Question 1

Normal costing is a method of job costing that allocates an indirect cost based on the actual indirect-cost rate times the actual quantity of the cost-allocation base.

Accepted Answer

A) True 
 B)False

Question 2

Why does the manufacturing overhead control account (debit)need to equal the manufacturing overhead allocated account (credit)?

Accepted Answer

If these accounts do not equal, then ove

Question 3

The budgeted indirect-cost rate for each cost pool is computed as

Accepted Answer

A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base. 
B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs. 
C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base. 
D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base. 
A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base. 
B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs. 
C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base. 
D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base.

Question 4

The Work-in-Process Control account tracks job costs from the time jobs are started until they are completed.

Accepted Answer

A) True 
 B)False

Question 5

The budgeted indirect-cost rate is calculated:

Accepted Answer

A) at the beginning of the year 
B) during the year 
C) at the end of each quarter 
D) at the end of the year 
A) at the beginning of the year 
B) during the year 
C) at the end of each quarter 
D) at the end of the year

Question 6

What are three possible ways to dispose of underallocated or overallocated overhead costs at the end of a fiscal year? Briefly comment on the theoretical correctness or incorrectness of each method.

Accepted Answer

One way to dispose of underallocated or

Question 7

In a costing system:

Accepted Answer

A) cost tracing allocates indirect costs 
B) cost allocation assigns direct costs 
C) a cost-allocation base can be either financial or nonfinancial 
D) a cost object should be a product and not a department or a geographic territory 
A) cost tracing allocates indirect costs 
B) cost allocation assigns direct costs 
C) a cost-allocation base can be either financial or nonfinancial 
D) a cost object should be a product and not a department or a geographic territory

Question 8

If indirect-cost rates are calculated monthly, distortions might occur because of:

Accepted Answer

A) rental costs paid monthly 
B) property tax payments made in July and December 
C) routine monthly preventive-maintenance costs that benefit future months 
D) Both B and C are correct. 
A) rental costs paid monthly 
B) property tax payments made in July and December 
C) routine monthly preventive-maintenance costs that benefit future months 
D) Both B and C are correct.

Question 9

An example of a numerator reason for calculating annual indirect-cost rates includes:

Accepted Answer

A) fewer production workdays in a month 
B) payment of estimated taxes four times a year 
C) higher snow-removal costs during the winter 
D) Both B and C are correct. 
A) fewer production workdays in a month 
B) payment of estimated taxes four times a year 
C) higher snow-removal costs during the winter 
D) Both B and C are correct.

Question 10

Answer the following questions using the information below:
Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 20X3:
  
-What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional labor-hour?

Accepted Answer

A) $27.00; $4.17 
B) $29.80; $5.40 
C) $32.40; $5.00 
D) $27.00; $5.00 
A) $27.00; $4.17 
B) $29.80; $5.40 
C) $32.40; $5.00 
D) $27.00; $5.00

Question 11

Overhead costs allocated each month are expected to equal actual overhead costs incurred each month.

Accepted Answer

A) True 
 B)False

Question 12

Answer the following questions using the information below:
Joni's Kitty Supplies applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials $40,000; 500 direct manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs.
-The bid price for this special order is:

Accepted Answer

A) $50,000 
B) $60,000 
C) $80,000 
D) $96,000 
A) $50,000 
B) $60,000 
C) $80,000 
D) $96,000

Question 13

Payment of the factory rent increases the:

Accepted Answer

A) Work-in-Process Control account 
B) Manufacturing Overhead Control account 
C) Both A and B are correct. 
D) None of these answers are correct. 
A) Work-in-Process Control account 
B) Manufacturing Overhead Control account 
C) Both A and B are correct. 
D) None of these answers are correct.

Question 14

The cost-allocation base is a systematic way to link an indirect cost or group of indirect costs to cost objects.

Accepted Answer

A) True 
 B)False

Question 15

Grounds-maintenance costs incurred during the summer months will distort indirect-cost rates that are computed monthly.

Accepted Answer

A) True 
 B)False

Question 16

Work-in-Process Control will be decreased (credited)for the amount of direct-labor costs incurred.

Accepted Answer

A) True 
 B)False

Question 17

In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use:

Accepted Answer

A) budgeted rates for all direct costs 
B) budgeted rates for indirect costs 
C) actual costing 
D) budgeted rates for some direct costs and indirect costs 
A) budgeted rates for all direct costs 
B) budgeted rates for indirect costs 
C) actual costing 
D) budgeted rates for some direct costs and indirect costs

Question 18

The actual indirect-cost rate is calculated by

Accepted Answer

A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base. 
B) multiplying actual total indirect costs by the actual total quantity of the cost-allocation base. 
C) dividing the actual total quantity of the cost allocation base by actual total indirect costs. 
D) multiplying the actual total quantity of the cost allocation base by actual total indirect costs. 
A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base. 
B) multiplying actual total indirect costs by the actual total quantity of the cost-allocation base. 
C) dividing the actual total quantity of the cost allocation base by actual total indirect costs. 
D) multiplying the actual total quantity of the cost allocation base by actual total indirect costs.

Question 19

The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________ approach.

Accepted Answer

A) adjusted allocation-rate 
B) proration 
C) write-off to cost of goods sold 
D) Both A and B are correct. 
A) adjusted allocation-rate 
B) proration 
C) write-off to cost of goods sold 
D) Both A and B are correct.

Question 20

Normal costing assigns indirect costs based on an actual indirect-cost rate.

Accepted Answer

A) True 
 B)False

Exam 4: Job Costing

Normal costing is a method of job costing that allocates an indirect cost based on the actual indirect-cost rate times the actual quantity of the cost-allocation base.

Why does the manufacturing overhead control account (debit)need to equal the manufacturing overhead allocated account (credit)?

The budgeted indirect-cost rate for each cost pool is computed as

The Work-in-Process Control account tracks job costs from the time jobs are started until they are completed.

The budgeted indirect-cost rate is calculated:

What are three possible ways to dispose of underallocated or overallocated overhead costs at the end of a fiscal year? Briefly comment on the theoretical correctness or incorrectness of each method.

In a costing system:

If indirect-cost rates are calculated monthly, distortions might occur because of:

An example of a numerator reason for calculating annual indirect-cost rates includes:

Overhead costs allocated each month are expected to equal actual overhead costs incurred each month.

Payment of the factory rent increases the:

The cost-allocation base is a systematic way to link an indirect cost or group of indirect costs to cost objects.

Grounds-maintenance costs incurred during the summer months will distort indirect-cost rates that are computed monthly.

Work-in-Process Control will be decreased (credited)for the amount of direct-labor costs incurred.

In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use:

The actual indirect-cost rate is calculated by

The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________ approach.

Normal costing assigns indirect costs based on an actual indirect-cost rate.

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

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