Managerial Accounting Creating Value in a Dynamic Business Environment 11Th Ed – Test Bank

Managerial Accounting Creating Value in a Dynamic Business Environment 11Th Ed By Hilton – Test Bank

Chapter 3

Product Costing and Cost Accumulation in a Batch Production Environment

Answer Key

True / False Questions

1. Product or service cost is a very objective number that anyone could agree on.

FALSE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand

Difficulty: 1 Easy

Learning Objective: 03-01
Feedback True: This statement is false.

Feedback False: Correct! In reality, product cost is a slippery concept.

2. Product costs provide crucial data for a variety of managerial purposes.

TRUE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember

Difficulty: 1 Easy

Learning Objective: 03-01
Feedback True: Correct! It is true that product costs provide crucial data for a variety of managerial purposes.

Feedback False:  This statement is true.

3. The final step in recognizing the completion of production requires a company to debit Finished-Goods Inventory and credit Work-in-Process Inventory.

TRUE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember

Difficulty: 1 Easy

Learning Objective: 03-02
Learning Objective: 03-05
Feedback True: Correct! Control systems influence behavior.

Feedback False: Control systems influence behavior. 

4. As soon as products are completed, their product costs are transferred from the Raw Materials Inventory to the Finished-Goods Inventory.

FALSE

AACSB: Reflective Thinking

AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand

Difficulty: 1 Easy

Learning Objective: 03-02
Feedback True: This statement is false.

Feedback False: Correct! As soon as products are completed, their costs are transferred from the Work-in-Process Inventory to the Finished-Goods Inventory.

5. Manufacturing overhead is a pool of indirect production costs that must somehow be attached to each unit manufactured.

TRUE

AACSB: Reflective Thinking

AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember

Difficulty: 1 Easy

Learning Objective: 03-03
Feedback True: Correct! Control systems influence behavior.

Feedback False: Control systems influence behavior. 

6. In a public accounting firm, for example, costs are assigned to an audit engagement in much the same way they are assigned to a single batch of tables by a furniture manufacturer.

TRUE

AACSB: Reflective Thinking

AICPA BB: Industry
AICPA FN: Measurement
Blooms: Remember

Difficulty: 1 Easy

Learning Objective: 03-03
Feedback True: Correct! Audits for accounting firms have costs assigned in the same manner that costs for tables are assigned within furniture manufacturers.

Feedback False: This statement is true.