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Examination Lesson 1, Pages 47 – 53 Questions 1 – 20

Lesson 1: Materials, Labor, and Factory Overhead


Questions 1–20: Select the one best answer to each question.


1.   The form that serves as an authorization to withdraw materials from stock is known as the


A.    stores requisition.


B.    purchase order.


C.   purchase requisition.


D.   returned materials report.


2.   Marlene works in a garment factory where she sews side seams in dresses and skirts. She receives no hourly wage. Rather, she’s paid a fixed rate for each seam she sews. The wage plan used by Marlene’s factory is called a _______ plan.


 A.modified wageC.make-up guarantee








3.   When should process costing techniques be used in assigning costs to products?


A.    In situations in which standard costing techniques should not be used


B.    When production is only partially completed during the accounting period


C.    When a company has a regular production of similar products


D.    If the product is manufactured on the basis of each order received


4.   Overapplied overhead always results when a predetermined overhead rate is employed and when


A.    overhead incurred is more than overhead applied.


B.    overhead incurred is less than overhead applied.


C.    production is greater than sales.


D.    production is less than sales.


5.   An employee regularly earns $10 an hour for an 8-hour day with time-and-a-half for overtime hours. Assuming that the employee works a 10-hour day, the total overtime premium is




6.   Rowe Co.’s Job 401 for the manufacture of 2,200 coats was completed during August at the unit costs presented below. Final inspection of Job 401 disclosed 200 units that were sold to a jobber for $6,000.


Direct materials$24
Direct labor18
Factory overhead   
(includes an allowance of $2 for spoiled work) 16


Assume that spoilage loss is charged to all production during August. What would be the unit cost of the good coats produced on Job 401?




7.   Which one of the following costs is considered a prime cost?


A.    Wages paid to production workers


B.    Wages paid to supervisory workers


C.   Amount paid for insurance


D.   Amount paid for rent











8.   The Lucas Manufacturing Company has two production departments (fabrication and assembly) and three service departments (general factory administration, factory mainte-nance, and factory cafeteria). A summary of costs and other data for each department, prior to allocation of service department costs for the year ended June 30, appears below.


The costs of the general factory administration department, factory maintenance depart-ment, and factory cafeteria are allocated on the basis of direct labor hours, square footage occupied, and number of employees, respectively.


  F abricationAssemblyAdministrationMaintenanceCafeteria 
 D irect labor costs$ 1,950,000$2,050,000    
 D irect material costs$ 3,130,000$950,000    
 F actory overhead costs$ 1,650,000$ 1,850,000$ 80,000$ 67,500$58,000 
 D irect labor hours237,690—387,810    
 Number of employees1 601 282 04 225 
 S quare footage occupied2 0,0003 0,0002 ,4002 ,0004,800 


Assuming that Lucas elects to distribute service department costs to production departments using the direct distribution method, calculate the amount of factory maintenance department costs that would be allocated to the fabrication department. (Round all final calculations to the nearest dollar.)




9.   If the amount of overtime premium is to be charged to all jobs worked on during the period, the debit will be to the _______ account.


A.Factory OverheadC.Work in Process
B.PayrollD.Accrued Payroll


10. Of the following industries, which one would most likely use process costing?


A.Canned soupC.Printing
B.Home constructionD.Shipbuilding
















Questions 11 and 12 are based on the following information.


The Bisset Corporation uses Raw Material A in a manufacturing process. The balances on hand, purchases, and requisitions of Raw Material A are given in the following table.



Raw Material A        
 Qu antities   Dollars  
D ateR eceivedIs suedBalance P riceR eceivedIs suedBalance 
1 /1  1 00$ 1.40  $140 
1 /243 00 4 001 .55$465.00   
2 /8 8 0320      
3 /16 1 40180      
6 /111 50 3 301 .62243.00   
8 /18 1 30200      
9 /6 11 090      
1 0/151 50 2 401 .70255.00   
1 2/29 1 40100      


11.   If Bisset maintains a perpetual inventory record of Raw Material A on a FIFO basis, what will be the year-end inventory?




12.   Assume that no perpetual inventory is maintained for Raw Material A and that quantities are obtained by an annual physical count. The accounting records show information as to purchases but not as to issues. On this assumption, the closing inventory on a LIFO basis will be



















13.   Selected data concerning the past fiscal year’s operations of the Stanley Manufacturing Company are presented below (000s omitted):


  B eginning  Ending
Ra w materials$ 90  $85
Wo rk in process3 0  65
F inished goods1 00  90
Other data:    
Raw materials used   395
Total manufacturing costs charged to    
production during the year (includes raw 
ma terials, direct labor, and factory overhead)680
Cost of goods available for sale   745
Labor and overhead expenses   285


Based on this information, the cost of raw materials purchased during the year amounted to





Use the following information to answer questions 14 and 15.



Carlos Company reported the following data for a six-month period:


MonthMaintenance Cost for the MonthUnits Produced


Plot this information onto the graph in Examination Figure 1, and then answer questions 14 and 15.

















































14. What is the estimate of the fixed cost portion of the semivariable cost?




15. What is the variable cost per unit at a volume level of 400?




16.   The Eleanor Company payroll for the first week in January was $12,000. The amount of income tax withheld was 12 percent and the FICA, state unemployment, and federal un-


employment taxes were 8 percent, 5 percent, and 1 percent, respectively. The amount of the employer’s payroll taxes are




17.   When using a flexible budget, what will occur to fixed costs (on a per-unit basis) as pro-duction increases?


A.   Fixed costs per unit will increase.


B.   Fixed costs aren’t considered in flexible budgeting.


C.   Fixed costs per unit will remain unchanged.


D.   Fixed costs per unit will decrease.



18.   How should a shipment of completed goods to the customer be debited and credited?


A.    Debited to Finished Goods and credited to Cost of Goods Sold


B.    Debited to Cost of Goods Sold and credited to Finished Goods


C.   Debited to Accounts Payable and credited to Cash


D.   Debited to Cash and credited to Accounts Payable


19.   An accrued expense, such as accrued wages, is an amount that’s


A.    paid and not currently matched with earnings.


B.    not paid and not currently matched with earnings.


C.   not paid and currently matched with earnings.


D.   paid and currently matched with earnings.


20.   Inventory levels for firms using JIT inventory systems will be


A.    higher both for work in process and finished goods.


B.    higher for work in process and finished goods but lower for raw materials.


C.   lower for raw materials, work in process, and finished goods.


D.   higher for finished goods but lower for raw materials and work in process.



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