Question 1

To calculate a predetermined overhead rate, budgeted overheads are divided by the actual cost driver.

Accepted Answer

A) True 
 B)False

Question 2

Underapplied overhead
i. Describe how overhead may be underapplied.
ii. Assume that underapplied overhead is treated as an adjustment to cost of goods sold. Explain why an under application of overhead increases cost of goods sold.

Accepted Answer

i. Overhead will be underapplied when to

Question 3

Snoozo Moozo manufactures bed frames and mattresses that are custom-made to a person's height and weight. Last week, Stevie Oslow, a bed frame specialist, reported spending 35 hours working on a number of bed frames, including 5 hours overtime. Barry is paid $20 per hour ordinarily, and $30 per hour when working overtime. Which of the following journal entries are most appropriate in accounting for Barry's wages for the 35 hours?

Accepted Answer

A)  Credit Wage Payable $750, Debit WIP $750 
B)  Credit Wage Payable $750, Debit WIP $700, Debit Manufacturing overhead $50 
C)  Credit Wage Payable $750, Debit WIP $600, Debit Manufacturing overhead $150 
D)  Credit Wage Payable $600, Credit other expenses $150, Debit WIP $750 
A)  Credit Wage Payable $750, Debit WIP $750 
B)  Credit Wage Payable $750, Debit WIP $700, Debit Manufacturing overhead $50 
C)  Credit Wage Payable $750, Debit WIP $600, Debit Manufacturing overhead $150 
D)  Credit Wage Payable $600, Credit other expenses $150, Debit WIP $750

Question 4

Applied overhead
Discuss the reasons for using applied overhead rather than actual overhead to determine the cost of production jobs.

Accepted Answer

There are three reasons. First, as overh

Question 5

A list of all materials required for a particular job is most commonly referred to as

Accepted Answer

A)  a source document. 
B)  a bill of materials. 
C)  a purchase order. 
D)  a schedule of goods manufactured. 
A)  a source document. 
B)  a bill of materials. 
C)  a purchase order. 
D)  a schedule of goods manufactured.

Question 6

Which of the following statements is false?

Accepted Answer

A)  In job costing, costs are accumulated by job order. 
B)  In process costing, the cost per unit is found by averaging the costs incurred over the units produced. 
C)  In process costing, the production costs are assigned to each unit produced. 
D)  In job costing, the cost of each unit of a particular job is found by dividing the total cost of the job by the number of units in the job. 
A)  In job costing, costs are accumulated by job order. 
B)  In process costing, the cost per unit is found by averaging the costs incurred over the units produced. 
C)  In process costing, the production costs are assigned to each unit produced. 
D)  In job costing, the cost of each unit of a particular job is found by dividing the total cost of the job by the number of units in the job.

Question 7

Consider the following statements regarding product cost information.
i. Product cost information is necessary for planning, cost control and providing information for making decisions.
ii. Product cost information is not necessary to justify rate increases that are subject to the approval of government authorities.
iii. Product cost information is necessary to value inventory on the balance sheet.
Which of the statement/s is/are correct?

Accepted Answer

A)  i, ii and iii 
B)  i and ii 
C)  i and iii 
D)  iii 
A)  i, ii and iii 
B)  i and ii 
C)  i and iii 
D)  iii

Question 8

Richardson & Sons purchased direct material worth $15 000 during the most recent period. At the end of the period the direct material account balance was $6000 larger than the beginning balance. Cost of goods sold was $150 000. Overhead is applied at 50 per cent of direct labour cost. Other account balances are:  
What is the amount of prime cost added to production for the period?

Accepted Answer

A)  $9000 
B)  $29 000 
C)  $33 000 
D)  $36 000 
A)  $9000 
B)  $29 000 
C)  $33 000 
D)  $36 000

Question 9

Which of the following industries are likely to be using process costing?
i. Petroleum
ii. Computer manufacture
iii. Sugar refining
iv. Furniture manufacture

Accepted Answer

A)  i and ii 
B)  ii and iii 
C)  i and iii 
D)  ii and iv 
A)  i and ii 
B)  ii and iii 
C)  i and iii 
D)  ii and iv

Question 10

Leisure Life manufactures a variety of sporting equipment. The firm's predetermined overhead application rate was 150 per cent of direct labour cost. Job 101 included direct materials of $15 000 and direct labour of $6000.
The manufacturing overhead applied to Job 101 during the year was

Accepted Answer

A)  $4000. 
B)  $6000. 
C)  $8000. 
D)  $9000. 
A)  $4000. 
B)  $6000. 
C)  $8000. 
D)  $9000.

Question 11

Gratis Company Ltd applies overhead based on direct labour hours in their printing department. At the beginning of the year, the company estimated that manufacturing overhead would be $550 000, direct labour hours would be 100 000 and direct labour cost would be $1 100 000 in the printing department. What is the printing department's predetermined overhead rate for the year?

Accepted Answer

A)  $0.18 per direct labour hour 
B)  $0.50 per direct labour hour 
C)  $2.00 per direct labour hour 
D)  $5.50 per direct labour hour 
A)  $0.18 per direct labour hour 
B)  $0.50 per direct labour hour 
C)  $2.00 per direct labour hour 
D)  $5.50 per direct labour hour

Question 12

The estimates used to calculate the predetermined overhead rate:

Accepted Answer

A)  will generally prove to be incorrect to some degree. 
B)  will usually result in a non-zero balance left in the manufacturing overhead account at the end of the year. 
C)  are likely to result in either overapplied or underapplied overhead. 
D)  All of the given answers. 
A)  will generally prove to be incorrect to some degree. 
B)  will usually result in a non-zero balance left in the manufacturing overhead account at the end of the year. 
C)  are likely to result in either overapplied or underapplied overhead. 
D)  All of the given answers.

Question 13

When underapplied or overapplied manufacturing overhead is prorated, to which of the following accounts can amounts be assigned?

Accepted Answer

A)  Direct materials, manufacturing overhead and direct labour 
B)  Cost of goods sold, work in process and finished goods 
C)  Direct materials, finished goods and cost of goods sold 
D)  Direct materials, work in process inventory and finished goods inventory 
A)  Direct materials, manufacturing overhead and direct labour 
B)  Cost of goods sold, work in process and finished goods 
C)  Direct materials, finished goods and cost of goods sold 
D)  Direct materials, work in process inventory and finished goods inventory

Question 14

Manufacturing costs consist of:

Accepted Answer

A)  direct materials. 
B)  conversion costs. 
C)  downstream costs. 
D)  direct materials and conversion costs, but not downstream costs. 
A)  direct materials. 
B)  conversion costs. 
C)  downstream costs. 
D)  direct materials and conversion costs, but not downstream costs.

Question 15

Under Australian accounting standards, manufactured products are generally:

Accepted Answer

A)  valued at market value and expensed in the period made. 
B)  valued at market value and expensed in the period sold. 
C)  valued at cost and expensed in the period made. 
D)  valued at cost and expensed in the period sold. 
A)  valued at market value and expensed in the period made. 
B)  valued at market value and expensed in the period sold. 
C)  valued at cost and expensed in the period made. 
D)  valued at cost and expensed in the period sold.

Question 16

Which of the following costs should be considered when managers are making short term profitability analysis decisions?

Accepted Answer

A)  Marketing costs 
B)  Design costs 
C)  Research and development costs 
D)  None of the above 
A)  Marketing costs 
B)  Design costs 
C)  Research and development costs 
D)  None of the above

Question 17

Cost of goods sold is closed into the income summary account:

Accepted Answer

A)  at the end of the production cycle. 
B)  when the product is sold. 
C)  at the end of the accounting period, along with other expenses and revenues of the period. 
D)  at no time. 
A)  at the end of the production cycle. 
B)  when the product is sold. 
C)  at the end of the accounting period, along with other expenses and revenues of the period. 
D)  at no time.

Question 18

Brainpower Pty Ltd is an advertising agency that uses a job costing system. Brainpower applies overhead to jobs based on direct professional labour hours. At the beginning of the year, overhead was estimated to be $75 000, direct professional labour hours were estimated to be 15 000, and direct professional labour cost was projected to be $225 000. During the year, Brainpower incurred actual overhead of $80 000, actual direct labour hours of 14 500 and actual direct labour cost of $222 000. What was Brainpower's overapplied or underapplied overhead during the year?

Accepted Answer

A)  $5000 underapplied 
B)  $5000 overapplied 
C)  $7500 underapplied 
D)  $7500 overapplied 
A)  $5000 underapplied 
B)  $5000 overapplied 
C)  $7500 underapplied 
D)  $7500 overapplied

Question 19

The following data apply to Stratford Ltd  
Calculate the amount of direct materials used during the year.

Accepted Answer

A)  $36 500 
B)  $42 500 
C)  $47 500 
D)  $53 500 
A)  $36 500 
B)  $42 500 
C)  $47 500 
D)  $53 500

Question 20

In a company where products undergo a number of separate processes, the process costing system

Accepted Answer

A)  is not appropriate and job costing system should be used instead. 
B)  aggregates the costs of different processes and averages them out when calculating product costs. 
C)  requires the costs of undergoing different production processes to be determined simultaneously. 
D)  requires the costs of products that have completed processing in the earlier department to be transferred to the subsequent department. 
A)  is not appropriate and job costing system should be used instead. 
B)  aggregates the costs of different processes and averages them out when calculating product costs. 
C)  requires the costs of undergoing different production processes to be determined simultaneously. 
D)  requires the costs of products that have completed processing in the earlier department to be transferred to the subsequent department.

To calculate a predetermined overhead rate, budgeted overheads are divided by the actual cost driver.

Underapplied overhead i. Describe how overhead may be underapplied. ii. Assume that underapplied overhead is treated as an adjustment to cost of goods sold. Explain why an under application of overhead increases cost of goods sold.

Applied overhead Discuss the reasons for using applied overhead rather than actual overhead to determine the cost of production jobs.

A list of all materials required for a particular job is most commonly referred to as

Which of the following statements is false?

Which of the following industries are likely to be using process costing? i. Petroleum ii. Computer manufacture iii. Sugar refining iv. Furniture manufacture

Leisure Life manufactures a variety of sporting equipment. The firm's predetermined overhead application rate was 150 per cent of direct labour cost. Job 101 included direct materials of $15 000 and direct labour of $6000. The manufacturing overhead applied to Job 101 during the year was

The estimates used to calculate the predetermined overhead rate:

When underapplied or overapplied manufacturing overhead is prorated, to which of the following accounts can amounts be assigned?

Manufacturing costs consist of:

Under Australian accounting standards, manufactured products are generally:

Which of the following costs should be considered when managers are making short term profitability analysis decisions?

Cost of goods sold is closed into the income summary account:

The following data apply to Stratford Ltd Calculate the amount of direct materials used during the year.

In a company where products undergo a number of separate processes, the process costing system

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters

Exam 4: Product Costing Systems

To calculate a predetermined overhead rate, budgeted overheads are divided by the actual cost driver.

Underapplied overhead i. Describe how overhead may be underapplied. ii. Assume that underapplied overhead is treated as an adjustment to cost of goods sold. Explain why an under application of overhead increases cost of goods sold.

Applied overhead Discuss the reasons for using applied overhead rather than actual overhead to determine the cost of production jobs.

A list of all materials required for a particular job is most commonly referred to as

Which of the following statements is false?

Which of the following industries are likely to be using process costing? i. Petroleum ii. Computer manufacture iii. Sugar refining iv. Furniture manufacture

Leisure Life manufactures a variety of sporting equipment. The firm's predetermined overhead application rate was 150 per cent of direct labour cost. Job 101 included direct materials of $15 000 and direct labour of $6000. The manufacturing overhead applied to Job 101 during the year was

The estimates used to calculate the predetermined overhead rate:

When underapplied or overapplied manufacturing overhead is prorated, to which of the following accounts can amounts be assigned?

Manufacturing costs consist of:

Under Australian accounting standards, manufactured products are generally:

Which of the following costs should be considered when managers are making short term profitability analysis decisions?

Cost of goods sold is closed into the income summary account:

The following data apply to Stratford Ltd Calculate the amount of direct materials used during the year.

In a company where products undergo a number of separate processes, the process costing system

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Activity-Based Costing

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters