Anda di halaman 1dari 3

Gleim CMA Test Prep: Part 1: Financial Planning, Performance, and Control

(5 questions)

[8]

In a process-costing system, the cost of abnormal spoilage should be

A. B. C. D.

Prorated between units transferred out and ending inventory. Included in the cost of units transferred out. Treated as a loss in the period incurred. Ignored. Answer (A) is incorrect because Abnormal spoilage costs are not considered a component of the cost of good units produced. Answer (B) is incorrect because The cost of good units produced does not include abnormal spoilage costs. Answer (C) is correct. Abnormal spoilage is spoilage that is not expected to occur under normal, efficient operating conditions. Because of its unusual nature, abnormal spoilage is typically treated as a loss in the period in which it is incurred. Answer (D) is incorrect because Abnormal spoilage costs must be taken out of the manufacturing account.

[35] FIFO requires separate costing of goods started last period and finished this period and goods started and completed this period. The weighted-average method does not. Which is the true statement about the cost of completed goods transferred under FIFO to the next production department or to finished goods inventory?

A. B. C. D.

The two amounts are kept separate but are combined by the next department. The two amounts are ultimately recorded in separate finished goods accounts. The two amounts are considered combined as the goods are transferred. The goods started and completed this period are transferred prior to those started last period and completed this period. Answer (A) is incorrect because If the cost of goods started last period and completed this period and the cost of goods started and completed this period are kept separate, separate layers will continue to multiply as the units of product are passed through additional WIP accounts. Thus, these costs are combined before transfer to the next department. Answer (B) is incorrect because If the cost of goods started last period and completed this period and the cost of goods started and completed this period are kept separate, separate layers will continue to multiply as the units of product are passed through additional WIP accounts. Thus, these costs are combined before transfer to the next department. Answer (C) is correct. Under FIFO, goods started last period and completed this period are differentiated from goods started and completed this period. The goods started last period but completed this period include the costs from last period as well as this periods costs to complete, whereas goods started and completed this period only include current costs. In the weighted-average method, the costs of the prior and current periods are averaged. When the goods are transferred to the next department or to finished goods under FIFO, however, they are considered transferred out at one average cost so that a multitude of layers of inventory is not created. This procedure is consistent with the basic concept of process costing. Answer (D) is incorrect because Under FIFO, the goods that were started last period and completed this period are deemed to be completed first and transferred first.

Copyright 2008 Gleim Publications, Inc. Printed for The Saboteur@ dvd4arab.com

Page 1

Gleim CMA Test Prep: Part 1: Financial Planning, Performance, and Control
(5 questions)

[39] A major advantage of the first-in, first-out (FIFO) process-costing method over the weighted-average process-costing method is

A. B. C. D.

The simplicity of the FIFO method. That inventories are eliminated from consideration in the FIFO method. That current-period cost per unit is highlighted under the FIFO method. That only ending inventory costs need to be separately computed when using the FIFO method. Answer (A) is incorrect because FIFO process costing is no simpler than weighted-average process costing. Answer (B) is incorrect because Elimination of inventories is a feature of backflush, not process, costing. Answer (C) is correct. First-in, first-out (FIFO) process costing involves backing out beginning inventory costs when computing work performed. This has the effect of highlighting the most recent costs. Answer (D) is incorrect because Beginning inventory costs must be separately computed so they can be backed out.

[44] A company that uses a process costing system inspects its goods at the 60% stage of completion. If the firms ending workin-process inventory is 80% complete, how would the firm account for its normal and abnormal spoilage?

A. Both normal and abnormal spoilage costs would be added to the cost of the good units completed during the period. B. Both normal and abnormal spoilage costs would be written off as an expense of the period. C. Normal spoilage costs would be added to the cost of the good units completed during the period; in contrast, abnormal spoilage costs would be written off as a loss. D. Normal spoilage costs would be allocated between the cost of good units completed during the period and the ending work-in-process inventory. In contrast, abnormal spoilage costs would be written off as a loss. Answer (A) is incorrect because Under process costing, as with job-order costing, the cost of a normal level of spoilage is left in cost of goods sold; abnormal spoilage is recognized separately as a loss. Answer (B) is incorrect because Under process costing, as with job-order costing, the cost of a normal level of spoilage is left in cost of goods sold; abnormal spoilage is recognized separately as a loss. Answer (C) is incorrect because The cost of the periods normal spoilage must be allocated among all the units worked on during the period, both those finished and those remaining in work-in-process. Answer (D) is correct. Under process costing, as with job-order costing, the cost of a normal level of spoilage is left in cost of goods sold. Thus, the cost of the periods normal spoilage must be allocated among all the units worked on during the period, both those finished and those remaining in work-in-process. Abnormal spoilage is recognized separately as a loss.

[45] When considering normal and abnormal spoilage, which one of the following is theoretically the best accounting method for spoilage in a process-costing system?

A. Both normal and abnormal spoilage cost should be charged to a separate expense account. B. Normal spoilage cost should be charged to good units and abnormal spoilage cost should be charged to a separate expense account. C. Both normal and abnormal spoilage costs should be charged to good units. D. Normal spoilage costs should be charged to a separate expense account and abnormal spoilage cost should be charged to good units.

Copyright 2008 Gleim Publications, Inc. Printed for The Saboteur@ dvd4arab.com

Page 2

Gleim CMA Test Prep: Part 1: Financial Planning, Performance, and Control
(5 questions)

Answer (A) is incorrect because The cost of a normal level of spoilage is left in cost of goods sold. Answer (B) is correct. Under process costing, as with job-order costing, the cost of a normal level of spoilage is left in cost of goods sold; abnormal spoilage is recognized separately as a loss. Answer (C) is incorrect because Abnormal spoilage is recognized separately as a loss. Answer (D) is incorrect because The best accounting method is the opposite (normal spoilage charged to good units, abnormal spoilage charged to a separate expense account).

Copyright 2008 Gleim Publications, Inc. Printed for The Saboteur@ dvd4arab.com

Page 3