Accounting Cost 1 chapter 1-4 Midterm

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1.     Bert's Bottles provided the following expense information for July:

 

Assembly-line workers' wages

 $56,800

Depreciation on factory equipment

 $35,900

Caps for bottles

 $3,100

Plastic bottles

 $52,000

Reconfiguring the assembly line

 $123,200

Salaries of salespeople

 $63,600

Customer support hotline

 $12,200

Salaries of research scientists

 $65,800

Delivery expenses

 $40,500

Customer toll-free order line

 $8,400

 

What is the total cost for the production category of the value chain?

A) $461,500

B) $309,300

C) $149,300

D) $147,800

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1.     Bert's Bottles provided the following expense information for July:

 

Assembly-line workers' wages

 $56,800

Depreciation on factory equipment

 $35,900

Caps for bottles

 $3,100

Plastic bottles

 $52,000

Reconfiguring the assembly line

 $123,200

Salaries of salespeople

 $63,600

Customer support hotline

 $12,200

Salaries of research scientists

 $65,800

Delivery expenses

 $40,500

Customer toll-free order line

 $8,400

 

What is the total cost for the production category of the value chain?

A) $461,500

B) $309,300

C) $149,300

D) $147,800

D) $147,800

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2. A product support hotline would be considered

A) marketing.

B) distribution.

C) production or purchases.

D) customer service.

D) customer service.

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3.     Classify each of the following business costs into one of the six value chain elements.

A.        cost of a commercial during a TV program    

marketing

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3.     Classify each of the following business costs into one of the six value chain elements.

 B.        cost of shipping goods to customers

distribution

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3.     Classify each of the following business costs into one of the six value chain elements.

 C.        costs associated with repairing products under warranty

customer services

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3.     Classify each of the following business costs into one of the six value chain elements.

 D.        costs of developing a new product

R&D

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3.     Classify each of the following business costs into one of the six value chain elements.

 E.         cost of making a prototype of a new product

Design

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3.     Classify each of the following business costs into one of the six value chain elements.

 F.         cost of labor for machine operator in factory

Production - DL

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4.Which statement describes direct materials in a manufacturing setting?

A) Direct materials are used to determine total manufacturing overhead. -Ind mat

B) Direct materials are used to determine total product costs.

C) Direct materials cannot be separately and conveniently traced.

D) Direct materials do not become part of the finished product.

 

B) Direct materials are used to determine total product costs.

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

 

A) …… rent expense on factory building

3. manufacturing overhead

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

B)  ________ sales supplies used

2.   period costs

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

C)  ________ factory supplies used

3.   manufacturing overhead

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

D) ________ indirect materials used

3.   manufacturing overhead

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

E)  ________ wages of assembly line personnel

4.   direct labor

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

F)  _______  cost of primary material used to make product

1.   direct materials

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

G) _______  depreciation expense on office equipment

2.   period costs

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

H) ___  rent expense on office facilities

2.   period costs

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

I)   _______  insurance expired on factory equipment

3.   manufacturing overhead

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

J) _______    utilities incurred in the office

2.   period costs

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

K) _______  advertising expense

2.   period costs

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5.Use the correct number to designate each item below. Assume each item is for a manufacturer.

 

1.   direct materials

2.   period costs

3.   manufacturing overhead

4.   direct labor

L)  _______   taxes paid on factory building

3.   manufacturing overhead

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6.Certain materials used in a manufacturing plant cannot be traced to a specific unit. What are these materials called?

A) General materials

B) Direct materials

C) Indirect materials

D) Finished materials

C) Indirect materials

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7.Rent on a factory building would be considered to be a ________ cost.

A) product

B) period

C) direct

D) none of the above

A) product

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8. State whether each company below would be more likely to use a job costing system or a process costing system.

 

A)   ________ soft drink bottler

Process

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8. State whether each company below would be more likely to use a job costing system or a process costing system.

B)    ________       yacht builder

Job

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8. State whether each company below would be more likely to use a job costing system or a process costing system.

C)    ______        hospital

Job

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8. State whether each company below would be more likely to use a job costing system or a process costing system.

D)   ________   printing firm

Both

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8. State whether each company below would be more likely to use a job costing system or a process costing system.

E)    ________ flour mill

Process

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9. True or False: For a manufacturing system, inventory flows from raw materials inventory to work in process inventory to finished goods inventory.

True

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10.True or False: A job cost record is a document that accumulates direct materials costs, direct labor costs and manufacturing overhead costs assigned to each individual job.

True

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11.True or False: Manufacturing overhead may include depreciation on the factory plant and equipment, utilities to run the plant, property taxes and insurance on the plant, and salaries of plant janitors.

True

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12.Shoe Biz allocates overhead based on machine hours. Selected data for the most recent year follow.

 

Estimated manufacturing overhead cost

$235,200

Actual manufacturing overhead cost

$244,300

Estimated machine hours

20,900

Actual machine hours

22,700

 

The estimates were made as of the beginning of the year, while the actual results were for the entire year.

The predetermined manufacturing overhead rate per machine hour is closest to ________. (Round your answer to the nearest cent.)

A) $10.36

B) $11.25

C) $10.76

D) $11.69

B) $11.25

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13.Cabinets Unlimited uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $50 per machine hour, while the Sanding Department uses a departmental overhead rate of $25 per direct labor hour. Job 603 used the following direct labor hours and machine hours in the two departments:

 

Actual results

Assembly Department

Sanding Department

Direct labor hours used

9

7

Machine hours used

10

8

 

The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 603 is $1,500.

 

How much manufacturing overhead would be allocated to Job 603 using the departmental overhead rates?

A) $675                         

B) $530                            

C)$920                                                                             D) $480

A) $675

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14.Cabinets Unlimited uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $45 per machine hour, while the Sanding Department uses a departmental overhead rate of $25 per direct labor hour. Job 542 used the following direct labor hours and machine hours in the two departments:

 

Actual results

Assembly Department

Sanding Department

Direct labor hours used

7

3

Machine hours used

11

5

                                               

The cost for direct labor is $35 per direct labor hour and the cost of the direct materials used by Job 542 is $1,200.                                                                                                                                                                        

What was the total cost of Job 542 if Lucas Industries used the departmental overhead rates to allocate manufacturing overhead?

A) $1,585

B) $2,055

C) $2,120

D) $1,550

C) $2,120

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15.Relax, Don't Do It Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June:

 

Activity

Estimated Indirect

Activity Costs

Allocation Base

Estimated Quantity of

Allocation Base

Materials handling

$15,000

Number of parts

5,600 parts = $2.68

 Assembling

$15,500

Number of parts

5,600 parts= $2.77

Packaging

$5,300

Number of lawn chairs

700 lawn chairs = $7.57

 

Each lawn chair consists of 8 parts; the total direct materials cost per lawn chair is $13.

 

What is the total cost of materials handling and assembling for each lawn chair? (Round intermediate and the final answer to the nearest cent.)

A) $64.14                                  

B) $43.57                                            

C) $35.14                                                   

D) $22.14

B) $43.57

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16. What is the total manufacturing cost per lawn chair? Compute:  

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Ch1-1 A manager has how many primary responsibilities?

3

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Ch1-3 Name all 3 of the primary responsibilities required by a manager.

Planning, directing, and controlling

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Ch1-4 Cost accounting is also referred to as ____________ accounting.

 

managerial

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Ch1-5 The primary responsibility of evaluating results of business ops vs the plan and then making adjustments is _________.

 

controlling

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Ch1-6 Setting goals and objectives for the company and determining how to achieve them is ______.

planning

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Ch1-7 Overseeing the company’s day to day operations is ____

directing

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Ch1-8 Financial vs Managerial: Information is required by an outside group/government agency such as the SEC.

Financial

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Ch1-9 Financial vs Manag: Independent CPAs audit and verify information.

Financial

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Ch1-10 Fin vs Manag: Reports are prepared as needed by managers

Managerial

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Ch1-11 Fin vs Manag: A report is prepared in segments, such as products and/or customers.

Managerial

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Ch1-12 Fin vs Manag: The reports are used by internal management.

Managerial

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Ch1-13 Fin vs Manag: The information must be relevant.

Managerial

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Ch1-14 Business acumen means…

understanding business situations/ knowledge

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Ch1-15 The controller reports to the

CFO

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Ch1-16 The CFO reports to the

CEO

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Ch1-17 The stockholders elect a ________ to oversee the corporation.

 

Board of Directors

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Ch1-18 Employees representing various functions of the company are _________ teams.

cross functional

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Ch1-19 Ethic Std: Disclose all relevant information and communicate fairly.

Credibility

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Ch1-20 Ethic Std: Abstain from engaging in or supporting any activity that might discredit the profession.

Integrity

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Ch1-21 Ethic Std: Avoid conflicts of interest and communicate any apparent conflicts of interest.

Integrity

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Ch1-22 Ethic Std: Continue to develop your knowledge and skills

Competence

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Ch1-23 Ethic Std: Refrain from using or giving out information to your friends or family for unethical or illegal advantage.

Confidentiality

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Ch1-24 Ethic Std: Joe, who is an excellent cost accountant, added marketing and sales expenses to Cost of Goods Sold on the income statement.

Competence

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Ch1-25 Ethic Std: Jackie does not disclose to her employer that her brother and dad are co-owners of a company that is bidding on a major contract with her company.

Integrity

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Ch1-26 Ethic Std: Jenni changed the way MOH is allocated to divisions, from DL hours to DL cost, for the better of the company—however she failed to note this change or disclose this change to all other employees and the management.

Credibility

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Ch1-27: Ethic Std: provide decision support information and recommendations that are accurate, clear, concise and timely.

Competence

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Ch1-28: The goal of producing near perfection with less than 3.4 defects per one million opportunities is called

Six Sigma

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Ch1-29: The ability to meet the needs of the present without compromising the ability of future generations to meet their own needs.

Sustainability

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Ch1-30: This was enacted in 2002 to restore trust in publicly traded corporations, their management, their fin stmts and their auditors.

SOX = Sarbannes Oxley Act

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Ch1-31: People, Planet or Profit: In 2015-PepsiCo increased its dividend to shareholders

Profit or Economic

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Ch1-32: PepsiCo strengthened its Responsible Advertising to Children policy.

People = social

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Ch1-33: In 2014, 93% of PepsiCo’s waste was not sent to landfills.

Planet = environmental

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Ch2-1: The Value Chain: List the 6 activities in the chain in the correct order.

R&D, Design, Production/purchases, Marketing & Sales, Distribution, Customer Service

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Ch2-2: Support provided after the sale (warranty).

Customer service

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Ch2-3: Promotion and advertising of products or services.

Marketing/ sales

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Ch2-4: The process for new and/or improved products or services.

R&D

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Ch2-5: Resources used to mfg a finished product.

Production

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Ch2-6: This cost can be traced to the cost object.

Direct cost

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Ch2-7: This cost related to the cost object but cannot be specifically traced to it.

Indirect cost

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Ch2-8: Product costs appear on which financial statement and in which account.

Product not sold = Finished Goods Inventory on Balance Sheet

Product is Sold = Cost of Goods Sold on Income Statement

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Ch2-9: Period costs appear on which financial statement and are classified as?

Income statement as operating expenses

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Ch2-10: MOH includes what 3 items and give 4 examples of each one.

Indirect materials: paint, glue, nut, tape

Indirect labor: plant supervisor, plant forklift driver, plant maintenance, plant security

Indirect Other Manufacturing Costs: plant rent, plant insurance, plant depreciation, plant taxes

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Ch2-14: Prime costs include.

Direct materials plus Direct labor

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Ch2-15: Conversion costs are.

Direct Labor and Manufacturing Overhead cost

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Ch2-16: Operating income is simply the company’s earnings BEFORE

Interest and income taxes

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Ch2-17: Bar coding is used in which inventory system.

Perpetual

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Ch2-18: Name the 3 Inventory accounts a manufacturer’s product costs flow through before they become part of COGS.

Raw materials inventory, WIP inventory, Finished Goods Inventory

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Ch2-19: Mfg cost behavior: Direct materials are normally fixed, variable or a mixture of both?

Variable

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Ch2-20: Mfg cost behavior: Direct labor is normally fixed, Variable or a mixture of both?

Variable

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Ch2-21: Mfg cost behavior: MOH is normally fixed, variable or a mixture of both?

Both

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Ch3-1: Which costing system is known as the ‘simple system’? (ABC or Job)

Job costing system

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Ch3-2: Mass producing similar units through a series of uniform production steps is known as

Process costing

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Ch3-3: List 2 elements of the products produced in a JOB costing system.

Individual units or small batches and Unique items

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Ch3-4: Term: A list of all of the raw/direct materials needed to mfg a job.

BOM = Bill of materials

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Ch3-5: Term: Products normally kept on hand in order to quickly fill customer orders.

Stock inventory

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Ch3-6: Term: Written or electronic document listing the quantity and cost of all units used and received, and the balance currently in stock.

Raw materials record

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Ch3-7: Term: Written or electronic document requesting specific materials be transferred to the production floor.

Materials requisition

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Ch3-8: Term: Written or electronic document authorizing the purchase of specific raw materials from a specific supplier.

Purchases order

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Ch3-10: Term: This report is typically a duplicate of the PO without the quantity pre-listed on the form.

Receiving Report

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Ch3-11: Term: Written or electronic document indicating the quantity and types of inventory that will be mfged during a specified time frame.

Production schedule

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Ch3-12: (over or under) Amount of MOH allocated to jobs is less than the amount of MOH actually incurred.

Under

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Ch3-13: Written or electronic document that lists DM, DL and MOH assigned to each job.

Job cost record

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Ch3-14: T/F – A cost-plus price is determined by adding a markup to the cost.

True

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Ch3-15: T/F – Job cost information is not useful for assessing the profitability of different products.

True

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