Question 1

Which of the following contains period costs?

Accepted Answer

A)  Work in Process 
B)  Finished Goods 
C)  Cost of Goods Sold 
D)  Selling and administrative expenses 
A)  Work in Process 
B)  Finished Goods 
C)  Cost of Goods Sold 
D)  Selling and administrative expenses

Question 2

Materials and supplies that cannot be traced conveniently to specific products are called

Accepted Answer

A)  indirect materials. 
B)  raw materials. 
C)  minor materials. 
D)  direct materials. 
A)  indirect materials. 
B)  raw materials. 
C)  minor materials. 
D)  direct materials.

Question 3

A single predetermined overhead rate is most appropriately used to assign overhead costs when a company produces a diverse set of products.

Accepted Answer

A) True 
 B)False

Question 4

Cost of goods manufactured appears on the income statement of a manufacturing company in a similar manner as purchases appear on the income statement of a merchandising company.

Accepted Answer

A) True 
 B)False

Question 5

As the management accountant for Bynami Enterprises,Inc.,you have been asked to prepare a statement of cost of goods manufactured at the end of the first quarter.Account balances at that time were as follows:
 $\begin{array}{lr}
\text { Materials inventory, January 1, 20xz } & \$ 510,500 \
\text { Work in process inventory, January 1, 20xx } & 697,300 \
\text { Finished goods inventory, January 1, 20xx } & 701,200 \
\text { Direct materials purchased during the quarter } & 1,105,400 \
\text { Direct labor costs } & 154,800 \
\text { Depreciation expense, plant and equipment } & 16,200 \
\text { Plant supervisors' salaries } & 50,600 \
\text { Insurance expense, plant and equipment } & 1,100 \
\text { Utilities expense, plant } & 4,000 \
\text { Indirect labor costs } & 16,800 \
\text { Manufacturing supplies expense } & 3,400 \
\text { Small tools expense } & 1,500
\end{array}$
 
March 31 inventories were as follows: materials,$540,200; work in process,$795,400; and finished goods,$604,100.Prepare the statement of cost of goods manufactured for the first quarter of 20xx.

Accepted Answer

The answer of As the management accountant for Bynami Enterprises,Inc.,you...

Question 6

The controller for Drisau Company is trying to decide whether or not the company should switch from the traditional approach of overhead cost allocation to the activity-based costing approach.She has gathered the following overhead data on the company's two products: estimated total overhead,$180,000 (consisting of the $70,000 for setups and $110,000 for assembly); estimated direct labor hours (Product A,6,000; Product B,3,000); estimated number of setups (Product A,750; Product B,1,250); estimated number of machine hours used in assembly (Product A,3,000; Product B,5,000); estimated number of units produced (Product A,500; Product B,200).
Using the traditional approach:
a. Calculate the predetermined overhead rate using direct labor hours as the cost driver.
b. Compute the amount of overhead costs applied to each product in total and per unit.

Accepted Answer

a.$180,000 ÷ 9,000 direct labor hours =

Question 7

Product costs could be reported as assets.

Accepted Answer

A) True 
 B)False

Question 8

A cost pool is a collection of overhead costs related to a cost object.

Accepted Answer

A) True 
 B)False

Question 9

An understated cost driver level will cause an understatement of the predetermined overhead rate.

Accepted Answer

A) True 
 B)False

Question 10

Both indirect materials and indirect labor are overhead costs.

Accepted Answer

A) True 
 B)False

Question 11

Cost allocation is the process of assigning which of the following costs to specific cost objects?

Accepted Answer

A)  Overhead 
B)  Direct labor 
C)  Selling and administrative expenses 
D)  Direct materials 
A)  Overhead 
B)  Direct labor 
C)  Selling and administrative expenses 
D)  Direct materials

Question 12

The presentation of merchandise inventory and cost of goods sold in the financial statements of merchandising companies most nearly resembles the presentation of __________ inventory and cost of goods sold in the financial statements of manufacturing companies.

Accepted Answer

A)  materials 
B)  finished goods 
C)  manufacturing supplies 
D)  work in process 
A)  materials 
B)  finished goods 
C)  manufacturing supplies 
D)  work in process

Question 13

Direct labor is a fixed cost because it always occurs.

Accepted Answer

A) True 
 B)False

Question 14

Sugar is an indirect cost in the manufacture of candy.

Accepted Answer

A) True 
 B)False

Question 15

At the beginning of 2010,Zuir Company's accounting department calculated the following estimates for the coming year's production:
 $\begin{array}{lr}
\text { Estimated overhead } & \$ 441,600 \
\text { Direct labor hours } & 9,200 \mathrm{hr}
\end{array}$
 
During the year,Zuir Company experienced $440,000 in actual overhead costs and actually worked 9,100 direct labor hours.Zuir applies overhead to production using a predetermined overhead rate based on direct labor hours. 
a. Calculate the predetermined overhead rate Zuir uses to apply overhead. (Show your computations.)
b. By what amount was overhead over- or underapplied for 2010? (Show your computations.)
c. Assuming the amount of over- or underapplied overhead is not significant, will the Cost of Goods Sold account be increased or decreased to correct the application of overhead?

Accepted Answer

a.Predetermined overhead rate = $441,600

Question 16

The factory personnel whose wages are traceable directly to a product include

Accepted Answer

A)  maintenance personnel. 
B)  support personnel. 
C)  factory supervisors. 
D)  employees who help to shape the product. 
A)  maintenance personnel. 
B)  support personnel. 
C)  factory supervisors. 
D)  employees who help to shape the product.

Question 17

The amount of underapplied or overapplied overhead is the difference between applied overhead and estimated overhead.

Accepted Answer

A) True 
 B)False

Question 18

A manufacturing company applies overhead based on direct labor hours.At the beginning of the year,it estimated that overhead costs would be $720,000 and direct labor hours would be 90,000.Actual overhead costs incurred were $754,400,and actual direct labor hours were 92,000.Compute the predetermined overhead rate per direct labor hour.

Accepted Answer

A)  $7.83 
B)  $8.38 
C)  $8.20 
D)  $8.00 
A)  $7.83 
B)  $8.38 
C)  $8.20 
D)  $8.00

Question 19

Manufacturing costs behave as variable or fixed costs.

Accepted Answer

A) True 
 B)False

Question 20

Nonvalue-adding costs increase the cost of a product.

Accepted Answer

A) True 
 B)False

Exam 16: Cost Concepts and Cost Allocation

Which of the following contains period costs?

Materials and supplies that cannot be traced conveniently to specific products are called

A single predetermined overhead rate is most appropriately used to assign overhead costs when a company produces a diverse set of products.

Cost of goods manufactured appears on the income statement of a manufacturing company in a similar manner as purchases appear on the income statement of a merchandising company.

Product costs could be reported as assets.

A cost pool is a collection of overhead costs related to a cost object.

An understated cost driver level will cause an understatement of the predetermined overhead rate.

Both indirect materials and indirect labor are overhead costs.

Cost allocation is the process of assigning which of the following costs to specific cost objects?

The presentation of merchandise inventory and cost of goods sold in the financial statements of merchandising companies most nearly resembles the presentation of __________ inventory and cost of goods sold in the financial statements of manufacturing companies.

Direct labor is a fixed cost because it always occurs.

Sugar is an indirect cost in the manufacture of candy.

The factory personnel whose wages are traceable directly to a product include

The amount of underapplied or overapplied overhead is the difference between applied overhead and estimated overhead.

Manufacturing costs behave as variable or fixed costs.

Nonvalue-adding costs increase the cost of a product.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Supplement - Closing Entries and the Work Sheet

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Long-Term Liabilities

Contributed Capital

Investments

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

The Changing Business Environment - a Managers Perspective

Costing Systems- Job Order Costing

Costing Systems- Process Costing

Value-Based Systems- Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, incltarget Costing and Transfer Pricing

Quality Management and Measurement

Financial Analysis of Performance

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