Job 102 Job 103
Direct Materials $3,500 $4,200 $3,300
Direct Labor $2,800 $3,600 $1900
Question 9: The predetermined overhead rate is set at 120% of the direct labor costs. At the end of the accounting period, Jobs 101 and 102 had been completed and sold. Job 103 was still under construction. The balance in the work in process inventory is:
a. $7,480.
b. $5,200.
c. $7,100.
d. None of the above.
Question 10: Determine the gross margin recognized on job 102 assuming it is sold for $18,000. (Ignore any overapplied or underapplied overhead).
a. $250.
b. $50.
c. $150.
d. None of the above.