ACC 203 Exam 1 Practice Questions and Answers, Exams of Business Economics

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ACC 203 – Exam 1 Practice Questions: The practice questions below are meant to help you determine if

your level of preparation is adequate and to get an idea about how I might word questions on the exam.

It DOES NOT mean this material is the only material subject to the exam. ANYTHING we covered in class,

in the chapters/powers points, or on MyAccountingLab is subject to being tested on the exam, with the

exception of the supplemental material if it was not covered in class. While most practice questions are

multiple choice, you may also have short answer and matching questions, problems, journal entries, be

asked to create reports, etc.

Further note that the answer key is included at the end of the practice questions. I strongly suggest that

you try the practice questions on their own and then reference the answer key to see what you missed.

CHAPTER 1

1. Creating budgets are part of which primary management responsibility? A) Controlling B) Planning C) Managerial accounting D) Directing
2. What do managers weigh to develop and run their accounting systems? A) Generally Accepted Accounting Principles (GAAP) B) SEC Regulations C) Cost-Benefit D) International Financial Reporting Standards (IFRS)
3. Managerial accounting would use which of the following types of information? A) Forecasts of future earnings B) Financial information C) Nonfinancial information D) All of the above
4. Which of the following statements is true about managerial accounting? A) Managerial accounting reports aid potential investors. B) Managerial accounting reports must follow GAAP. C) Managerial accounting reports are audited by CPAs. D) Managerial accounting reports provide detailed internal information.
5. Which of the following tasks do management accountants perform? A) Help design information systems B) Provide decision support C) Ensure financial records are correct D) All of the above
6. The standards in the IMA Statement of Ethical Professional Practice includes A) Competence, Confidentiality, Integrity, and Credibility. B) Competence, Objectivity, Credibility, and Honesty. C) Competence, Confidence, Integrity, and Credibility. D) Competence, Confidentiality, Integrity, and Objectivity.
7. Accepting a job that you know can be better performed by someone else with the required skills would violate the ethical conduct standard of

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B) integrity. C) competency. D) confidentiality.

8. A wave of accounting scandals around the turn of the 21st century prompted which of the following? A) XBRL B) IFRS C) SOX D) ISO
9. What is a system that requires suppliers to deliver materials at the exact time the materials are needed? A) JIT B) TQM C) ISO D) ERP
10. Torque Engine Company is considering opening a plant in China. It will cost $3,500, to set up the plant and $750,000 to train employees. An additional $100,000 will be spent to build relationships with the local suppliers. The company anticipates gross profit of $4,400,000 from this new plant. Do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much? A) Costs outweigh benefits by $150,000. B) Benefits outweigh costs by $150,000. C) Costs outweigh benefits by $50,000. D) Benefits outweigh costs by $50,000.
11. Match the definition to the term:

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D) research and development expenses.

9. Before operating income can be determined for a manufacturer, which of the following is calculated? A) Cost of goods available for sale B) Cost of goods sold C) Cost of goods manufactured D) All of the above
10. Tuity Fruity Beverage Company's operating activities for the year are listed below. Purchases $140, Operating expenses 80, Beginning inventory 12, Ending inventory 18, Sales revenue 300,

What is the cost of goods sold for the year? A) $152, B) $134, C) $140, D) $80,

11. In addition to cost of goods manufactured, which of the following is needed to compute the cost of goods sold for a manufacturer? A) Beginning work in process inventory less ending work in process inventory B) Ending work in process inventory less beginning work in process inventory C) Ending finished goods D) Beginning finished goods inventory less ending finished goods inventory
12. Page's sells books. The following information summarizes the company's operating expenses for the year: Cost of goods sold $105, Salaries and wages $ 23, Rent and utilities $ 14, Marketing $ 11, Sales revenues $170,

What is operating income? A) $12, B) $102, C) $108, D) $17,

13. Porches, Inc., sells lawn furniture. Selected financial information for the most recent year follows: Beginning merchandise inventory on January 1 was $33,000. Ending merchandise inventory on December 31 was $35,000. Purchases during the year were $92,000. Selling and administrative expenses were $75,000. Sales for year were $262,000.

What was gross profit? A) $(165,000)

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B) $170,

C) $187,

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CHAPTER 3

1. On the line in front of each statement, enter the letter corresponding to the term that best fits that statement. You may use a letter more than once and some letters may not be used at all.

A. bill of materials F. job cost record B. cost driver G. process costing C. materials requisition H. labor time record D. invoice I. receiving report E. purchase order J. job costing

a bill from a supplier a list of all of the raw materials needed to manufacture a job system for assigning costs to a specific unit or to a small batch of products or services that pass through production steps as a distinct identifiable job a written or electronic document authorizing the purchase of specific raw materials from a specific supplier system for assigning costs to large numbers of identical units that usually proceed in a continuous fashion through a series of uniform production steps or processes a written or electronic document that requests specific materials be transferred from the raw materials inventory storeroom to the production floor a written or electronic document listing the quantity and type of raw materials received in an incoming shipment a primary factor that causes a cost a written or electronic document that lists the direct materials, direct labor, and manufacturing overhead costs assigned to each individual job a written or electronic document that identifies the employee, the amount of time spent on a particular job, and the labor cost charged to a job

2. Which of the following is an example of an industry that would use a process costing—rather than a job costing—system? A) Coca-Cola B) Boeing Jets C) Centex Custom Homes D) Snyder & Lewis, Attorneys at Law
3. Which of these documents authorizes the purchase of specific raw materials from a specific supplier? A) Labor time record B) Materials inventory requisition form C) Job cost record D) Purchase order
4. The assignment of direct and indirect materials to a cost object reduces the A) finished goods inventory account. B) raw materials inventory account. C) manufacturing overhead account. D) work in process inventory account. 5. The first three steps to allocating manufacturing overhead are taken before the year begins and include all of the following except A) estimating total manufacturing overhead costs for the coming year. B) selecting an allocation base and estimating the total amount that will be used during the

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year.

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9. If the company allocates overhead based on direct labor cost, what are the total actual manufacturing overhead costs? A) $280, B) $171, C) $258, D) $226,
10. Manufacturing overhead has an underallocated balance of $12,000; raw materials inventory balance is $145,000; work in process inventory is $122,000; finished goods inventory is $140,000; and cost of goods sold is $170,000. After adjusting for the underallocated manufacturing overhead, what is cost of goods sold? A) $170, B) $12, C) $182, D) $158,
11. Jasper Carts manufactures custom carts for a variety of uses. The following data have been recorded for Job 651, which was recently completed. Direct materials used cost $7,200. There were 175 direct labor hours worked on this job at a direct labor wage rate of $22 per hour. There were 82 machine hours used on this job. The predetermined overhead rate is $30 per machine hour used.

What is the total manufacturing cost of Job 651? A) $3, B) $2, C) $13, D) $7,

12. Overallocated manufacturing overhead results when A) production is less than last year. B) estimated overhead is less than actual overhead. C) actual overhead is less than allocated overhead. D) actual overhead is less than expected.

Before the year began, Milkway Manufacturing estimated that manufacturing overhead for the year would be $175,000 and that 25,000 direct labor hours would be worked. Actual results for the year included the following:

Actual manufacturing overhead cost $182, Actual direct labor hours 20,

13. If the company allocates manufacturing overhead based on direct labor hours, the manufacturing overhead for the year would have been A) $42,000 overallocated. B) $7,000 underallocated. C) $7,000 overallocated. D) $42,000 underallocated.

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14. What adjusting journal entry would be made for the over/under-allocation above?
15. The cost of direct materials used in production is debited to A) either Manufacturing Overhead account or Work-in-Process Inventory account. B) Finished Goods Inventory account. C) Work-in-Process Inventory account. D) Manufacturing Overhead account.
16. How is the cost of indirect materials used in the factory recorded? A) Credit to Manufacturing Overhead account B) Credit to Raw Materials Inventory account C) Credit to Work-in-Process Inventory account D) Credit to Direct Materials Expense account
17. The journal entry to issue $600 of direct materials and $40 of indirect materials involves a debit to A) the Manufacturing Overhead account for $640. B) the Work-in-Process Inventory account for $640. C) the Work-in-Process Inventory account for $600 and a credit to the Manufacturing Overhead account for $40. D) the Work-in-Process Inventory account for $600 and a debit to the Manufacturing Overhead account for $40.
18. Job 222 started on June 1 and finished on July 15. Total cost on July 1 was $12,400, and the costs added in July were $188,500. What would be the journal entry for the sale at a price of $310,000?

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D) confidentiality. Answer: C

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8. A wave of accounting scandals around the turn of the 21st century prompted which of the following? A) XBRL B) IFRS C) SOX D) ISO Answer: C
9. What is a system that requires suppliers to deliver materials at the exact time the materials are needed? A) JIT B) TQM C) ISO D) ERP Answer: A
10. Torque Engine Company is considering opening a plant in China. It will cost $3,500, to set up the plant and $750,000 to train employees. An additional $100,000 will be spent to build relationships with the local suppliers. The company anticipates gross profit of $4,400,000 from this new plant. Do the benefits outweigh the costs or do the costs outweigh the benefits, and by how much? A) Costs outweigh benefits by $150,000. B) Benefits outweigh costs by $150,000. C) Costs outweigh benefits by $50,000. D) Benefits outweigh costs by $50,000. Answer: D

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Answer: D

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8. All of the following are period costs except E) distribution expenses. F) direct labor expenses. G) marketing expenses. H) research and development expenses. Answer: B

9. Before operating income can be determined for a manufacturer, which of the following is calculated? E) Cost of goods available for sale F) Cost of goods sold G) Cost of goods manufactured H) All of the above Answer: D
10. Tuity Fruity Beverage Company's operating activities for the year are listed below.

Purchases $140, Operating expenses 80, Beginning inventory 12, Ending inventory 18, Sales revenue 300,

What is the cost of goods sold for the year? E) $152, F) $134, G) $140, H) $80, Answer: B

11. In addition to cost of goods manufactured, which of the following is needed to compute the cost of goods sold for a manufacturer? E) Beginning work in process inventory less ending work in process inventory F) Ending work in process inventory less beginning work in process inventory G) Ending finished goods H) Beginning finished goods inventory less ending finished goods inventory Answer: D
12. Page's sells books. The following information summarizes the company's operating expenses for the year:

Cost of goods sold $105, Salaries and wages $ 23, Rent and utilities $ 14, Marketing $ 11, Sales revenues $170,

What is operating income? E) $12, F) $102,