Question 1

Which of the following statements is false?
Manufacturing overhead costs are:

Accepted Answer

A)  sometimes called factory burden 
B)  indirect product costs 
C)  all manufacturing costs other than direct material and direct labour 
D)  non-existent in service firms 
A)  sometimes called factory burden 
B)  indirect product costs 
C)  all manufacturing costs other than direct material and direct labour 
D)  non-existent in service firms

Question 2

The size and scale of support departments is usually determined by the:

Accepted Answer

A)  capital budget 
B)  average fixed and variable costs 
C)  short-term needs of the user departments 
D)  projected long-run needs of the user departments 
A)  capital budget 
B)  average fixed and variable costs 
C)  short-term needs of the user departments 
D)  projected long-run needs of the user departments

Question 3

The support department cost allocation method that fully accounts for the mutual provision of services between support departments is called the:

Accepted Answer

A)  direct method 
B)  step-down method 
C)  reciprocal method 
D)  dual cost allocation method 
A)  direct method 
B)  step-down method 
C)  reciprocal method 
D)  dual cost allocation method

Question 4

The production section of a firm is serviced by personnel and computing as follows:
Personnel costs are allocated on the number of employees and computing costs on service hours.Overhead rates are based on labour hours.If the reciprocal services method is used to allocate support department costs,the total cost (rounded)allocated out of Personnel would be:

Accepted Answer

A)  $40 000 
B)  $44 444 
C)  $56 715 
D)  $55 636 
A)  $40 000 
B)  $44 444 
C)  $56 715 
D)  $55 636

Question 5

Consider the following statements about support department cost allocations.i.The allocation of actual costs encourages support department managers to control the costs in their departments
Ii)When budgeted costs are allocated,any efficiency in support department operations are passed along to user departments.
Iii)The allocation of budgeted costs rather than actual costs gives an incentive for support department managers to control costs in their departments.Which statement/s is/are true?

Accepted Answer

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

Question 6

The estimation of the quantity of a cost driver is called the denominator volume.

Accepted Answer

A) True 
 B)False

Question 7

The first step under the step-down method is:

Accepted Answer

A)  allocate total support department costs to production departments. 
B)  choose a sequence in which to allocate support department costs. 
C)  apply a cost to the secondary support departments. 
D)  determine the overhead base for each production department. 
A)  allocate total support department costs to production departments. 
B)  choose a sequence in which to allocate support department costs. 
C)  apply a cost to the secondary support departments. 
D)  determine the overhead base for each production department.

Question 8

The following information about Monfort Manufacturing is available:
Using the reciprocal method,the cost allocated from Training Department to Polishing Department is:

Accepted Answer

A)  $297,297 
B)  $106,177 
C)  $79,279 
D)  $74,324 
A)  $297,297 
B)  $106,177 
C)  $79,279 
D)  $74,324

Question 9

Under dual cost allocation,variable costs are allocated based on the user departments of the support department's output:

Accepted Answer

A)  long-run usage 
B)  short-run usage 
C)  long-run usage and short-run usage 
D)  neither the long- or short-run usage 
A)  long-run usage 
B)  short-run usage 
C)  long-run usage and short-run usage 
D)  neither the long- or short-run usage

Question 10

Assume a firm uses job costing.Which of the following is NOT a good reason to use departmental overhead rates rather than a single plantwide rate?

Accepted Answer

A)  Total overhead costs amount to about 5 per cent of total prime costs. 
B)  The various products made by the firm follow different sequences of manufacturing activities. 
C)  Overhead costs in some departments are a very large proportion of total department cost,but are a very small proportion in other departments. 
D)  The firm makes multiple products using common equipment and employees. 
A)  Total overhead costs amount to about 5 per cent of total prime costs. 
B)  The various products made by the firm follow different sequences of manufacturing activities. 
C)  Overhead costs in some departments are a very large proportion of total department cost,but are a very small proportion in other departments. 
D)  The firm makes multiple products using common equipment and employees.

Question 11

Under dual cost allocation,fixed costs are allocated based on the user departments of the support department's output:

Accepted Answer

A)  long-run average usage 
B)  short-run usage 
C)  long-run usage and short-run usage 
D)  forecasted short-run usage 
A)  long-run average usage 
B)  short-run usage 
C)  long-run usage and short-run usage 
D)  forecasted short-run usage

Question 12

Which of the following statement/s is/are correct?

Accepted Answer

A)  Absorption costing is required by the Australian accounting standards. 
B)  Variable costing records are more useful than absorption costing records for management decision making. 
C)  Firms that are required to comply with the accounting standards are likely to use variable costing if the benefits of keeping a second set of records exceed the costs. 
D)  All of the given answers. 
A)  Absorption costing is required by the Australian accounting standards. 
B)  Variable costing records are more useful than absorption costing records for management decision making. 
C)  Firms that are required to comply with the accounting standards are likely to use variable costing if the benefits of keeping a second set of records exceed the costs. 
D)  All of the given answers.

Question 13

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments.The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated because of employees.The following information is available.Using the step-down method,calculate the amount of Personnel Department cost allocated to Sales Department #3,if the Personnel Department is allocated first.

Accepted Answer

A)  $13 500 
B)  $12 857 
C)  $12 000 
D)  $15 000 
A)  $13 500 
B)  $12 857 
C)  $12 000 
D)  $15 000

Question 14

The East Coast University uses a printing machine,the FL200,to print exam papers.According to the operation manual,FL200 can prints 2000 sets of exam papers per hour when it is operating at peak efficiency.However,Edgo Liew,the head printer,notes that in normal (but still efficient)operations,the machine can produce only 1800 sets of exam papers in an hour.Further,Edgo also notes that given the small number of students enrolled in the East Coast University,the machine is never required to print more than 1500 sets of exam papers per hour.The theoretical capacity of the FL200 is:

Accepted Answer

A)  2000 sets of exam papers per hour 
B)  1800 sets of exam papers per hour 
C)  1500 sets of exam papers per hour 
D)  500 sets of exam papers per hour 
A)  2000 sets of exam papers per hour 
B)  1800 sets of exam papers per hour 
C)  1500 sets of exam papers per hour 
D)  500 sets of exam papers per hour

Question 15

Consider the following statements regarding absorption costing and variable costing.i.Profit reported under absorption costing for a year will likely differ from that reported under variable costing because production and sales differ
Ii)Total profit when added together over a ten-year period will be approximately equal under absorption costing and variable costing because production and sales will be approximately the same.
Iii)Total profit when added together over a ten-year period will be significantly different under absorption and variable costing because fixed costs will generally increase significantly over that long.Which statement/s is/are true?

Accepted Answer

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

Question 16

Which of the following statements is correct?

Accepted Answer

A)  Inventories under absorption costing are always higher than under variable costing. 
B)  Cost of goods sold under absorption costing is always higher than under variable costing. 
C)  The amount of fixed overhead expensed under absorption costing is always higher than under variable costing. 
D)  Inventories under absorption costing are always higher than under variable costing AND cost of goods sold under absorption costing is always higher than under variable costing. 
A)  Inventories under absorption costing are always higher than under variable costing. 
B)  Cost of goods sold under absorption costing is always higher than under variable costing. 
C)  The amount of fixed overhead expensed under absorption costing is always higher than under variable costing. 
D)  Inventories under absorption costing are always higher than under variable costing AND cost of goods sold under absorption costing is always higher than under variable costing.

Question 17

The Browning Company manufactures a single product;the standard costs per unit being variable manufacturing $8,fixed manufacturing $6.Selling and administrative costs are $2 per unit sold.The selling price is $20 per unit.Actual and budgeted fixed overhead is $900 000 for the year.Information about Browning's production activity for the year follows:
What is the value of closing inventory of finished goods under variable costing?

Accepted Answer

A)  $420 000 
B)  $180 000 
C)  $240 000 
D)  $120 000 
A)  $420 000 
B)  $180 000 
C)  $240 000 
D)  $120 000

Question 18

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments.The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated based on employees.The following information is available.Using the direct method,calculate the amount of Personnel Department cost allocated to Sales Department #3.

Accepted Answer

A)  $12 000 
B)  $15 000 
C)  $12 857 
D)  $13 500 
A)  $12 000 
B)  $15 000 
C)  $12 857 
D)  $13 500

Question 19

The income of a company for a year on a variable costing basis is $85 000 and on an absorption costing basis is $73 000.Fixed costs per unit were the same in both the prior and current year ($1.20 per unit).What was the change in inventory over the year?

Accepted Answer

A)  Decrease of 10 000 units 
B)  Increase of 10 000 units 
C)  Increase of 12 000 units 
D)  None of the given answers 
A)  Decrease of 10 000 units 
B)  Increase of 10 000 units 
C)  Increase of 12 000 units 
D)  None of the given answers

Question 20

The Browning Company manufactures a single product;the standard costs per unit being variable manufacturing $8,fixed manufacturing $6.Selling and administrative costs are $2 per unit sold.The selling price is $20 per unit.Actual and budgeted fixed overhead is $900 000 for the year.Information about Browning's production activity for the year follows:
What is the value of closing inventory of finished goods under absorption costing?

Accepted Answer

A)  $420 000 
B)  $240 000 
C)  $120 000 
D)  $480 000 
A)  $420 000 
B)  $240 000 
C)  $120 000 
D)  $480 000

Which of the following statements is false? Manufacturing overhead costs are:

The size and scale of support departments is usually determined by the:

The support department cost allocation method that fully accounts for the mutual provision of services between support departments is called the:

The estimation of the quantity of a cost driver is called the denominator volume.

The first step under the step-down method is:

The following information about Monfort Manufacturing is available: Using the reciprocal method,the cost allocated from Training Department to Polishing Department is:

Under dual cost allocation,variable costs are allocated based on the user departments of the support department's output:

Assume a firm uses job costing.Which of the following is NOT a good reason to use departmental overhead rates rather than a single plantwide rate?

Under dual cost allocation,fixed costs are allocated based on the user departments of the support department's output:

Which of the following statement/s is/are correct?

Which of the following statements is correct?

The income of a company for a year on a variable costing basis is $85 000 and on an absorption costing basis is $73 000.Fixed costs per unit were the same in both the prior and current year ($1.20 per unit).What was the change in inventory over the year?

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

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

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Exam 7: A Closer Look at Overhead Costs

Which of the following statements is false? Manufacturing overhead costs are:

The size and scale of support departments is usually determined by the:

The support department cost allocation method that fully accounts for the mutual provision of services between support departments is called the:

The estimation of the quantity of a cost driver is called the denominator volume.

The first step under the step-down method is:

The following information about Monfort Manufacturing is available: Using the reciprocal method,the cost allocated from Training Department to Polishing Department is:

Under dual cost allocation,variable costs are allocated based on the user departments of the support department's output:

Assume a firm uses job costing.Which of the following is NOT a good reason to use departmental overhead rates rather than a single plantwide rate?

Under dual cost allocation,fixed costs are allocated based on the user departments of the support department's output:

Which of the following statement/s is/are correct?

Which of the following statements is correct?

The income of a company for a year on a variable costing basis is $85 000 and on an absorption costing basis is $73 000.Fixed costs per unit were the same in both the prior and current year ($1.20 per unit).What was the change in inventory over the year?

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

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