Management Accounting: Concepts, Techniques & Controversial Issues
Chapter 4 Extra MC Questions

James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Chapter 4 | MAAW's Textbook Table of Contents

1. Job order costing is

a. a cost flow assumption.
b. an inventory valuation method.
c. an input measurement basis.
d. a cost accumulation method.
e. none of these.

2. Which of the following accounts represent expenses?

a. Factory payroll.
b. Factory overhead.
c. Work in process.
d. Finished goods.
e. Cost of goods sold.

3. Which of the accounts below is not a control account?

a. Factory payroll.
b. Factory overhead.
c. Work in process.
d. Finished goods.
e. None of the above.

4. Which of the items below represent subsidiary ledger accounts?

a. Material requisition number 168.
b. A Job cost sheet for Bill Brown.
c. A labor time ticket for Mary Moore.
d. All of the above.
e. None of the above.

5. The entry to record material usage is represented by which of the following?

a. a debit to materials control and a credit to accountants payable.
b. a debit to materials control, a debit to factory overhead and a credit to accounts payable.
c. a debit to work in process, a debit to factory overhead and a credit to accounts payable.
d. a debit to work in process, a debit to factory overhead and a credit to materials control.
e. None of these.

6. The entry to record applied factory overhead is represented by which of the following?

a. debit factory overhead for actual overhead, credit work in process for applied overhead.
b. debit factory overhead for applied overhead, credit miscellaneous accounts for actual overhead.
c. debit work in process for applied overhead, credit factory overhead for applied overhead.
d. debit work in process for applied overhead, credit factory overhead for actual overhead.
e. None of the above.

7. Overapplied factory overhead represents

a. the amount that applied overhead exceeds actual overhead.
b. an unfavorable variance.
c. the amount that actual overhead exceeds applied overhead.
d. a. and b.
e. b. and c.

8. In a flexible budget Y = a + bx, the constants include

a. x.
b. a.
c. b.
d. a., b and c.
e. b. and c.

9. Overhead Spending variances are created by differences between the predetermined and actual

a. prices of the various indirect resources used.
b. quantities of the various indirect resources used.
c. production volumes.
d. a. and b.
e. all of the above.

10. Capacity, or idle capacity, variances are created by differences between the predetermined and actual

a. prices of the various indirect resources used.
b. quantities of the various indirect resources used.
c. production volumes.
d. a. and b.
e. b. and c.

11. General ledger control accounts must be supported by

a. a normal historical cost system.
b. a subsidiary ledger.
c. a statistical process control chart.
d. job order costing.
e. none of the above.

12. Which of the following is not an asset account?

a. The factory payroll account.
b. The sales account.
c. The cost of goods sold account.
d. a and c.
e. b and c.

13.Assume that a company has seasonal production and predetermined overhead rates are not used. Historical (actual) overhead is spread across the jobs produced at the end of each month. Products are then shipped and customers are billed based on each job’s cost, plus a fixed markup percentage. Using this approach, which of the following would be true?

a. Jobs produced in high volume months would tend to be priced lower than jobs produced in low volume months.
b. Jobs produced in low volume months would tend to be priced lower than jobs produced in high volume months.
c. Jobs produced in both low and high volume months would be priced higher than jobs produced in an average (mean) volume month.
d. Jobs produced in both low and high volume months would be priced lower than jobs produced in an average (mean) volume month.
e. None of the above.

14. Underapplied factory overhead represents

a. an unfavorable variance.
b. a debit balance.
c. a credit balance.
d. a. and b.
e. a and c.

15. A flexible budget for factory overhead costs

a. contains a flexible amount for variable overhead costs.
b. contains a flexible amount for fixed overhead costs.
c. contains a flexible amount of total overhead costs.
d. a and c.
e. all of the above.

16. When direct labor is used as the basis for determining factory overhead rates, slow inefficient direct labor would have which of the following effects?

a. cause the capacity (or idle capacity) variance to be more favorable or less unfavorable.
b. cause the capacity (or idle capacity) variance to be more unfavorable or less favorable.
c. cause underapplied overhead.
d. a and c.
e. b and c.

17. Which of the following is considered uncontrollable?

a. The variable overhead spending variance.
b. The fixed overhead spending variance.
c. The idle capacity variance.
d. a. and b.
e. b. and c.

18. The difference between cost of goods manufactured (or cost of jobs completed) and cost of goods sold for the accounting period is

a. the dollar amount of beginning finished goods inventory.
b. the dollar amount of ending finished goods inventory.
c. the change in the dollar amount of finished goods inventory.
d. the change in the dollar amount of work in process and finished goods inventory.
e. none of the above.

19. Which of the accounts below represent assets?

a. Cost of goods sold.
b. Work in process.
c. Sales.
d. a. and b.
e. b. and c.

20. Recording materials usage does not include an entry to

a. Debit work in process.
b. Credit accounts payable.
c. Debit factory overhead.
d. Credit materials.
e. b. and c.

21. Which of the following provides a generic conceptual definition of indirect costs?

a. indirect materials.
b. indirect labor.
c. costs that do not change with a change in the cost object.
d. cost that do not become a part of a product.
e. all of the above.

22. If identical products are mass produced, the company would probably use

a. normal historical costing.
b. standard costing.
c. process costing.
d. job order costing.
e. none of the above.

23. When direct labor is used as the basis for determining factory overhead rates, very efficient direct labor would have which of the following effects?

a. cause the capacity (or idle capacity) variance to be more favorable or less unfavorable.
b. cause the capacity (or idle capacity) variance to be more unfavorable or less favorable.
c. cause underapplied overhead.
d. cause overapplied overhead.
e. b and c.

24. In normal historical job order costing, the entry to record actual factory overhead is represented by which of the following?

a. debit factory overhead for actual overhead, credit work in process for applied overhead.
b. debit factory overhead for actual overhead, credit miscellaneous accounts for actual overhead.
c. debit work in process for applied overhead, credit factory overhead for actual overhead.
d. debit work in process for actual overhead, credit factory overhead for actual overhead.
e. None of the above.

25. Which of the following would cause a favorable overhead spending variance?

a. actual prices of the various indirect resources are less than estimated or budgeted prices.
b. actual quantities of the various indirect resources per activity measure are less than estimated.
c. actual production volume is greater than estimated or budgeted.
d. a. and b.
e. all of the above.

26. In overhead variance analysis, if there is perfect correlation between the quantity of the allocation basis used (e.g., direct labor hours) and the quantities of indirect resources used, then the variable overhead spending variance would represent

a. only a price variance.
b. only a quantity variance.
c. a mixed price quantity variance.
d. only a capacity variance.
e. none of these.

27. Which of the following are referred to as controllable?

a. The total overhead spending variance.
b. The idle capacity variance.
c. Normal spoilage.
d. Abnormal spoilage.
e. a and d.

28. When we refer to the two stage cost allocation process, we mean that costs are allocated

a. To products, then to cost of goods sold.
b. From service departments to producing departments, then to products.
c. To the materials, payroll and overhead accounts, then to work in process.
d. To products, then to time periods.
e. None of these.

29. A problem that arises in attempting to extend the control chart concept to factory overhead spending variances is that

a. spending variances are aggregate measurements of the variation in both prices and quantities.
b. the time sequence of the performance results are lost because overhead variances are usually based on monthly data.
c. the accounting control methodology does not provide the control limits needed for determining when the system is out of control.
d. all of the above.
e. none of the above.

30. Net Normal spoilage costs (i.e., excluding any disposal value) that are common to all jobs would be

a. Charged to WIP.
b. Charged to factory overhead.
c. Charged to a loss account.
d. Charged to cost of goods sold.
e. Charged to a specific job.

The Hopper Company had the following transactions during the month.

31. The entry to record the purchase of materials is:

a. Debit materials control 3,000, credit accounts payable 3,000.
b. Debit work in process 3,000, credit accounts payable 3,000.
c. Debit factory overhead 3,000, credit accounts payable 3,000.
d. Debit work in process 2,500, debit factory overhead 400, credit accounts payable 3,000.
e. None of these.

32. The entry to record material usage is:

a. Debit work in process 2,900, credit materials control 2,500, credit factory overhead 400.
b. Debit materials control 2,900, credit work in process 2,500, credit factory overhead 400.
c. Debit factory overhead 2,900, credit materials control 2,900.
d. Debit work in process 2,500, debit factory overhead 400, credit materials control 2,900.
e. None of these.

33. The entry to record the factory payroll is:

a. Debit factory payroll 4,000, credit wages & salaries payable 4,000.
b. Debit factory payroll 4,000, credit wages & salaries payable 3,200, credit withholding accounts 800.
c. Debit work in process 3,500, debit factory overhead 500, credit wages & salaries payable 4,000.
d. Debit factory payroll 4,000, credit work in process 3,500, credit factory overhead 500.
e. None of these.

34. The entry to record the distribution of payroll costs is:

a. Debit work in process 4,000, debit factory payroll 4,000.
b. Debit factory payroll 4,000, credit wages and salaries payable 3,200, credit withholding accounts 800.
c. Debit work in process 3,500, debit factory overhead 500, credit factory payroll 4,000.
d. Debit work in process 3,500, credit factory payroll 3,500
e. None of these.

35. The entry to record applied factory overhead is:

a. Debit work in process 3,100, credit factory overhead 3,100.
b. Debit work in process 2,200, credit factory overhead 2,200.
c. Debit factory overhead 2,200, credit work in process 2,200.
d. Debit work in process 3,000, credit factory overhead 3,000.
e. None of these.

36. The entry to record cost of goods (jobs) manufactured is:

a. Debit work in process 16,000, credit finished goods 16,000.
b. Debit work in process 9,000, credit materials control 2,500, credit payroll 3,500, credit factory overhead 3,000.
c. Debit finished goods 9,100, credit work in process 9,100.
d. Debit finished goods 16,000, credit work in process 16,000.
e. None of these.

37. The entry to record cost of goods sold is:

a. Debit cost of goods sold 16,000, debit net income 7,000, credit finished goods 9,000.
b. Debit cost of goods sold 16,000, credit finished goods 16,000.
c. Debit cost of goods sold 16,000, credit net income 9,000, credit sales 25,000.
d. Debit cost of goods sold 9,000, credit finished goods 9,000.
e. None of these.

38. The entry to record sales is:

a. Debit sales 25,000, credit finished goods 25,000.
b. Debit accounts receivable or cash 25,000, credit sales 25,000.
c. Debit accounts receivable or cash 25,000, credit cost of goods sold 16,000, credit net income 9,000.
d. Debit accounts receivable or cash 16,000, credit finished goods 9,000, credit net income 7,000.
e. None of these.

Ignore your previous answers regarding the actual overhead and assume that the total actual overhead costs included $2,000 variable overhead and 1,100 fixed overhead. Assume the $5 factory overhead rate represents $3 of variable overhead and $2 of fixed overhead. These rates were based on 500 denominator hours. Actual D.L. hours are still 600.

39. The total overhead variance is:

a. $100 underapplied.
b. $500 unfavorable.
c. $100 overapplied.
d. Zero.
e. None of these.

40. The total spending variance is:

a. $200 unfavorable.
b. $100 unfavorable.
c. $200 favorable.
d. $300 unfavorable.
e. None of these.

41. The variable overhead spending variance is:

a. $200 unfavorable.
b. $300 unfavorable.
c. $500 unfavorable.
d. $200 favorable.
e. None of these.

42. The fixed overhead spending variance is:

a. $300 favorable.
b. $500 unfavorable.
c. $100 unfavorable.
d. 100 favorable.
e. None of these.

43. The idle capacity variance is:

a. $200 unfavorable.
b. $200 favorable.
c. $100 favorable.
d. Zero.
e. None of these.

44. Which variance(s) is(are) controllable?

a. Total spending.
b. Variable overhead spending.
c. Fixed overhead spending.
d. Idle capacity.
e. a., b. and c.

Data for Wood Company's transactions during April are as follows:

45. The entry to record the purchase of materials is:

a. Debit work in process 80,000, credit accounts payable 80,000.
b. Debit factory overhead 80,000, credit materials control 80,000.
c. Debit work in process 75,000, debit factory overhead 1,000, credit materials control 76,000, credit accounts payable 4,000.
d. Debit materials control 80,000, credit accounts payable 80,000.
e. None of these.

46. The entry to record material usage is:

a. Debit work in process 75,000, debit factory overhead 1,000, credit materials control 76,000.
b. Debit materials control 76,000, credit work in process 75,000, credit factory overhead 1,000.
c. Debit factory overhead 76,000 credit materials control 76,000.
d. Debit work in process 75,000, debit factory overhead 5,000, credit materials control 80,000.
e. None of these.

47. The entry to record the factory payroll is:

a. Debit factory payroll 38,000, credit wages & salaries payable 32,500, credit withholding accounts 5,500.
b. Debit work in process 6,000, debit factory overhead 2,000, credit wages & salaries payable 8,000.
c. Debit factory payroll 8,000, credit wages & salaries payable 5,500, credit withholding accounts 2,500.
d. Debit factory payroll 8,000, credit wages & salaries payable 8,000.
e. None of these.

48. The entry to record the payment of the factory payroll to employees is:

a. Debit wages & salaries payable 8,000, credit cash 8,000.
b. Debit wages & salaries payable 5,500, credit cash 5,500.
c. Debit wages & salaries payable 32,500, credit cash 32,500.
d. Debit cash 5,500, credit wages & salaries payable 5,500.
e. None of these.

49. The entry to record the distribution of payroll costs is:

a. Debit factory payroll 8,000, credit work in process 8,000.
b. Debit work in process 6,000, debit factory overhead 2,000, credit factory payroll 8,000.
c. Debit work in process 8,000, debit factory overhead 8,000.
d. Debit work in process 2,000, debit factory overhead 6,000 credit factory payroll 8,000.
e. None of these.

50. The entry to record applied factory overhead is:

a. Debit work in process 40,000, credit factory overhead 40,000.
b. Debit factory overhead 40,000, credit work in process 40,000.
c. Debit work in process 38,400, credit factory overhead 38,400.
d. Debit work in process 40,800, credit factory overhead 40,800.
e. None of these.

51. The entry to record spoilage is:

a. Debit work in process 500, credit factory overhead 500.
b. Debit spoilage inventory 400, credit work in process 400.
c. Debit spoilage inventory 100, debit factory overhead 400, credit work in process 500.
d. Debit spoilage inventory 100, debit work in process 400, credit factory overhead 500.
e. None of these.

52. The entry to record cost of goods manufactured is:

a. Debit work in process 125,000, credit finished goods 125,000.
b. Debit finished goods 121,800, credit work in process 121,800.
c. Debit finished goods 119,400, credit materials control 75,000 credit payroll 6,000, credit factory overhead 38,400.
d. Debit finished goods 125,000, credit work in process 125,000.
e. None of these.

53. The entry to record cost of goods sold is:

a. Debit cost of goods sold 125,000, credit finished goods 125,000.
b. Debit cost of goods sold 123,000, credit finished goods 123,000.
c. Debit cost of goods sold 127,000, credit finished goods 127,000.
d. Debit cost of goods sold 117,400, credit finished goods 117,400.
e. None of these.

54. The entry to record sales is:

a. Debit accounts receivable or cash 250,000, credit sales 250,000.
b. Debit sales 250,000, credit accounts receivable or cash 250,000.
c. Debit accounts receivable or cash 250,000, credit cost of goods sold 125,000, credit finished goods 125,000.
d. Debit accounts receivable or cash 250,000, credit finished goods 123,000, credit gross profit 63,800.
e. None of these.

Ignore your previous answers involving actual overhead and assume that the total actual overhead was $38,400 and included $18,000 variable overhead and $20,400 fixed overhead. Also assume the $4 factory overhead rate per machine hour represents $1.80 of variable overhead and $2.20 of fixed overhead. Actual machine hours and denominator machine hours are still 10,200 and 10,000 respectively.

55. The total overhead variance is:

a. $1,960 overapplied.
b. $2,400 unfavorable.
c. $2,400 overapplied.
d. $1,600 favorable.
e. None of these.

56. The total spending variance is:

a. $2,400 unfavorable.
b. $1,960 favorable.
c. $2,400 favorable.
d. $1,600 favorable.
e. None of these.

57. The variable overhead spending variance is:

a. $360 favorable.
b. $360 unfavorable
c. $1960 favorable.
d. $2,400 favorable.
e. None of these.

58. The fixed overhead spending variance is:

a. $440 unfavorable.
b. $2,040 favorable.
c. $2,040 unfavorable.
d. 1,600 favorable.
e. None of these.

59. The capacity, or capacity variance is:

a. $1,600 favorable.
b. $440 favorable.
c. $2,400 favorable.
d. zero.
e. None of these.

Chapter 4 Extra MC Solution