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Management Accounting: Concepts,
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Chapter 4 Extra MC Solution

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

d. a cost accumulation method.

2. Which of the following accounts represent expenses?

e. Cost of goods sold.

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

a. Factory payroll.

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

b. A Job cost sheet for Bill Brown.

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

d. a debit to work in process, a debit to factory overhead and a credit to materials control.

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

c. debit work in process for applied overhead, credit factory overhead for applied overhead.

7. Overapplied factory overhead represents

a. the amount that applied overhead exceeds actual overhead.

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

e. b. and c.

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

d. a. and b.

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

c. production volumes.

11. General ledger control accounts must be supported by

b. a subsidiary ledger.

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

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.

14. Underapplied factory overhead represents

d. a. and b.

15. A flexible budget for factory overhead costs

d. a and c.

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.

17. Which of the following is considered uncontrollable?

c. The idle capacity variance.

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

c. the change in the dollar amount of finished goods inventory.

19. Which of the accounts below represent assets?

b. Work in process.

20. Recording materials usage does not include an entry to

b. Credit accounts payable.

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

c. costs that do not change with a change in the cost object.

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

c. process costing.

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?

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?

b. debit factory overhead for actual overhead, credit miscellaneous accounts for actual overhead.

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

d. a. and b.

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.

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

e. a and d.

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

b. From service departments to producing departments, then to products.

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

d. all of the above.

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

b. Charged to factory overhead.

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.

32. The entry to record material usage is:

d. Debit work in process 2,500, debit factory overhead 400, credit materials control 2,900.

33. The entry to record the factory payroll is:

b. Debit factory payroll 4,000, credit wages & salaries payable 3,200, credit withholding accounts 800.

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

c. Debit work in process 3,500, debit factory overhead 500, credit factory payroll 4,000.

35. The entry to record applied factory overhead is:

d. Debit work in process 3,000, credit factory overhead 3,000.

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

d. Debit finished goods 16,000, credit work in process 16,000.

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

b. Debit cost of goods sold 16,000, credit finished goods 16,000.

38. The entry to record sales is:

b. Debit accounts receivable or cash 25,000, credit sales 25,000.

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.

40. The total spending variance is:

d. $300 unfavorable.

41. The variable overhead spending variance is:

a. $200 unfavorable.

42. The fixed overhead spending variance is:

c. $100 unfavorable.

43. The idle capacity variance is:

b. $200 favorable.

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

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:

d. Debit materials control 80,000, credit accounts payable 80,000.

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.

47. The entry to record the factory payroll is:

c. Debit factory payroll 8,000, credit wages & salaries payable 5,500, credit withholding accounts 2,500.

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

b. Debit wages & salaries payable 5,500, credit cash 5,500.

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

b. Debit work in process 6,000, debit factory overhead 2,000, credit factory payroll 8,000.

50. The entry to record applied factory overhead is:

d. Debit work in process 40,800, credit factory overhead 40,800.

51. The entry to record spoilage is:

c. Debit spoilage inventory 100, debit factory overhead 400, credit work in process 500.

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

d. Debit finished goods 125,000, credit work in process 125,000.

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

b. Debit cost of goods sold 123,000, credit finished goods 123,000.

54. The entry to record sales is:

a. Debit accounts receivable or cash 250,000, credit sales 250,000.

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:

c. $2,400 overapplied.

56. The total spending variance is:

b. $1,960 favorable.

57. The variable overhead spending variance is:

a. $360 favorable.

58. The fixed overhead spending variance is:

d. 1,600 favorable.

59. The capacity, or capacity variance is:

b. $440 favorable.

Chapter 4 Extra MC Questions