COST ACCOUNTING (THEORIES)

MULTIPLE CHOICE QUESTIONS

JOB ORDER COSTING

1. Which of the following costing methods of valuation are acceptable in

a job order costing system?

Actual Standard Actual Predetermined

Material Material Labor Overhead
Cost Cost Cost Cost
a. yes yes no yes
b. yes no yes no
c. no yes yes yes
d. yes yes yes yes

ANSWER: d

2. Which of the following costing systems allows management to quickly

recognize materials, labs, and overhead variances and take measures to
correct them?

Actual Cost System Normal Cost System

a. yes yes
b. yes no
c. no yes
d. no no

ANSWER: d

3. In a normal cost system, debits to Work in Process Inventory would not

be made for

a. actual overhead.
b. applied overhead.
c. actual direct material.
d. actual direct labor.

ANSWER: a

4. Which of the following are drawbacks to applying actual overhead to

production?

a. A delay occurs in assigning costs to jobs or products.

b. Fluctuations in quantities produced during a period could cause
varying per-unit charges for fixed overhead.
c. Seasonality of overhead costs may cause distortions in job or
product costs.
d. All of the above.

ANSWER: d
5. Job order costing and process costing have which of the following
characteristics?

Job Order Costing Process Costing

a. homogeneous products heterogeneous products
and large quantities and small quantities
b. homogeneous products heterogeneous products
and small quantities and large quantities
c. heterogeneous products homogeneous products
and large quantities and small quantities
d. heterogeneous products homogeneous products
and small quantities and large quantities

ANSWER: d

6. A credit to Work in Process Inventory represents

a. work still in process.

b. raw material put into production.
c. the application of overhead to production.
d. the transfer of completed items to Finished Goods Inventory.

ANSWER: d

7. Additional accounts that comprise the balance of a single general

account is a

a. worksheet.
b. journal.
c. subsidiary ledger.
d. book of original entry.

ANSWER: c

8. In a job order costing system, the dollar amount of the entry that
debits Finished Goods Inventory and credits Work in Process Inventory
is the sum of the costs charged to all jobs

a. started in process during the period.

b. in process during the period.
c. completed and sold during the period.
d. completed during the period.

ANSWER: d

9. Total manufacturing costs for the year plus beginning Work in Process
Inventory cost equals

a. cost of goods manufactured in the year.

b. ending Work in Process Inventory.
c. total manufacturing costs to account for.
d. cost of goods available for sale.
 ANSWER: c

10. Which of the following would be least likely to be supported by

subsidiary accounts or ledgers in a company that employs a job order
costing system?
a. Work in Process Inventory
b. Raw Material Inventory
c. Accounts Payable
d. Supplies Inventory

ANSWER: d

11. A journal entry includes a debit to Work in Process Inventory and a

credit to Raw Material Inventory. The explanation for this would be
that
a. indirect material was placed into production.
b. raw material was purchased on account.
c. direct material was placed into production.
d. direct labor was utilized for production.

ANSWER: c

12. The source document that records the amount of raw material that has
been requested by production is the
a. job order cost sheet.
b. bill of lading.
c. interoffice memo.
d. material requisition.

ANSWER: d

13. A material requisition form should show all of the following

information except
a. job number.
b. quantity required.
c. unit cost.
d. purchase order number.

ANSWER: d

14. Which of the following statements about job order cost sheets is true?
a. All job order cost sheets serve as the general ledger control
account for Work in Process Inventory.
b. Job order cost sheets can serve as subsidiary ledger information
for both Work in Process Inventory and Finished Goods Inventory.
c. If material requisition forms are used, job order cost sheets do
not need to be maintained.
d. Job order cost sheets show costs for direct material and direct
labor, but not for manufacturing overhead since it is an applied
amount.

ANSWER: b
15. Clyde Jenkins is an auditor for the General Accounting Office. Clyde
is investigating invoices sent by Proper Paper Products charging the
Army $30 per roll for toilet paper. Proper Paper uses a job order
costing system. Where should Clyde look to find total production costs
related to the toilet paper?
a. material requisition form
b. bill of materials
c. sales invoice
d. job order cost sheet

ANSWER: d

16. The primary accounting document in a job order costing system is a(n)
a. bill of materials.
b. job order cost sheet.
c. employee time sheet.
d. materials requisition.

ANSWER: b

17. The cost sheets for incomplete jobs at the end of the period comprise
the subsidiary ledger for
a. Finished Goods Inventory.
b. Raw Material Inventory.
c. Work in Process Inventory.
d. Supplies Inventory.

ANSWER: c

18. The __________ provides management with an historical summation of

total costs for a given product.
a. job order cost sheet
b. employee time sheet
c. material requisition form
d. bill of lading

ANSWER: a

19. Which of the following journal entries records the accrual of the cost
of indirect labor used in production?
a. debit Work in Process Inventory, credit Wages Payable
b. debit Work in Process Inventory, credit Manufacturing Overhead
c. debit Manufacturing Overhead, credit Work in Process Inventory
d. debit Manufacturing Overhead, credit Wages Payable

ANSWER: d

20. In job order costing, payroll taxes paid by the employer for factory
employees are commonly accounted for as
a. direct labor cost.
b. manufacturing overhead cost.
c. indirect labor cost.
d. administrative cost.
 ANSWER: b

21. The logical explanation for an entry that includes a debit to

Manufacturing Overhead control and a credit to Prepaid Insurance is
a. the insurance company sent the company a refund of its policy
premium.
b. overhead for insurance was applied to production.
c. insurance for production equipment expired.
d. insurance was paid on production equipment.

ANSWER: c

22. The journal entry to apply overhead to production includes a credit to

Manufacturing Overhead control and a debit to
a. Finished Goods Inventory.
b. Work in Process Inventory.
c. Cost of Goods Sold.
d. Raw Material Inventory.

ANSWER: b

23. Production overhead does not include the costs of

a. factory depreciation and supplies.
b. factory employees’ cafeteria departments.
c. production line workers.
d. the maintenance department for the factory.

ANSWER: c

24. In a job order costing system, the use of indirect material would
usually be reflected in the general ledger as an increase in
a. stores control.
b. work in process control.
c. manufacturing overhead applied.
d. manufacturing overhead control.

ANSWER: d

25. Manufacturing overhead application

a. rates are applied within a range of 35 to 60 percent of direct
labor.
b. is performed at the beginning of the period.
c. rates fluctuate during the period with changes in production
quantities.
d. rates are calculated by dividing budgeted overhead by a budgeted
quantity of some cost driver.

ANSWER: d

26. A credit to the Manufacturing Overhead control account represents the

a. actual cost of overhead incurred.
b. actual cost of overhead paid this period.
c. amount of overhead applied to production.
 d. amount of indirect material and labor used during the period.

ANSWER: c

27. The journal entry to record the incurrence and payment of overhead
costs for factory insurance requires a debit to
a. Cash and a credit to Manufacturing Overhead.
b. Manufacturing Overhead and a credit to Accounts Payable.
c. Manufacturing Overhead and a credit to Cash.
d. Work in Process Inventory and a credit to Cash.

ANSWER: c

28. The source document that records the amount of time an employee worked
on a job and his/her pay rate is the
a. job order cost sheet.
b. employee time sheet.
c. interoffice memo.
d. labor requisition form.

ANSWER: b

29. Overhead is applied to jobs in a job order costing system

a. at the end of a period.
b. as jobs are completed.
c. at the end of a period or as jobs are completed, whichever is
earlier.
d. at the end of a period or as jobs are completed, whichever is
later.

ANSWER: c

30. In a job order costing system, the subsidiary ledger for Finished
Goods Inventory is comprised of
a. all job order cost sheets.
b. job order cost sheets for all uncompleted jobs.
c. job order cost sheets for all completed jobs not yet sold.
d. job order cost sheets for all ordered, uncompleted, and completed
jobs.

ANSWER: c

31. Underapplied overhead resulting from unanticipated and immaterial

price increases for overhead items should be written off by
a. decreasing Cost of Goods Sold.
b. increasing Cost of Goods Sold.
c. decreasing Cost of Goods Sold, Work in Process Inventory, and
Finished Goods Inventory.
d. increasing Cost of Goods Sold, Work in Process Inventory, and
Finished Goods Inventory.

ANSWER: b
32. Overapplied overhead would result if
a. the plant were operated at less than normal capacity.
b. overhead costs incurred were less than costs charged to
production.
c. overhead costs incurred were unreasonably small in relation to
units produced.
d. overhead costs incurred were greater than costs charged to
production.

ANSWER: b

33. Debits to Cost of Goods Sold typically represent the

a. transfer of completed items to Finished Goods Inventory.
b. costs of items sold.
c. selling price of items sold.
d. the cost of goods manufactured.

ANSWER: b

34. In a perpetual inventory system, a transaction that requires two

journal entries (or one compound entry) is needed when
a. raw materials are purchased on account.
b. goods are sold for either cash or on account.
c. goods are finished and transferred out of Work in Process
Inventory.
d. overhead is applied to Work in Process Inventory.

ANSWER: b

35. Which of the following organizations would be most likely to use a job
order costing system?
a. the loan department of a bank
b. the check clearing department of a bank
c. a manufacturer of processed cheese food
d. a manufacturer of video cassette tapes

ANSWER: a

36. Which of the following organizations would most likely not use a job
order costing system?
a. Avondale Shipbuilders
b. Pickle and Weymann, Attorneys-at-Law
c. Atlantic City Saltwater Taffy
d. Century City Construction Company

ANSWER: c

37. In a job order costing system,

a. standards cannot be used.

b. an average cost per unit within a job cannot be computed.
c. costs are accumulated by departments and averaged among all jobs.
d. overhead is typically assigned to jobs on the basis of some cost
driver.
 ANSWER: d

38. When job order costing is used, the primary focal point of cost
accumulation is the
a. department.
b. supervisor.
c. item.
d. job.

ANSWER: d

39. What is the best cost accumulation procedure to use when many batches,
each differing as to product specifications, are produced?
a. job order
b. process
c. actual
d. standard

ANSWER: a

40. Which of the following could not be used in job order costing?
a. standards
b. an average cost per unit for all jobs
c. normal costing
d. overhead allocation based on the job’s direct labor hours

ANSWER: b

41. Product costing is not concerned with cost

a. assignment.
b. origination.
c. identification.
d. measurement.

ANSWER: b

42. Which of the following statements is false?

a. While the use of standard costing is acceptable for job order
costing systems, actual cost records should still be maintained.
b. It is normally more time-consuming for a company to use standard
costs in a job order costing system.
c. Standards can be used in a job order costing system, if the
company usually produces items that are similar in nature.
d. Standard costs may be used for material, labor, or both material
and labor in a job order costing environment.

ANSWER: b
PROCESS COSTING

1. Which cost accumulation procedure is most applicable in continuous

mass-production manufacturing environments?

a. standard
b. actual
c. process
d. job order

ANSWER: c

2. Process costing is used in companies that

a. engage in road and bridge construction.

b. produce sailboats made to customer specifications.
c. produce bricks for sale to the public.
d. construct houses according to customer plans.

ANSWER: c

3. A producer of ________ would not use a process costing system.

a. gasoline
b. potato chips
c. blank videotapes
d. stained glass windows

ANSWER: d

4. A process costing system is used by a company that

a. produces heterogeneous products.

b. produces items by special request of customers.
c. produces homogeneous products.
d. accumulates costs by job.

ANSWER: c

5. Which is the best cost accumulation procedure to use for continuous

mass production of like units?

a. actual
b. standard
c. job order
d. process

ANSWER: d

6. Equivalent units of production are equal to the

a. units completed by a production department in the period.

b. number of units worked on during the period by a production
department.
 c. number of whole units that could have been completed if all work
of the period had been used to produce whole units.
d. identifiable units existing at the end of the period in a
production department.

ANSWER: c

7. In a process costing system using the weighted average method, cost

per equivalent unit for a given cost component is found by dividing
which of the following by EUP?

a. only current period cost

b. current period cost plus the cost of beginning inventory
c. current period cost less the cost of beginning inventory
d. current period cost plus the cost of ending inventory

ANSWER: b

8. The weighted average method is thought by some accountants to be

inferior to the FIFO method because it

a. is more difficult to apply.

b. only considers the last units worked on.
c. ignores work performed in subsequent periods.
d. commingles costs of two periods.

ANSWER: d

9. The first step in determining the cost per EUP per cost component
under the weighted average method is to

a. add the beginning Work in Process Inventory cost to the current

period’s production cost.
b. divide the current period’s production cost by the equivalent
units.
c. subtract the beginning Work in Process Inventory cost from the
current period’s production cost.
d. divide the current period’s production cost into the EUP.

ANSWER: a

10. The difference between EUP calculated using FIFO and EUP calculated
using weighted average is the equivalent units

a. started and completed during the period.

b. residing in beginning Work in Process Inventory.
c. residing in ending Work in Process Inventory.
d. uncompleted in Work in Process Inventory.

ANSWER: b
11. EUP calculations for standard process costing are the same as
a. the EUP calculations for weighted average process costing.
b. the EUP calculations for FIFO process costing.
c. LIFO inventory costing for merchandise.
d. the EUP calculations for LIFO process costing.

ANSWER: b

12. In a FIFO process costing system, which of the following are assumed
to be completed first in the current period?
a. units started this period
b. units started last period
c. units transferred out
d. units still in process

ANSWER: b

13. To compute equivalent units of production using the FIFO method of

process costing, work for the current period must be stated in units
a. completed during the period and units in ending inventory.
b. completed from beginning inventory, units started and completed
during the period, and units partially completed in ending
inventory.
c. started during the period and units transferred out during the
period.
d. processed during the period and units completed during the
period.

ANSWER: b

14. The FIFO method of process costing will produce the same cost of goods
transferred out amount as the weighted average method when
a. the goods produced are homogeneous.
b. there is no beginning Work in Process Inventory.
c. there is no ending Work in Process Inventory.
d. beginning and ending Work in Process Inventories are each 50
percent complete.

ANSWER: b

15. The primary difference between the FIFO and weighted average methods
of process costing is
a. in the treatment of beginning Work in Process Inventory.
b. in the treatment of current period production costs.
c. in the treatment of spoiled units.
d. none of the above.

ANSWER: a
16. Material is added at the beginning of a process in a process costing
system. The beginning Work in Process Inventory for the process was 30
percent complete as to conversion costs. Using the FIFO method of
costing, the number of equivalent units of material for the process
during this period is equal to the
a. beginning inventory this period for the process.
b. units started this period in the process.
c. units started this period in the process plus the beginning Work
in Process Inventory.
d. units started and completed this period plus the units in ending
Work in Process Inventory.

ANSWER: d

17. In a cost of production report using process costing, transferred-in

costs are similar to the
a. cost of material added at the beginning of production.
b. conversion cost added during the period.
c. cost transferred out to the next department.
d. cost included in beginning inventory.

ANSWER: a

18. In a process costing system, the journal entry to record the transfer
of goods from Department #2 to Finished Goods Inventory is a
a. debit Work in Process Inventory #2, credit Finished Goods Inventory.
b. debit Finished Goods Inventory, credit Work in Process Inventory #1.
c. debit Finished Goods Inventory, credit Work in Process Inventory #2.
d. debit Cost of Goods Sold, credit Work in Process Inventory #2.

ANSWER: c EASY

19. Transferred-in cost represents the cost from

a. the last department only.
b. the last production cycle.
c. all prior departments.
d. the current period only.

ANSWER: c

20. Which of the following is(are) the same between the weighted average
and FIFO methods of calculating EUPs?

Units to EUP Total cost to

account for calculations account for
a. no yes no
b. yes yes yes
c. yes no no
d. yes no yes

ANSWER: d
21. Process costing techniques should be used in assigning costs to
products
a. if a product is manufactured on the basis of each order received.
b. when production is only partially completed during the accounting
period.
c. if a product is composed of mass-produced homogeneous units.
d. whenever standard-costing techniques should not be used.

ANSWER: c

22. Averaging the total cost of completed beginning inventory and units
started and completed over all units transferred out is known as
a. strict FIFO.
b. modified FIFO.
c. weighted average costing.
d. normal costing.

ANSWER: b

23. A process costing system

a. cannot use standard costs.
b. restates Work in Process Inventory in terms of completed units.
c. accumulates costs by job rather than by department.
d. assigns direct labor and manufacturing overhead costs separately
to units of production.

ANSWER: b

24. A process costing system does which of the following?

Calculates EUPs Assigns costs to inventories
a. no no
b. no yes
c. yes yes
d. yes no

ANSWER: c

25. A process costing system

Calculates average cost Determines total units to
per whole unit account for
a. yes yes
b. no no
c. yes no
d. no yes

ANSWER: d

26. A hybrid costing system combines characteristics of

a. job order and standard costing systems.
b. job order and process costing systems.
c. process and standard costing systems.
d. job order and normal costing systems.

ANSWER: b
27. When standard costs are used in process costing,
a. variances can be measured during the production period.
b. total costs rather than current production and current costs are
used.
c. process costing calculations are made simpler.
d. the weighted average method of calculating EUPs makes computing
transferred-out costs easier.

ANSWER: d

SPECIAL PRODUCTION ISSUES: LOST UNITS AND ACCRETION

1. Shrinkage should be treated as

a. defective units.
b. spoiled units.
c. miscellaneous expense.
d. a reduction of overhead.

ANSWER: b

2. Economically reworked units may

a. not be sold through normal channels of distribution.
b. be sold through normal channels of distribution.
c. not be reprocessed to a sufficient quality level.
d. also be called a spoiled unit.

ANSWER: b

3. A unit that is rejected at a quality control inspection point, but

that can be reworked and sold, is referred to as a
a. spoiled unit.
b. scrap unit.
c. abnormal unit.
d. defective unit.

ANSWER: d

4. Spoiled units are

a. units that cannot be economically reworked to bring them up to
standard.
b. units that can be economically reworked to bring them up to
standard.
c. the same as defective units.
d. considered abnormal losses.

ANSWER: a
5. The cost of abnormal losses (net of disposal costs) should be written
off as
Product cost Period cost
a. yes no
b. yes yes
c. no yes
d. no no

ANSWER: c

6. Which of the following would fall within the range of tolerance for a
production cycle?
Abnormal loss Normal loss
a. yes yes
b. yes no
c. no no
d. no yes

ANSWER: d

7. If abnormal spoilage occurs in a job order costing system, has a

material dollar value, and is related to a specific job, the recovery
value of the spoiled goods should be
Debited to Credited to
a. a scrap inventory account the specific job in process
b. the specific job in process overhead
c. a loss account the specific job in process
d. factory overhead sales

ANSWER: a

8. If normal spoilage is detected at an inspection point within the

process (rather than at the end), the cost of that spoilage should be
a. included with the cost of the units sold during the period.
b. included with the cost of the units completed in that department
during the period.
c. allocated to ending work in process units and units transferred
out based on their relative values.
d. allocated to the good units that have passed the inspection
point.

ANSWER: d

9. A continuous loss
a. occurs unevenly throughout a process.
b. never occurs during the production process.
c. always occurs at the same place in a production process.
d. occurs evenly throughout the production process.

ANSWER: d
10. Which of the following would be considered a discrete loss in a
production process?
a. adding the correct ingredients to make a bottle of ketchup
b. putting the appropriate components together for a stereo
c. adding the wrong components when assembling a stereo
d. putting the appropriate pieces for a bike in the box

ANSWER: c

11. The method of neglect handles spoilage that is

a. discrete and abnormal.
b. discrete and normal.
c. continuous and abnormal.
d. continuous and normal.

ANSWER: d

12. Normal spoilage is defined as unacceptable production that

a. arises because of a special job or process.
b. occurs in on-going operations.
c. is caused specifically by human error.
d. is in excess of that which is expected.

ANSWER: b

13. When the cost of good units are increased and lost units are not
included in an equivalent unit schedule, these units are considered
a. normal and discrete.
b. normal and continuous.
c. abnormal and discrete.
d. abnormal and continuous.

ANSWER: b

14. The net cost of normal spoilage in a job order costing system in which
spoilage is common to all jobs should be
a. assigned directly to the jobs that caused the spoilage.
b. charged to manufacturing overhead during the period of the
spoilage.
c. charged to a loss account during the period of the spoilage.
d. allocated only to jobs that are completed during the period.

ANSWER: b

15. Normal spoilage is

a. written off as a period cost.
b. never shown in EUP schedules.
c. treated as a product cost.
d. both b and c.

ANSWER: c
16. Normal spoilage units resulting from a continuous process
a. are extended to the EUP schedule.
b. result in a higher unit cost for the good units produced.
c. result in a loss being incurred.
d. cause estimated overhead to increase.

ANSWER: b

17. When normal spoilage is discovered at a discrete inspection point and

the degree of completion of ending work in process has not reached the
level of completion of the inspection point, normal spoilage is
handled by
a. prorating the spoilage cost between units transferred out and
units in ending work in process.
b. extending the spoiled units to the EUP schedule.
c. assigning the normal spoilage costs to the units transferred out
and those in beginning inventory.
d. both b and c.

ANSWER: d

18. In a job order costing system, the net cost of normal spoilage is
equal to
a. estimated disposal value plus the cost of spoiled work.
b. the cost of spoiled work minus estimated spoilage cost.
c. the units of spoiled work times the predetermined overhead rate.
d. the cost of spoiled work minus the estimated disposal value.

ANSWER: d

19. Taylor Co. has a production process in which the inspection point is
at 65 percent of conversion. The beginning inventory for July was 35
percent complete and ending inventory was 80 percent complete. Normal
spoilage costs would be assigned to which of the following groups of
units, using FIFO costing?

Beginning Ending Units Started

Inventory Inventory & Completed
a. no yes yes
b. yes yes yes
c. no no yes
d. yes no no

ANSWER: b

20. The cost of normal discrete losses is

a. absorbed by all units past the inspection point on an equivalent
unit basis.
b. absorbed by all units in ending inventory.
c. considered a period cost.
d. written off as a loss on an equivalent unit basis.

ANSWER: a
21. When spoilage is discovered at a discrete point in the production
process,
a. equivalent units for the spoilage are shown in the EUP schedule.
b. its cost, if normal, should be assigned to the units transferred
out.
c. its cost, if abnormal, should be assigned to the good units
produced.
d. both a and c.

ANSWER: a

22. When the cost of lost units must be assigned, and those same units
must be included in an equivalent unit schedule, these units are
considered
a. normal and discrete.
b. normal and continuous.
c. abnormal and discrete.
d. abnormal and continuous.

ANSWER: d

23. Abnormal spoilage is

a. spoilage that is forecasted or planned.
b. spoilage that is in excess of planned.
c. accounted for as a product cost.
d. debited to Cost of Goods Sold.

ANSWER: b

24. Which of the following accounts is credited when abnormal spoilage is

written off in an actual cost system?
a. Miscellaneous Revenue
b. Loss from Spoilage
c. Finished Goods
d. Work in Process

ANSWER: d

25. Which of the following types of spoilage cost is considered a product

cost?
Abnormal spoilage Normal spoilage
a. yes yes
b. yes no
c. no yes
d. no no

ANSWER: c

26. Abnormal spoilage can be

Continuous Discrete
a. yes no
b. no no
c. yes yes
d. no yes
 ANSWER: c

27. The cost of abnormal discrete units must be assigned to

Good units lost units
a. yes yes
b. no no
c. yes no
d. no yes

ANSWER: d

28. The cost of abnormal continuous losses is

a. considered a product cost.
b. absorbed by all units in ending inventory and transferred out on
an equivalent unit basis.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units past the inspection point.

ANSWER: c

29. Which of the following statements is false? The cost of rework on

defective units, if
a. abnormal, should be assigned to a loss account.
b. normal and if actual costs are used, should be assigned to
material, labor and overhead costs of the good production.
c. normal and if standard costs are used, should be considered when
developing the overhead application rate.
d. abnormal, should be prorated among WIP, FG, and CGS.

ANSWER: d

30. A process that generates continuous defective units

a. never requires a quality control point.
b. requires a quality control point at the end of the process.
c. requires quality control points every time new materials are
added to the production process.
d. requires quality control points at the beginning of the
production process.

ANSWER: b

31. The addition of material in a successor department that causes an

increase in volume is called
a. accretion.
b. reworked units.
c. complex procedure.
d. undetected spoilage.

ANSWER: a
32. When material added in a successor department increases the number of
units, the
a. extra units are treated like spoilage.
b. unit cost of the transferred-in units is decreased.
c. costs associated with the extra units are maintained separately
for financial reporting purposes.
d. unit cost of the transferred-in units is increased.

ANSWER: b

33. Which of the following is not a question that needs to be answered in

regard to quality control?
a. What happens to the spoiled units?
b. What is the actual cost of spoilage?
c. How can spoilage be controlled?
d. Why does spoilage happen?

ANSWER: a

34. In regard to spoilage, management should be most concerned with which

of the following?
a. accounting for spoilage
b. controlling spoilage
c. planning for spoilage
d. inspecting spoilage

ANSWER: b

JOINT AND BY-PRODUCTS COSTING

1. If a company obtains two salable products from the refining of one

ore, the refining process should be accounted for as a(n)
a. mixed cost process.
b. joint process.
c. extractive process.
d. reduction process.

ANSWER: b

2. Joint costs are allocated to joint products to

a. obtain a cost per unit for financial statement purposes.
b. provide accurate management information on production costs of
each type of product.
c. compute variances from expected costs for each joint product.
d. allow the use of high-low analysis by the company.

ANSWER: a

3. Joint costs are allocated to which of the following products?

By-products Scrap
a. yes yes
b. yes no
c. no no
 d. no yes

ANSWER: c

4. Joint cost allocation is useful for

a. decision making.
b. product costing.
c. control.
d. evaluating managers’ performance.

ANSWER: b

5. Joint costs are useful for

a. setting the selling price of a product.
b. determining whether to continue producing an item.
c. evaluating management by means of a responsibility reporting
system.
d. determining inventory cost for accounting purposes.

ANSWER: d

6. Which of the following components of production are allocable as joint

costs when a single manufacturing process produces several salable
products?
a. direct material, direct labor, and overhead
b. direct material and direct labor only
c. direct labor and overhead only
d. overhead and direct material only

ANSWER: a

7. Each of the following is a method to allocate joint costs except

a. relative sales value.
b. relative net realizable value.
c. relative weight, volume, or linear measure.
d. average unit cost.

ANSWER: d

8. Joint costs are most frequently allocated based upon relative

a. profitability.
b. conversion costs.
c. prime costs.
d. sales value.

ANSWER: d

9. When allocating joint process cost based on tons of output, all

products will
a. be salable at split-off.
b. have the same joint cost per ton.
c. have a sales value greater than their costs.
d. have no disposal costs at the split-off point.
 ANSWER: b

10. If two or more products share a common process before they are
separated, the joint costs should be assigned in a manner that
a. assigns a proportionate amount of the total cost to each product
on a quantitative basis.
b. maximizes total earnings.
c. minimizes variations in unit production costs.
d. does not introduce an element of estimation into the process of
accumulating costs for each product.

ANSWER: a

11. Scrap is defined as a

a. finished unit of product that has no sales value.
b. residual of the production process that has limited sales value.
c. residual of the production process that can be reworked for sale
as an irregular unit of product.
d. residual of the production process that has no sales value.

ANSWER: b

12. Waste created by a production process is

a. accounted for in the same manner as defective units.
b. accounted for as an abnormal loss.
c. material that can be sold as an irregular product.
d. discarded rather than sold.

ANSWER: d

13. While preparing a salad, you remove the core of a head of lettuce.
This core would be classified as
a. defective.
b. shrinkage.
c. waste.
d. scrap.

ANSWER: c

14. Which of the following is/are synonyms for joint products?

Main products Co-products
a. no no
b. yes yes
c. yes no
d. no yes

ANSWER: b

15. In a lumber mill, which of the following would most likely be

considered a primary product?
a. 2 × 4 studs
b. sawdust
c. wood chips
d. tree bark
 ANSWER: a

16. Company Q produces three products from a joint process. The products
can be sold at split-off or processed further. In deciding whether to
sell at split-off or process further, management should
a. allocate the joint cost to the products based on relative sales
value prior to making the decision.
b. allocate the joint cost to the products based on a physical
quantity measure prior to making the decision.
c. subtract the joint cost from the total sales value of the
products before determining relative sales value and making the
decision.
d. ignore the joint cost in making the decision.

ANSWER: d

17. By-products are

a. allocated a portion of joint production cost.
b. not sufficient alone, in terms of sales value, for management to
justify undertaking the joint process.
c. also known as scrap.
d. the primary reason management undertook the production process.

ANSWER: b

18. Which of the following statements is true regarding by-products or

scrap?
a. Process costing is the only method that should result in by-
products or scrap.
b. Job order costing systems will never have by-products or scrap.
c. Job order costing systems may have instances where by-products or
scrap result from the production process.
d. Process costing will never have by-products or scrap from the
production process.

ANSWER: c

19. Which of the following has sales value?

By-products Waste
a. no no
b. yes no
c. yes yes
d. no yes

ANSWER: b

20. Under an acceptable method of costing by-products, inventory costs of

the by-product are based on the portion of the joint production cost
allocated to the by-product

a. but any subsequent processing cost is debited to the cost of the

main product.
 b. but any subsequent processing cost is debited to revenue of the
main product.
c. plus any subsequent processing cost.
d. minus any subsequent processing cost.

ANSWER: c

21. Which of the following is a false statement about scrap and by-
products?
a. Both by-products and scrap are salable.
b. A by-product has a higher sales value than does scrap.
c. By-products and scrap are the primary reason that management
undertakes the joint process.
d. Both scrap and by-products are incidental outputs to the joint
process.

ANSWER: c

22. The split-off point is the point at which

a. output is first identifiable as individual products.
b. joint costs are allocated to joint products.
c. some products may first be sold.
d. all of the above.

ANSWER: d

23. A product may be processed beyond the split-off point if management

believes that
a. its marketability will be enhanced.
b. the incremental cost of further processing will be less than the
incremental revenue of further processing.
c. the joint cost assigned to it is not already greater than its
prospective selling price.
d. both a and b.

ANSWER: d

24. Which of the following would not be considered a sunk cost?

a. direct material cost
b. direct labor cost
c. joint cost
d. building cost

ANSWER: d

25. The definition of a sunk cost is

a. a cost that cannot be recovered regardless of what happens.
b. a cost that relates to money poured into the ground.
c. considered the original cost of an item.
d. also known as an opportunity cost.

ANSWER: a
26. The net realizable value approach mandates that the NRV of the by-
products/scrap be treated as
a. an increase in joint costs.
b. a sunk cost.
c. a reduction of joint costs.
d. a cost that can be ignored totally.

ANSWER: c

27. The net realizable value approach is normally used when the NRV is
expected to be
insignificant significant
a. yes yes
b. no yes
c. no no
d. yes no

ANSWER: b

28. Approximated net realizable value at split-off for joint products is

computed as
a. selling price at split-off minus further processing and disposal
costs.
b. final selling price minus further processing and disposal costs.
c. selling price at split-off minus allocated joint processing costs.
d. final selling price minus a normal profit margin.

ANSWER: b

29. Which of the following is a commonly used joint cost allocation

method?
a. high-low method
b. regression analysis
c. approximated sales value at split-off method
d. weighted average quantity technique

ANSWER: c

30. Incremental separate costs are defined as all costs incurred between
___________ and the point of sale.
a. inception
b. split-off point
c. transfer to finished goods inventory
d. point of addition of disposal costs

ANSWER: b

31. All costs that are incurred between the split-off point and the point
of sale are known as
a. sunk costs.
b. incremental separate costs.
c. joint cost.
d. committed costs.
 ANSWER: b

32. Incremental revenues and costs need to be considered when using which
allocation method?
Physical measures Sales value at split-off
a. yes yes
b. yes no
c. no no
d. no yes

ANSWER: c

33. The method of pricing by-products/scrap where no value is assigned to

these items until they are sold is known as the
a. net realizable value at split-off point method.
b. sales value at split-off method.
c. realized value approach.
d. approximated net realizable value at split-off method.

ANSWER: c

34. Relative sales value at split-off is used to allocate

costs beyond split-off joint costs
a. yes yes
b. yes no
c. no yes
d. no no

ANSWER: c

35. For purposes of allocating joint costs to joint products using the
relative sales value at split-off method, the costs beyond split-off
a. are allocated in the same manner as the joint costs.
b. are deducted from the relative sales value at split-off.
c. are deducted from the sales value at the point of sale.
d. do not affect the allocation of the joint costs.

ANSWER: d
STANDARD COSTING

1. A primary purpose of using a standard cost system is

a. to make things easier for managers in the production facility.
b. to provide a distinct measure of cost control.
c. to minimize the cost per unit of production.
d. b and c are correct.

ANSWER: b

2. The standard cost card contains quantities and costs for

a. direct material only.
b. direct labor only.
c. direct material and direct labor only.
d. direct material, direct labor, and overhead.

ANSWER: d

3. Which of the following statements regarding standard cost systems is

true?
a. Favorable variances are not necessarily good variances.
b. Managers will investigate all variances from standard.
c. The production supervisor is generally responsible for material
price variances.
d. Standard costs cannot be used for planning purposes since costs
normally change in the future.

ANSWER: a

4. In a standard cost system, Work in Process Inventory is ordinarily

debited with
a. actual costs of material and labor and a predetermined overhead
cost for overhead.
b. standard costs based on the level of input activity (such as
direct labor hours worked).
c. standard costs based on production output.
d. actual costs of material, labor, and overhead.

ANSWER: c

5. A standard cost system may be used in

a. job order costing, but not process costing.
b. process costing, but not job order costing.
c. either job order costing or process costing.
d. neither job order costing nor process costing.

ANSWER: c

6. Standard costs may be used for

a. product costing.
b. planning.
c. controlling.
d. all of the above.
 ANSWER: d

7. A purpose of standard costing is to

a. replace budgets and budgeting.
b. simplify costing procedures.
c. eliminate the need for actual costing for external reporting
purposes.
d. eliminate the need to account for year-end underapplied or
overapplied manufacturing overhead.

ANSWER: b

8. Standard costs
a. are estimates of costs attainable only under the most ideal
conditions.
b. are difficult to use with a process costing system.
c. can, if properly used, help motivate employees.
d. require that significant unfavorable variances be investigated, but
do not require that significant favorable variances be investigated.

ANSWER: c

9. A bill of material does not include

a. quantity of component inputs.
b. price of component inputs.
c. quality of component inputs.
d. type of product output.

ANSWER: b

10. An operations flow document

a. tracks the cost and quantity of material through an operation.
b. tracks the network of control points from receipt of a customer’s
order through the delivery of the finished product.
c. specifies tasks to make a unit and the times allowed for each
task.
d. charts the shortest path by which to arrange machines for
completing products.

ANSWER: c

11. A total variance is best defined as the difference between total

a. actual cost and total cost applied for the standard output of the
period.
b. standard cost and total cost applied to production.
c. actual cost and total standard cost of the actual input of the
period.
d. actual cost and total cost applied for the actual output of the
period.

ANSWER: d
12. The term standard hours allowed measures
a. budgeted output at actual hours.
b. budgeted output at standard hours.
c. actual output at standard hours.
d. actual output at actual hours.

ANSWER: c

13. A large labor efficiency variance is prorated to which of the

following at year-end?
WIP FG
Cost of Goods Sold Inventory Inventory
a. no no no
b. no yes yes
c. yes no no
d. yes yes yes

ANSWER: d

14. Which of the following factors should not be considered when deciding
whether to investigate a variance?
a. magnitude of the variance
b. trend of the variances over time
c. likelihood that an investigation will reduce or eliminate future
occurrences of the variance
d. whether the variance is favorable or unfavorable

ANSWER: d

15. At the end of a period, a significant material quantity variance

should be
a. closed to Cost of Goods Sold.
b. allocated among Raw Material, Work in Process, Finished Goods,
and Cost of Goods Sold.
c. allocated among Work in Process, Finished Goods, and Cost of
Goods Sold.
d. carried forward as a balance sheet account to the next period.

ANSWER: c

16. When computing variances from standard costs, the difference between
actual and standard price multiplied by actual quantity used yields a
a. combined price-quantity variance.
b. price variance.
c. quantity variance.
d. mix variance.

ANSWER: b

17. A company wishing to isolate variances at the point closest to the

point of responsibility will determine its material price variance
when
a. material is purchased.
b. material is issued to production.
 c. material is used in production.
d. production is completed.

ANSWER: a

18. The material price variance (computed at point of purchase) is

a. the difference between the actual cost of material purchased and
the standard cost of material purchased.
b. the difference between the actual cost of material purchased and
the standard cost of material used.
c. primarily the responsibility of the production manager.
d. both a and c.

ANSWER: a

19. The sum of the material price variance (calculated at point of

purchase) and material quantity variance equals
a. the total cost variance.
b. the material mix variance.
c. the material yield variance.
d. no meaningful number.

ANSWER: d

20. A company would most likely have an unfavorable labor rate variance
and a favorable labor efficiency variance if
a. the mix of workers used in the production process was more
experienced than the normal mix.
b. the mix of workers used in the production process was less
experienced than the normal mix.
c. workers from another part of the plant were used due to an extra
heavy production schedule.
d. the purchasing agent acquired very high quality material that
resulted in less spoilage.

ANSWER: a

21. If actual direct labor hours (DLHs) are less than standard direct
labor hours allowed and overhead is applied on a DLH basis, a(n)
a. favorable variable overhead spending variance exists.
b. favorable variable overhead efficiency variance exists.
c. favorable volume variance exists.
d. unfavorable volume variance exists.

ANSWER: b

22. If all sub-variances are calculated for labor, which of the following
cannot be determined?
a. labor rate variance
b. actual hours of labor used
c. reason for the labor variances
d. efficiency of the labor force

ANSWER: c
23. The total labor variance can be subdivided into all of the following
except
a. rate variance.
b. yield variance.
c. learning curve variance.
d. mix variance.

ANSWER: c

24. The standard predominantly used in Western cultures for motivational

purposes is a(n) _____________________ standard.
a. expected annual
b. ideal
c. practical
d. theoretical

ANSWER: c

25. Which of the following standards can commonly be reached or slightly

exceeded by workers in a motivated work environment?
Ideal Practical Expected annual
a. no no no
b. no yes yes
c. yes yes no
d. no yes no

ANSWER: b

26. Management would generally expect unfavorable variances if standards

were based on which of the following capacity measures?
Ideal Practical Expected annual
a. yes no no
b. no no yes
c. no yes yes
d. no no no

ANSWER: a

27. Which of the following capacity levels has traditionally been used to
compute the fixed overhead application rate?
a. expected annual
b. normal
c. theoretical
d. prior year

ANSWER: a

28. A company has a favorable variable overhead spending variance, an

unfavorable variable overhead efficiency variance, and underapplied
variable overhead at the end of a period. The journal entry to record
these variances and close the variable overhead control account will
show which of the following?
 VOH spending VOH efficiency
variance variance VMOH
a. debit credit credit
b. credit debit credit
c. debit credit debit
d. credit debit debit

ANSWER: b

29. Ronald Corp. incurred 2,300 direct labor hours to produce 600 units of
product. Each unit should take 4 direct labor hours. Ronald applies
variable overhead to production on a direct labor hour basis. The
variable overhead efficiency variance

a. will be unfavorable.
b. will be favorable.
c. will depend upon the capacity measure selected to assign overhead
to production.
d. is impossible to determine without additional information.

ANSWER: b

30. A variable overhead spending variance is caused by

a. using more or fewer actual hours than the standard hours allowed
for the production achieved.
b. paying a higher/lower average actual overhead price per unit of
the activity base than the standard price allowed per unit of the
activity base.
c. larger/smaller waste and shrinkage associated with the resources
involved than expected.
d. both b and c are causes.

ANSWER: d

31. Which of the following are considered controllable variances?

VOH spending Total overhead budget Volume
a. yes yes yes
b. no no yes
c. no yes no
d. yes yes no

ANSWER: d

32. A company may set predetermined overhead rates based on normal,

expected annual, or theoretical capacity. At the end of a period, the
fixed overhead spending variance would
a. be the same regardless of the capacity level selected.
b. be the largest if theoretical capacity had been selected.
c. be the smallest if theoretical capacity had been selected.
d. not occur if actual capacity were the same as the capacity level
selected.

ANSWER: a
33. The variance least significant for purposes of controlling costs is
the
a. material quantity variance.
b. variable overhead efficiency variance.
c. fixed overhead spending variance.
d. fixed overhead volume variance.

ANSWER: d

34. Fixed overhead costs are

a. best controlled on a unit-by-unit basis of products produced.
b. mostly incurred to provide the capacity to produce and are best
controlled on a total basis at the time they are originally
negotiated.
c. constant on a per-unit basis at all different activity levels
within the relevant range.
d. best controlled as to spending during the production process.

ANSWER: b

35. The variance most useful in evaluating plant utilization is the

a. variable overhead spending variance.
b. fixed overhead spending variance.
c. variable overhead efficiency variance.
d. fixed overhead volume variance.

ANSWER: d

36. A favorable fixed overhead volume variance occurs if

a. there is a favorable labor efficiency variance.
b. there is a favorable labor rate variance.
c. production is less than planned.
d. production is greater than planned.

ANSWER: d

37. The fixed overhead application rate is a function of a predetermined

activity level. If standard hours allowed for good output equal the
predetermined activity level for a given period, the volume variance
will be
a. zero.
b. favorable.
c. unfavorable.
d. either favorable or unfavorable, depending on the budgeted
overhead.

ANSWER: a

38. Actual fixed overhead minus budgeted fixed overhead equals the
a. fixed overhead volume variance.
b. fixed overhead spending variance.
c. noncontrollable variance.
d. controllable variance.
 ANSWER: b

39. Total actual overhead minus total budgeted overhead at the actual
input production level equals the
a. variable overhead spending variance.
b. total overhead efficiency variance.
c. total overhead spending variance.
d. total overhead volume variance.

ANSWER: c

40. A favorable fixed overhead spending variance indicates that

a. budgeted fixed overhead is less than actual fixed overhead.
b. budgeted fixed overhead is greater than applied fixed overhead.
c. applied fixed overhead is greater than budgeted fixed overhead.
d. actual fixed overhead is less than budgeted fixed overhead.

ANSWER: d

41. An unfavorable fixed overhead volume variance is most often caused by

a. actual fixed overhead incurred exceeding budgeted fixed overhead.
b. an over-application of fixed overhead to production.
c. an increase in the level of the finished inventory.
d. normal capacity exceeding actual production levels.

ANSWER: d

42. In a standard cost system, when production is greater than the

estimated unit or denominator level of activity, there will be a(n)
a. unfavorable capacity variance.
b. favorable material and labor usage variance.
c. favorable volume variance.
d. unfavorable manufacturing overhead variance.

ANSWER: c

43. In analyzing manufacturing overhead variances, the volume variance is

the difference between the
a. amount shown in the flexible budget and the amount shown in debit
side of the overhead control account.
b. predetermined overhead application rate and the flexible budget
application rate times actual hours worked.
c. budget allowance based on standard hours allowed for actual
production for the period and the amount budgeted to be applied
during the period.
d. actual amount spent for overhead items during the period and the
overhead amount applied to production during the period.

ANSWER: c

44. Variance analysis for overhead normally focuses on

a. efficiency variances for machinery and indirect production costs.
b. volume variances for fixed overhead costs.
c. the controllable variance as a lump-sum amount.
 d. the difference between budgeted and applied variable overhead.

ANSWER: a

45. The efficiency variance computed on a three-variance approach is

a. equal to the variable overhead efficiency variance computed on
the four-variance approach.
b. equal to the variable overhead spending variance plus the
variable overhead efficiency variance computed on the four-
variance approach.
c. computed as the difference between applied variable overhead and
actual variable overhead.
d. computed as actual variable overhead minus the flexible budget
for variable overhead based on actual hours worked.

ANSWER: a

46. The use of separate variable and fixed overhead rates is better than a
combined rate because such a system
a. is less expensive to operate and maintain.
b. does not result in underapplied or overapplied overhead.
c. is more effective in assigning overhead costs to products.
d. is easier to develop.

ANSWER: c

47. Under the two-variance approach, the volume variance is computed by

subtracting _________ based on standard input allowed for the
production achieved from budgeted overhead.
a. applied overhead
b. actual overhead
c. budgeted fixed overhead plus actual variable overhead
d. budgeted variable overhead

ANSWER: a

48. The overhead variance calculated as total budgeted overhead at the

actual input production level minus total budgeted overhead at the
standard hours allowed for actual output is the
a. efficiency variance.
b. spending variance.
c. volume variance.
d. budget variance.

ANSWER: a

49. Analyzing overhead variances will not help in

a. controlling costs.
b. evaluating performance.
c. determining why variances occurred.
d. planning costs for future production cycles.

ANSWER: c
50. A company using very tight (high) standards in a standard cost system
should expect that
a. no incentive bonus will be paid.
b. most variances will be unfavorable.
c. employees will be strongly motivated to attain the standards.
d. costs will be controlled better than if lower standards were
used.

ANSWER: b

JUST IN TIME, BACKFLUSH COSTING, & PRODUCTION MANAGEMENT SYSTEM

1. All of the following are potential financial benefits of just-in-time

EXCEPT:
a. lower investments in inventories
b. lower investments in plant space for inventories
c. reducing the risk of obsolescence
d. reducing manufacturing lead time

ANSWER: c

2. A costing system that omits recording some or all of the journal entries
relating to the cycle from purchase of direct materials to the sale of
finished goods is called:
a. dependent costing
b. synchronous costing
c. sequential costing
d. backflush costing

ANSWER: d

3. The implications of JIT and backflush costing systems for activity-based

costing systems include:
a. more of the costs are direct
b. overhead cost allocations are reduced
c. Neither of these answers is correct.
d. Both of these answers are correct.

ANSWER: d

4. Companies that would benefit from backflush costing include companies:

a. which have fast manufacturing lead times
b. whose inventories vary from period to period
c. companies that require audit trails
d. Both a and b are correct.

ANSWER: a

5. _____________ is a “pull” system of production and inventory control.

a. EDI
b. EOQ
c. JIT
d. ABC
 ANSWER: c

6. In a JIT system, the quality of each product begins with

a. a company’s vendors.
b. employees.
c. inspection of finished goods inventory.
d. a good product warranty.

ANSWER: a

7. Reducing setup time is a major aspect of

a. all push inventory systems.
b. the determination of safety stock quantities.
c. a JIT system.
d. an EOQ system.

ANSWER: c

8. Reducing inventory to the lowest possible levels is a major focus of

a. JIT.
b. push inventory systems.
c. EOQ.
d. ABC.

ANSWER: a

9. JIT is a philosophy concerned with

a. when to do something.
b. how to do something.
c. where to do something.
d. how much of something should be done.

ANSWER: a

10. When JIT is implemented, which of the following changes in the

accounting system would not be expected?
a. fewer cost allocations
b. elimination of standard costs
c. combining labor and overhead into one product cost category
d. combing raw material and materials in work-in-process into one
product cost category

ANSWER: b

11. Striving for flexibility in the number of products that can be

produced in a short period of time is characteristic of
a. EOQ systems.
b. push systems in general.
c. JIT.
d. pull systems in general.

ANSWER: c
12. Just-in-time (JIT) inventory systems
a. result in a greater number of suppliers for each production
process.
b. focus on a “push” type of production system.
c. can only be used with automated production processes.
d. result in inventories being either greatly reduced or eliminated.

ANSWER: d

13. The JIT philosophy does not focus on

a. standardizing parts used in products.
b. eliminating waste in the production process.
c. finding the absolute lowest price for purchased parts.
d. improving quality of output.

ANSWER: c

14. In a JIT manufacturing environment, product costing information is

least important for use in
a. work in process inventory valuation.
b. pricing decisions.
c. product profitability analysis.
d. make-or-buy decisions.

ANSWER: a

15. With JIT manufacturing, which of the following costs would be

considered an indirect product cost?
a. cost of specific-purpose equipment
b. cost of equipment maintenance
c. property taxes on the plant
d. salary of a manufacturing cell worker

ANSWER: c

16. With JIT manufacturing, which of the following costs would be

considered a direct product cost?
a. insurance on the plant
b. repair parts for machinery
c. janitors’ salaries
d. salary of the plant supervisor

ANSWER: b

17. Which of the following statements is not true?

a. JIT manufacturing strives for zero inventories.
b. JIT manufacturing strives for zero defects.
c. JIT manufacturing uses manufacturing cells.
d. JIT manufacturing utilizes long lead time and few deliveries.

ANSWER: d
18. The JIT environment has caused a reassessment of product costing
techniques. Which of the following statements is true with respect to
this reassessment?
a. Traditional cost allocations based on direct labor are being
questioned and criticized.
b. The national government, through the SEC, is responsible for the
reassessment.
c. The reassessment is caused by the replacement of machine hours
with labor hours.
d. None of the above is true.

ANSWER: a

19. When a firm adopts the just-in-time method of management,

a. employees are retrained on different equipment, but the plant
layout generally remains unchanged.
b. new machinery and equipment must be purchased from franchised JIT
dealers.
c. machinery and equipment are moved into small autonomous
production lines called islands or cells.
d. new, more efficient machinery and equipment are purchased and
installed in the original plant layout.

ANSWER: c

20. Which of the following describes the effect on direct labor when
management adopts the JIT philosophy?
a. Each direct labor person performs a single task, thereby allowing
that person to reach his or her theoretical potential.
b. Because each person runs a single machine in a JIT environment,
there are more employees classified as direct labor.
c. The environment becomes more labor-intensive.
d. Machine operators are expected to run several different types of
machines, help set up for production runs, and identify and
repair machinery needing maintenance.

ANSWER: d

21. JIT concepts

a. can be effectively implemented in organizations that are only
partially automated.
b. are only appropriate for use with CIM systems.
c. involve shifting from a capital-intensive to a labor-intensive
process.
d. require full computerization of the JIT manufacturing process.

ANSWER: a

22. According to JIT philosophy,

a. inventories of finished goods always should be available to meet
customer demand.
b. push-through manufacturing flows are the most efficient.
c. maintaining inventories wastes resources and frequently covers up
poor work or other problems.
 d. long production runs and large production lot sizes take
advantage of economies of scale.

ANSWER: c

23. Accounting for product costs in a JIT environment

a. uses a job order costing system.
b. classifies processing costs as raw (or direct) material, direct
labor, and overhead.
c. is more complex than in other types of manufacturing
environments.
d. follows process costing procedures whereby costs are accumulated
by the process (cell) and attached to units processed for the
period.

ANSWER: d

24. An implication of the demand-pull nature of the JIT production process

is that
a. finished goods inventories must be available to meet customer
demand, although raw material is delivered on an as-needed basis.
b. more storage space for inventories is necessary.
c. finished products are packaged and shipped to customers
immediately, thus requiring minimal finished goods inventories.
d. problem areas become less visible as inventories are reduced.

ANSWER: c MEDIUM

25. In accounting for JIT operations, the Raw Material Inventory account
a. is closely monitored to ensure that materials are always on hand
in time.
b. can be expected to have a larger balance than with traditional
manufacturing methods.
c. is combined with the Work In Process Inventory account.
d. is combined with the Finished Goods Inventory account.

ANSWER: c EASY
26. A kanban plays an important role in
a. JIT.
b. EOQ.
c. ABC.
d. CPM.

ANSWER: a

27. ____________________ may involve relocation or plant modernization by

a vendor.
a. Focused factory arrangements
b. Economic order quantity
c. Multiprocess handling
d. Activity-based management

ANSWER: b
28. The term “cell” is used to describe
a. a grouping of one or more automated machines within a company.
b. a storage bin for “C” type inventory in an ABC inventory system.
c. files in a CAD/CAM system.
d. a factory’s area of conversion activity.

ANSWER: a

29. In a production cell,

a. an individual worker may be expected to operate several different
machines, do setups, and perform preventive maintenance on the
equipment.
b. each worker becomes an expert in the operation of a single piece
of equipment.
c. machines are arranged so that similar machines are grouped
together.
d. clear separation is maintained between those workers who operate
the machinery and those workers who set up and maintain the
machinery.

ANSWER: a

30. U-shaped groupings of workers and machines that improve materials

handling and flow are known as
a. manufacturing cells.
b. efficiency stations.
c. multi-flow modules.
d. productivity islands.

ANSWER: a

31. For workers in a multiprocess handling situation, which of the

following happens?
More flexibility Less process involvement
a. no no
b. no yes
c. yes yes
d. yes no

ANSWER: d EASY

32. The process of _________ occurs when equipment is programmed to stop

when a certain situation arises.
a. throughput
b. automation
c. backflushing
d. information sharing

ANSWER: b
33. The connection of two or more flexible manufacturing systems via a
host computer and a networking information system is known as
computer integrated electronic data
manufacturing interchange
a. yes yes
b. yes no
c. no no
d. no yes

ANSWER: b

34. A key element of Japan’s success in world markets is

a. the elimination of waste in all operations.
b. automation of the billing function.
c. inefficient labor forces in competing countries.
d. the verification procedures incorporated into computer programs.

ANSWER: a

35. Backflush costing is concerned with which of the following?

Standard costs Minimal variances from standards
a. yes no
b. no no
c. yes yes
d. no yes

ANSWER: c

36. Which of the following areas offers an opportunity to eliminate waste?

a. raw material and labor
b. space and production time
c. recordkeeping and working capital
d. all of the above

ANSWER: d

37. Flexible manufacturing systems are

a. designed to provide more flexibility in a firm’s manufacturing
process by using computer-aided machinery.
b. the same as computer-aided design systems.
c. commonly used by firms that need to make large quantities of one
product.
d. are very complicated and cause increased defect rates in output.

ANSWER: a

38. Kanban is the Japanese word for

a. production.
b. just-in-time.
c. card.
d. target costing.

ANSWER: c
39. JIT seeks to
a. reduce production cost while increasing quality.
b. radically redesign the production process for effectiveness.
c. modify all non-value-added activities.
d. all of the above.

ANSWER: a

40. The JIT philosophy indicates that inventory, as well as which of the
following, should be eliminated?
Business-Value-
Suppliers Storage Employees Added Activities
a. yes yes yes yes
b. yes yes no no
c. no no yes no
d. no yes no yes

ANSWER: d