Question 1

The four most common activity bases used for overhead cost allocation purposes are direct labor dollars, units of output, water pressure, and machine hours.

Accepted Answer

A) True 
 B)False

Question 2

All manufacturing costs incurred and assigned to products that are being produced are classified as

Accepted Answer

A)  variable costs. 
B)  allocated costs. 
C)  product costs. 
D)  overhead costs. 
A)  variable costs. 
B)  allocated costs. 
C)  product costs. 
D)  overhead costs.

Question 3

In accounting for an immaterial amount of overapplied overhead, which of the following is part of the adjusting entry?

Accepted Answer

A)  A debit to the Work in Process Inventory account 
B)  A debit to the Overhead account 
C)  A debit to the Cost of Goods Sold account 
D)  A credit to the Overhead account 
A)  A debit to the Work in Process Inventory account 
B)  A debit to the Overhead account 
C)  A debit to the Cost of Goods Sold account 
D)  A credit to the Overhead account

Question 4

Which of the following account balances is not reported on the balance sheet?

Accepted Answer

A)  Materials Inventory 
B)  Manufacturing Patents 
C)  Cost of Goods Sold 
D)  Work in Process Inventory 
A)  Materials Inventory 
B)  Manufacturing Patents 
C)  Cost of Goods Sold 
D)  Work in Process Inventory

Question 5

Total manufacturing costs increase the balance of the Work in Process Inventory account.

Accepted Answer

A) True 
 B)False

Question 6

Complete the following chart by placing an "X" under the applicable column headings. Classify each cost as a fixed cost or a variable cost and as either a direct or indirect product cost or a period cost.

Accepted Answer

The answer of Complete the following chart by placing an...

Question 7

Both direct labor and indirect labor are recorded in the Work in Process Inventory account as the product is being manufactured.

Accepted Answer

A) True 
 B)False

Question 8

Direct labor is a fixed cost because it always occurs.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following should not be included in the computation of cost of goods manufactured?

Accepted Answer

A)  Power costs 
B)  Small tools expense 
C)  Total selling costs 
D)  Work in Process Inventory 
A)  Power costs 
B)  Small tools expense 
C)  Total selling costs 
D)  Work in Process Inventory

Question 10

Which of the following is not considered important in the proper allocation of overhead costs?

Accepted Answer

A)  Forecasting production activity 
B)  Estimating total overhead costs 
C)  Selecting an appropriate activity base 
D)  Estimating the selling price of the product 
A)  Forecasting production activity 
B)  Estimating total overhead costs 
C)  Selecting an appropriate activity base 
D)  Estimating the selling price of the product

Question 11

Indirect costs incurred are charged directly to the Work in Process Inventory account.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  direct labor dollars. 
B)  direct labor hours. 
C)  sales volume. 
D)  machine hours. 
A)  direct labor dollars. 
B)  direct labor hours. 
C)  sales volume. 
D)  machine hours.

Question 13

Overhead costs are traced to products in the same way that direct materials and direct labor are traced.

Accepted Answer

A) True 
 B)False

Question 14

An example of a period cost is

Accepted Answer

A)  advertising costs. 
B)  indirect materials. 
C)  product design costs. 
D)  direct materials. 
A)  advertising costs. 
B)  indirect materials. 
C)  product design costs. 
D)  direct materials.

Question 15

A cost driver is a cost pool that increases with activity.

Accepted Answer

A) True 
 B)False

Question 16

The following information has been made available to you. Assume that overhead is applied on the basis of direct labor hours.
 $\begin{array}{lc}
\hline \text { Actual overhead } & \$ 47,400 \
\text { Estimated overhead } & \$ 48,300 \
& \
\text { Actual direct labor hours } & 8,900 \
\text { Estimated direct labor hours } & 9,200 \
\hline
\end{array}$ 
a. Compute the predetermined overhead rate.
b. Compute overhead applied.
c. Compute over- or underapplied overhead (indicate amount and direction).
d. Indicate whether cost of goods sold should be increased or decreased to adjust the balance to actual costs.

Accepted Answer

a. $48,300 ÷ 9,200 direct labor hours =

Question 17

Which of the following is not a product cost?

Accepted Answer

A)  Depreciation of office furniture 
B)  Overhead 
C)  Direct labor 
D)  Direct materials 
A)  Depreciation of office furniture 
B)  Overhead 
C)  Direct labor 
D)  Direct materials

Question 18

The costs of labor for maintenance and inspections are examples of direct labor.

Accepted Answer

A) True 
 B)False

Question 19

The entry to record the application of overhead costs includes a debit to the Overhead account.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following costs is considered overhead?

Accepted Answer

A)  Indirect labor only 
B)  Indirect materials only 
C)  Indirect materials and indirect labor 
D)  None of these 
A)  Indirect labor only 
B)  Indirect materials only 
C)  Indirect materials and indirect labor 
D)  None of these

Exam 19: Cost Concepts and Cost Allocation

The four most common activity bases used for overhead cost allocation purposes are direct labor dollars, units of output, water pressure, and machine hours.

All manufacturing costs incurred and assigned to products that are being produced are classified as

In accounting for an immaterial amount of overapplied overhead, which of the following is part of the adjusting entry?

Which of the following account balances is not reported on the balance sheet?

Total manufacturing costs increase the balance of the Work in Process Inventory account.

Complete the following chart by placing an "X" under the applicable column headings. Classify each cost as a fixed cost or a variable cost and as either a direct or indirect product cost or a period cost.

Both direct labor and indirect labor are recorded in the Work in Process Inventory account as the product is being manufactured.

Direct labor is a fixed cost because it always occurs.

Which of the following should not be included in the computation of cost of goods manufactured?

Which of the following is not considered important in the proper allocation of overhead costs?

Indirect costs incurred are charged directly to the Work in Process Inventory account.

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

Overhead costs are traced to products in the same way that direct materials and direct labor are traced.

An example of a period cost is

A cost driver is a cost pool that increases with activity.

Which of the following is not a product cost?

The costs of labor for maintenance and inspections are examples of direct labor.

The entry to record the application of overhead costs includes a debit to the Overhead account.

Which of the following costs is considered overhead?

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-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

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