Chapter 4 Quiz (Choose the best answer)

1. Direct costs:
a. are costs that are allocated to a cost object.
b. are easily traceable to a cost object.
c. include the cost objects overhead.
d. are costs consumed by multiple cost objects.
2. In a job order costing system, the cost flow model moves costs through the accounts in
which order?
a. Raw materials, work-in-process, cost of goods sold, finished goods
b. Finished goods, work-in-process, raw materials, cost of goods sold
c. Raw materials, work-in-process, finished goods, cost of goods sold
d. Work-in-process, raw materials, finished goods, cost of goods sold
3. A job order costing system is less likely to distort job costs if it assigns support costs to
individual jobs based on:
a. direct labor hours.
b. machine hours.
c. direct material cost.
d. the consumption of different cost drivers.
4. Which of the following statements about job order costing systems is FALSE?
a. A job order costing system is a method used for estimating product costs in firms
that have several distinct products.
b. A job order costing system estimates costs of manufacturing products for different
jobs required for customer orders.
c. A job order costing system relies on the concept of conversion costs.
d. A job order costing system provides the means to estimate costs so that bids can be
prepared.
5. Conversion costs are:
a. direct costs.
b. indirect costs.
c. a combination of direct material and direct labor costs.
d. a combination of direct labor and support costs.
6. A process costing system would be appropriate for which of the following?
a. Lays potato chips
b. Aircraft carrier
c. Custom diamond ring
d. Dell computers

Accumulating and Assigning Costs to Products 1

7. Variable overhead includes the costs for such items as:

a. depreciation on factory equipment.
b. indirect materials.
c. plant managers salary.
d. insurance on the factory.
8. Suppose budgeted production for EG Company is estimated to require 8,000 machine
hours per year and practical capacity is 10,000 machine hours per year. Estimated
manufacturing overhead cost for the year is $720,000. The cost driver rate per machine
hour is:
a. $90.
b. $80.
c. $72.
d. cannot be determined from the information provided.
9. Pats Paint Company (PPC) uses process costing to determine the costs of its various
products. In October, PPC had 3,000 gallons of paint in work in process. The paint was
100% complete with respect to materials and 40% complete with respect to conversion.
If the cost per equivalent unit of materials is $18 and the cost per equivalent unit of
conversion is $130, then the cost of ending work in process is:
a. $177,600.
b. $210,000.
c. $411,600.
d. $444,000.
10. The sequential method of allocating service department costs completely deals with the
criticism that the direct method ignores services provided among service departments.
a. True
b. False

2 Management Accounting 6e

Solutions to Chapter 4 Quiz

1. b
2. c
3. d
4. c
5. d
6. a
7. b
8. c
9. b
10. b

Accumulating and Assigning Costs to Products 3