Exam 16: Cost Concepts and Cost Allocation

Because it is invisible,direct labor cannot be traced to products.

The changes in Work in Process Inventory and total manufacturing costs for a period are used to compute cost of goods manufactured.

The job order cost card reflects the product cost per unit.

The activity base that would be most appropriate in a capital-intensive industry is

Minor materials and other production supplies that cannot be conveniently or economically traced to specific products are accounted for as indirect materials.

Applied overhead is equal to the overhead rate times the actual cost driver level.

Direct materials,direct labor,and overhead costs will most likely become part of the Cost of Goods Sold account balance in case of manufacturing companies.

By using a predetermined overhead rate and an allocation base,such as direct labor dollars or hours,one can assign overhead costs by debiting the Overhead account and crediting the Work in Process Inventory account.

Product unit cost comprises only direct materials and direct labor costs.