COST ACCOUNTING FULL TESTBANK

CHAPTER 3—ACCOUNTING FOR LABOR MULTIPLE CHOICE 1. At a plant where car doors were manufactured, all of the following would be classified as direct labor except: a. Machinists. b. Assembly workers. c. Maintenance pe ...

CHAPTER 3—ACCOUNTING FOR LABOR MULTIPLE CHOICE 1. At a plant where car doors were manufactured, all of the following would be classified as direct labor except: a. Machinists. b. Assembly workers. c. Maintenance personnel. d. Painters. ANS: C Maintenance workers, while integral to the manufacturing process as they keep the machinery maintained, are not direct laborers because they do not actually add value to the product. Machinists, assembly workers and painters would all add value to the manufacture of a car door. PTS: 1 DIF: Moderate REF: P. OBJ: Introduction NAT: IMA 2B - Cost Management TOP: AACSB - Reflective 2. All of the following personnel would be classified as indirect labor except the: a. machinist. b. supervisor. c. fork lift driver. d. plant janitor. ANS: A The machinist would most likely be a direct laborer. The supervisor, fork lift driver and plant janitor, while part of the manufacturing process, do not add value to the goods being produced. PTS: 1 DIF: Moderate REF: P. OBJ: Introduction NAT: IMA 2B - Cost Management TOP: AACSB - Reflective 3. All of the following are characteristics of hourly wage plans except: a. They provide no extra recognition for doing more than the minimum required. b. They are easy to apply. c. They establish a definite rate per hour for each employee. d. They encourage employees to sacrifice quality in order to maximize earnings. ANS: D Hourly wage plans pay a fixed rate per hour, so they are easy to apply, but they do not provide any incentive to do more than what is required, nor do they encourage employees to work so fast as to sacrifice quality. PTS: 1 DIF: Easy REF: P. OBJ: 1 NAT: IMA 2B - Cost Management TOP: AACSB - Reflective 4. A wage plan based solely on an employee's quantity of production is known as a(n): a. Modified wage plan. b. Hourly-rate plan. c. Incentive wage plan. d. Piece-rate plan. ANS: D A piece-rate plan bases an employee's earnings strictly on the number of units produced. PTS: 1 DIF: Easy REF: P. OBJ: 1 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic 5. Wage plans that encourage employees to work harder and earn more by producing a high level of output are known as: a. Modified wage plans. b. Salary wage plans. c. Piece-rate plans. d. Hourly-rate plans. ANS: C Piece-rate plans encourage employees to work harder and earn more by producing more or by meeting and exceeding quotas. PTS: 1 DIF: Easy REF: P. OBJ: 1 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic 6. Under a modified wage plan, an employee earns $.75 for each finished unit and is guaranteed $10 per hour as a minimum wage. If the daily quota is 100 units, on a particular day when an employee completes 85 units and works 8 hours, the amount of the make-up guarantee will be: a. $80.00 b. $72.25 c. $16.25 d. $5.00 ANS: C Make-up guarantee = ($10  8 hours) - ($.75  85 pieces) = $16.25 PTS: 1 DIF: Moderate REF: P. OBJ: 1 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic 7. Under a modified wage plan, Jim Phillips works an eight-hour day and earns $.50 for each finished unit he produces in excess of 200 units. However, he is guaranteed $12.50 per hour as a minimum wage. His production this week was a follows: Monday 220 units Tuesday 180 units Wednesday 200 units Thursday 200 units Friday 190 units How much was the make-up guarantee paid to Jim this week? a. $10 b. $5 c. $15 d. $12.50 ANS: C The make-up guarantee is $15 as follows: Hours Pieces Earnings @ Earnings @ Make-up Payroll Worked Finished $12.50/hr $.50/unit Guarantee Earnings Monday 8 220 $100 $110 $110 Tuesday 8 180 100 90 $10 100 Wednesday 8 200 100 100 100 Thursday 8 200 100 100 100 Friday 8 190 100 95 5 100 $500 $495 $15 $510 PTS: 1 DIF: Moderate REF: P. OBJ: 1 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic 8. Under a modified wage plan, Jim Phillips works an eight-hour day and earns $.50 for each finished unit he produces in excess of 200 units. However, he is guaranteed $12.50 per hour as a minimum wage. His production this week was a follows: Monday 220 units Tuesday 180 units Wednesday 200 units Thursday 200 units Friday 190 units What were Jim’s total earnings this week? a. $500 b. $510 c. $495 d. $515 ANS: B Jim’s total earnings were $510 as follows: Hours Worked Pieces Finished Earnings @ $12.50/hr Earnings @ $.50/unit Make-up Guarantee Payroll Earnings Monday 8 220 $100 $110 $110 Tuesday 8 180 100 90 $10 100 Wednesday 8 200 100 100 100 Thursday 8 200 100 100 100 Friday 8 190 100 95 5 100 $500 $495 $15 $510 PTS: 1 DIF: Moderate REF: P. OBJ: 1 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic 9. Under a modified wage plan, an employee working an eight-hour day earns $.40 for each finished unit and is guaranteed $20 per hour as a minimum wage. At what level should the daily quota be set? a. 160 units b. 400 units c. 500 units d. 640 units ANS: B Daily wage = $20 x 8 hours = $160. Units made in a day to reach $160 at a rate of $.40 = $160 / $.40 = 400 units PTS: 1 DIF: Hard REF: P. OBJ: 1 NAT: IMA 2B - Cost Management TOP: AACSB - Reflective 10. Idle time should be treated as follows: a. It should be recorded along with the reason for it, and charged to Factory Overhead. b. It should be charged to the job from which the employee took a break. c. It should be documented and the employee should not be paid for that time. d. It should be allocated to the various manufacturing departments and the supervisors should decide how to handle it. ANS: A Idle time should be recorded and charged to Factory Overhead as it does not add value to any specific jobs. PTS: 1 DIF: Easy REF: P. OBJ: 2 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic 11. The file for each factory employee that shows the time the employee spent on each job, as well as time spent as indirect labor is the: a. labor time record. b. payroll record. c. employee’s earnings record. d. labor cost summary. ANS: A Each factory employee’s time will be summarized on a labor time record. The labor cost summary reports the total payroll distribution. The payroll record and employee’s earnings record relate to the payment of payroll rather than the timekeeping function. PTS: 1 DIF: Easy REF: P. OBJ: 2 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic 12. The departmental responsibilities of the payroll function include all of the following except: a. Reviewing the labor hours on the time record for accuracy. b. Summarizing the period’s payroll data. c. Keeping a record of earnings for each employee. d. Computing deductions and withholdings for each employee. ANS: A Items (b), (c), and (d) are the responsibilities of the payroll function, whereas item (a) is the responsibility of the production supervisor. PTS: 1 DIF: Moderate REF: P. OBJ: 2 NAT: IMA 2B - Cost Management TOP: AACSB - Analytic 13. The file that serves as a basis for reporting payroll information to governmental agencies and preparing Form W-2 is the: a. labor time record. b. payroll record. c. employee’s earnings record. d. labor cost summary