Question 1

The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates is called ________.

Accepted Answer

A)  the adjusted allocation rate approach 
B)  the proration approach 
C)  the write-off of cost of goods sold approach 
D)  the weighted-average cost approach 
A)  the adjusted allocation rate approach 
B)  the proration approach 
C)  the write-off of cost of goods sold approach 
D)  the weighted-average cost approach

Question 2

Process costing is used to assign manufacturing costs to unique batches of a product.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements regarding manufacturing overhead allocation is true?

Accepted Answer

A)  It includes all manufacturing costs that cannot be directly traced to a product or service. 
B)  The costs can be grouped only as a single indirect-cost pool. 
C)  Total costs are unknown at the end of the accounting period. 
D)  Allocated amounts are debited to Manufacturing Overhead Control. 
A)  It includes all manufacturing costs that cannot be directly traced to a product or service. 
B)  The costs can be grouped only as a single indirect-cost pool. 
C)  Total costs are unknown at the end of the accounting period. 
D)  Allocated amounts are debited to Manufacturing Overhead Control.

Question 4

In each period,job costing divides the total cost of producing an identical or similar product produced in batches by the total number of units produced to obtain a per-unit cost.

Accepted Answer

A) True 
 B)False

Question 5

The advantage of using normal costing instead of actual costing is ________.

Accepted Answer

A)  indirect costs are assigned at the end of the year when they are known 
B)  the job cost is more accurate under normal costing 
C)  indirect costs are assigned to a job on a timely basis 
D)  normal costing provides a higher gross profit margin 
A)  indirect costs are assigned at the end of the year when they are known 
B)  the job cost is more accurate under normal costing 
C)  indirect costs are assigned to a job on a timely basis 
D)  normal costing provides a higher gross profit margin

Question 6

Ruby Corp is bidding on a design project for a new client.The total budgeted direct-labor costs for the firm are $400,000.The total budgeted indirect costs are $800,000.It is estimated that there are 10,000 billable hours in total.
Required:
a.What is the budgeted direct-labor cost rate?
b.What is the budgeted indirect-cost rate assuming direct-labor cost is the allocation base?
c.What should be the engineering firm bid on the project if the direct labor hours are estimated at 300 hours?

Accepted Answer

a.$400,000/10,000 = $40/hour
b

Question 7

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 8

The law firm of Smith & Jones has a staff of 30 lawyers and administrative staff.Budgeted total costs of the firm total $4,000,000 of which $2,500,000 is direct-labor costs.Assuming that the remaining costs are indirect and direct-labor cost is the allocation base,calculate the budgeted indirect cost rate.

Accepted Answer

A)  38 of direct-labor cost 
B)  60% of direct-labor cost 
C)  63% of direct-labor cost 
D)  160% of direct-labor cost 
A)  38 of direct-labor cost 
B)  60% of direct-labor cost 
C)  63% of direct-labor cost 
D)  160% of direct-labor cost

Question 9

The cost driver of an indirect cost is often used as the cost-allocation base.

Accepted Answer

A) True 
 B)False

Question 10

Answer the following questions using the information below:
A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.
Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year.
-If ten clients are lost and the workforce stays at 20 employees,then the direct labor cost rate per hour:

Accepted Answer

A)  $18.00 per hour 
B)  $17.50 per hour 
C)  $20.25 per hour 
D)  $15.00 per hour 
A)  $18.00 per hour 
B)  $17.50 per hour 
C)  $20.25 per hour 
D)  $15.00 per hour

Question 11

Answer the following questions using the information below:
Apple Valley Corporation uses a job cost system and has two production departments, A and B. Budgeted manufacturing costs for the year are:
 $\begin{array}{lll}&\text { Department A }&\text { Department B }\
\text { Direct materials } & \$ 700,000 & \$ 100,000 \
\text { Direct manufacturing labor } & \$ 200,000 & \$ 800,000 \
\text { Manufacturing overhead } & \$ 600,000 & \$ 400,000
\end{array}$
$\text { The actual material and labor costs charged to Job \#432 were as follows: }$
$\begin{array}{lr}
\text { Direct materials: } & \$ 25,000 \
\text { Direct labor: } & \
\text { Department A } & \$ 8,000 \
\text { Department B } & \$ 12,000 \
& \$ 20,000
\end{array}$ Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year.
-For Department A,the manufacturing overhead allocation rate is ________.

Accepted Answer

A)  33% 
B)  66% 
C)  300% 
D)  100% 
A)  33% 
B)  66% 
C)  300% 
D)  100%

Question 12

Filippucci Company used a budgeted indirect-cost rate for its manufacturing operations, the amount allocated ($200,000) is different from the actual amount incurred ($225,000).
 Ending balances in the relevant accounts are:
$\begin{array}{lr}
\text { Work-in-Process } & \$ 10,000 \
\text { Finished Goods } & 20,000 \
\text { Cost of Goods Sold } & 170,000
\end{array}$
-Legal Advisory Inc.,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 2014: $\begin{array}{lcc}&\text { Budget }&\text { actual }\
\text { Indirect costs } & \$ 270,000 & \$ 300,000 \
\text { Annual salary of each attorney } & \$ 100,000 & \$ 110,000 \
\text { Annual salary of each paraprofessional } & \$ 29,000 & \$ 30,000 \
\text { Total professional labor-hours } & 50,000 \mathrm{dlh} & 60,000 \mathrm{dlh}
\end{array}$ When using a normal costing system,year-end accounting records will show that indirect costs are ________.

Accepted Answer

A)  perfectly allocated 
B)  underallocated 
C)  within budget 
D)  overallocated 
A)  perfectly allocated 
B)  underallocated 
C)  within budget 
D)  overallocated

Question 13

A company would use multiple cost-allocation bases ________.

Accepted Answer

A)  if managers believed the benefits exceeded the additional costs of that costing system 
B)  because there is more than one way to allocate overhead 
C)  because this is a simpler approach than using one cost allocation base 
D)  if managers believe that using multiple cost-allocation bases is the only acceptable method 
A)  if managers believed the benefits exceeded the additional costs of that costing system 
B)  because there is more than one way to allocate overhead 
C)  because this is a simpler approach than using one cost allocation base 
D)  if managers believe that using multiple cost-allocation bases is the only acceptable method

Question 14

What is the difference between an actual cost system and a normal cost system?

Accepted Answer

An actual cost system is one that traces

Question 15

Answer the following questions using the information below:
Sky High Company has two departments, X and Y. The following estimates are for the coming year:
 $\begin{array}{lrr}&X&Y\
\text { Direct manufacturing labor-hours } & 20,000 & 40,000 \
\text { Machine-hours } & 40,000 & 20,000 \
\text { Manufacturing overhead } & \$ 200,000 & \$ 400,000
\end{array}$
-The budgeted indirect-cost driver rate for Y based on the number of machine-hours is in excess of X by ________.

Accepted Answer

A)  $15 per machine-hour 
B)  $10 per machine-hour 
C)  $20 per machine-hour 
D)  $8 per machine-hour 
A)  $15 per machine-hour 
B)  $10 per machine-hour 
C)  $20 per machine-hour 
D)  $8 per machine-hour

Question 16

The ending balance in Work-in-Process Control represents the total costs of all jobs that have NOT yet been completed.

Accepted Answer

A) True 
 B)False

Question 17

Answer the following questions using the information below:
Pearl Corp. 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 a necklace. Estimates for this order include: Direct materials of $50,000; 400 direct manufacturing labor-hours at $20 per hour; and a 30% markup rate on total manufacturing costs.
-Estimated total product costs for this special order equal ________.

Accepted Answer

A)  $96,000 
B)  $76,000 
C)  $80,000 
D)  $82,000 
A)  $96,000 
B)  $76,000 
C)  $80,000 
D)  $82,000

Question 18

Which of the following includes both traced direct costs and allocated indirect costs?

Accepted Answer

A)  cost tracing 
B)  cost pools 
C)  cost assignments 
D)  cost allocations 
A)  cost tracing 
B)  cost pools 
C)  cost assignments 
D)  cost allocations

Question 19

An increase in direct labor cost per unit ________.

Accepted Answer

A)  increases the fixed cost 
B)  increases profits 
C)  increases the variable cost 
D)  increases overhead costs 
A)  increases the fixed cost 
B)  increases profits 
C)  increases the variable cost 
D)  increases overhead costs

Question 20

Purchases of materials are credited to materials control.

Accepted Answer

A) True 
 B)False

The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates is called ________.

Process costing is used to assign manufacturing costs to unique batches of a product.

Which of the following statements regarding manufacturing overhead allocation is true?

In each period,job costing divides the total cost of producing an identical or similar product produced in batches by the total number of units produced to obtain a per-unit cost.

The advantage of using normal costing instead of actual costing is ________.

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.

The cost driver of an indirect cost is often used as the cost-allocation base.

A company would use multiple cost-allocation bases ________.

What is the difference between an actual cost system and a normal cost system?

The ending balance in Work-in-Process Control represents the total costs of all jobs that have NOT yet been completed.

Which of the following includes both traced direct costs and allocated indirect costs?

An increase in direct labor cost per unit ________.

Purchases of materials are credited to materials control.

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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

Filters

Exam 4: Job Costing

The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates is called ________.

Process costing is used to assign manufacturing costs to unique batches of a product.

Which of the following statements regarding manufacturing overhead allocation is true?

In each period,job costing divides the total cost of producing an identical or similar product produced in batches by the total number of units produced to obtain a per-unit cost.

The advantage of using normal costing instead of actual costing is ________.

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.

The cost driver of an indirect cost is often used as the cost-allocation base.

A company would use multiple cost-allocation bases ________.

What is the difference between an actual cost system and a normal cost system?

The ending balance in Work-in-Process Control represents the total costs of all jobs that have NOT yet been completed.

Which of the following includes both traced direct costs and allocated indirect costs?

An increase in direct labor cost per unit ________.

Purchases of materials are credited to materials control.

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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

Filters