Deck 13: Accounting for Overhead Costs

Question 1

White Company had the following information: Assume the cost driver for factory overhead costs is direct labor hours.What amount of factory overhead is applied to the products produced?

A)$137,700
B)$142,922
C)$144,500
D)$149,980

Answer 1

A

Question 2

Dodge Company had the following information: Assume machine hours are the cost driver of factory overhead costs.The budgeted factory overhead rate is ________.

A)$2.025 per machine hour
B)$2.05 per machine hour
C)$2.25 per machine hour
D)$2.875 per machine hour

Answer 2

C

Question 3

Kings Company had the following information: Assume the cost driver for factory overhead costs is direct labor hours and a job uses 2,000 direct labor hours.What amount of factory overhead is applied to the job?

A)$7,140
B)$7,500
C)$7,600
D)$8,000

Answer 3

B

Question 4

The overhead cost applied to a job is equal to the budgeted overhead rate times the budgeted amount of the cost driver.

Question 5

Applied fixed overhead is computed using the ________ amount of the cost driver.

A)expected
B)budgeted
C)actual
D)full-capacity

Question 6

Accountants use actual overhead rates when applying overhead costs to jobs as they are completed.

Question 7

If a department identifies more than one cost driver for overhead costs,the department ideally should ________.

A)put 80 percent of the cost into one pool and 20 percent into a second pool
B)select a single cost driver
C)allocate 80 percent of the costs with 20% of the cost drivers
D)create as many cost pools as there are cost drivers

Question 8

Royals Company had the following information: Assume the cost driver for factory overhead costs is direct labor hours.What is the amount of factory overhead applied?

A)$215,295
B)$220,875
C)$224,970
D)$230,850

Question 9

To apply the budgeted overhead costs to a job,the budgeted overhead rate is multiplied by the ________.

A)actual production in units
B)expected production in units
C)actual amount of cost driver used by the job
D)expected amount of cost driver used by the job

Question 10

Red Company had the following information: Assume direct labor hours are the cost driver for factory overhead costs.The budgeted factory overhead rate is ________.

A)$4.25 per direct labor hour
B)$4.45 per direct labor hour
C)$4.63 per direct labor hour
D)$4.84 per direct labor hour

Question 11

The two key items in determining the budgeted factory overhead application rate are total budgeted factory overhead costs and ________.

A)actual amount of the cost driver
B)total actual factory overhead costs
C)budgeted amount of cost driver
D)total estimated factory overhead costs

Question 12

USC Company has the following information available: Assume direct labor hours are the cost driver of factory overhead costs.The budgeted factory overhead rate is ________.

A)$3.57 per direct labor hour
B)$3.81 per direct labor hour
C)$4.00 per direct labor hour
D)$4.50 per direct labor hour

Question 13

The budgeted factory overhead rate is computed as ________.

A)actual factory overhead divided by actual production in units
B)actual factory overhead divided by actual cost driver activity
C)budgeted factory overhead divided by actual cost driver activity
D)budgeted factory overhead divided by budgeted cost driver activity

Question 14

Rocky Company had the following information: Assume production setups are the cost driver for factory overhead costs.The budgeted factory overhead rate is ________.

A)$6.25 per setup
B)$6.52 per setup
C)$6.78 per setup
D)$7.50 per setup

Question 15

When calculating the budgeted overhead rate,the numerator of the fraction is the actual amount of the cost driver.

Question 16

Giants Company had the following information: Assume the cost driver for factory overhead costs is machine hours and a product uses 10,000 machine hours.What amount of factory overhead is applied to the product?

A)$20,000
B)$20,250
C)$20,500
D)$28,750

Question 17

A company can increase the accuracy of its product cost information by converting indirect costs to direct costs.

Question 18

Rams Company had the following information: Assume direct labor costs are the cost driver of factory overhead costs.The budgeted factory overhead rate is ________.

A)81 percent of direct labor costs
B)90 percent of direct labor costs
C)100 percent of direct labor costs
D)105 percent of direct labor costs

Question 19

Indians Company had the following information: Assume direct labor hours are the cost driver for factory overhead costs.The budgeted factory overhead rate is ________.

A)$27.27 per direct labor hour
B)$27.61 per direct labor hour
C)$27.77 per direct labor hour
D)$29.03 per direct labor hour

Question 20

The cost driver chosen for applying factory overhead costs should be the cost driver that ________.

A)is easiest to understand
B)incurs the least administrative costs
C)is easiest to calculate
D)causes most of the overhead costs

Question 21

The immediate write-off method of disposing of underapplied overhead subtracts the dollar amount from Cost of Goods Sold.

Question 22

To determine the cost of a manufactured product,a normal costing system uses ________.

A)actual direct material,actual direct labor and actual overhead
B)applied direct material,applied direct labor and applied overhead
C)applied direct material,applied direct labor and actual overhead
D)actual direct materials,actual direct labor and normal applied overhead

Question 23

The immediate write-off of overhead variances is used because ________.

A)it is simpler
B)the company has probably sold most of the goods produced during the period so prorating the variance to inventory accounts would not produce materially different results
C)the extra overhead costs result from inefficiencies in the current period and therefore do not represent assets
D)all of the above

Question 24

The most widely used approach in disposing of an overhead variance is proration to the affected accounts.

Question 25

The proration method of disposing of overhead variances assigns the variance in proportion to the sizes of the ending account balances of ________.

A)work-in-process inventory,finished goods inventory and direct material inventory
B)work-in-process inventory,direct material inventory and cost of goods sold
C)work-in-process inventory and direct materials inventory
D)work-in-process inventory,finished goods inventory and cost of goods sold

Question 26

The excess of actual overhead costs over the applied overhead costs is called ________.

A)overapplied overhead
B)underapplied overhead
C)underbudgeted overhead
D)overestimated overhead

Question 27

The following information was gathered for the Badger Company: Assume the cost driver for factory overhead costs is direct labor hours.What is the amount of overapplied or underapplied overhead?

A)$970 underapplied
B)$970 overapplied
C)$1,830 underapplied
D)$1,830 overapplied

Question 28

Vikings Company incurred actual overhead costs of $297,500 for the year.A budgeted factory overhead rate of 150% of direct labor cost was determined at the beginning of the year.Budgeted factory overhead was $300,000 and budgeted direct labor cost was $200,000.Actual direct labor cost was $205,000 for the year.The factory overhead variance for the year was ________.

A)$2,500 underapplied
B)$2,500 overapplied
C)$10,000 underapplied
D)$10,000 overapplied

Question 29

In practice,companies generally prorate overhead variances when it would materially affect ________ and ________.

A)inventory valuations; manager bonuses
B)inventory valuations; stock option plans
C)inventory valuations; net income
D)stock option plans; manager bonuses

Question 30

When the amount of overhead applied to a product exceeds the amount incurred by the department,the difference is called overapplied overhead.

Question 31

No one cost driver is appropriate for all situations.

Question 32

The most important contributor to the variance between actual and applied overhead costs is ________.

A)poor forecasting
B)inefficient use of overhead items
C)price changes in overhead items
D)operating at a different level of volume than the level used as a denominator in calculating the budgeted overhead rate

Question 33

There should be a strong cause-and-effect relationship between factory overhead costs incurred and the cost-allocation base chosen for its application.

Question 34

In the immediate write-off of overhead variances,underapplied overhead is regarded as a(n)________.

A)addition to the cost of inventory
B)deduction from the cost of inventory
C)decrease in cost of goods sold
D)increase in cost of goods sold

Question 35

In the immediate write-off approach to overhead variances,overapplied overhead is regarded as a(n)________.

A)addition to the cost of inventory
B)reduction to the cost of inventory
C)increase in cost of goods sold
D)decrease in cost of goods sold

Question 36

The most common reason for a variance between actual overhead costs and applied overhead costs is the actual level of volume does not equal the level used to calculate the budgeted overhead rate.

Question 37

Direct labor hours rather than direct labor cost usually drive fringe benefit costs such as pensions and payroll taxes.

Question 38

The following information was gathered for the Gophers Company: Assume the cost driver for factory overhead costs is direct labor hours.What is the amount of overapplied or underapplied overhead?

A)$2,730 underapplied
B)$2,730 overapplied
C)$3,920 underapplied
D)$3,920 overapplied

Question 39

The proration method of disposing of an overhead variance prorates the variance among three accounts that include Direct Materials Inventory,Work-in-Process Inventory and Finished Goods Inventory.

Question 40

The most widely used approach to disposing of overhead variances is ________.

A)to allocate it between finished goods inventory,work-in-process inventory and direct materials inventory
B)to allocate it between cost of goods sold,finished goods inventory and work-in-process inventory
C)to allocate it between cost of goods sold,finished goods inventory and direct material inventory
D)immediate write-off

Question 41

Smith Company applies overhead based on machine hours.The following data was available:
Required:

A)Compute the budgeted factory overhead rate.
B)Compute the underapplied or overapplied factory overhead.
C)Under the immediate write-off approach to overhead variances,how would you dispose of the overhead variance?
D)If the immediate write-off approach to overhead variances is not used,how would you dispose of the overhead variance?

Question 42

Variable costing is also called ________.

A)full costing
B)traditional costing
C)absorption costing
D)direct costing

Question 43

The proration method of disposing of overhead variances prorates the variance based on the beginning of the reporting period account balances in Cost of Goods Sold,Work-in-Process Inventory and Finished Goods Inventory.

Question 44

Schmidt Company reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,what is the product cost per unit?

A)$35.00
B)$36.25
C)$37.92
D)$65.00

Question 45

Dorglass Incorporated reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the product cost per unit is ________.

A)$160
B)$170
C)$200
D)$225

Question 46

Iowa Company reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the contribution margin is ________.

A)$20,000
B)$40,000
C)$84,000
D)$104,000

Question 47

Schumann Company reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the cost of ending inventory of finished goods is ________.

A)$42,000
B)$48,000
C)$84,000
D)$96,000

Question 48

Variable costing considers fixed manufacturing overhead costs as a(n)________.

A)inventoriable cost
B)product cost
C)future cost
D)immediate expense

Question 49

In practice,proration of overhead variances among the affected accounts is undertaken when it materially affects inventory valuations and net income.

Question 50

Penn Company reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the operating income or loss is ________.

A)$(6,000)
B)$(70,000)
C)$10,000
D)$41,000

Question 51

When the variable costing method is used,fixed factory overhead appears on the income statement as a ________.

A)component of cost of goods sold
B)component of cost of goods sold and production volume variance
C)production volume variance
D)fixed expense

Question 52

Jones Corporation uses a budgeted factory overhead rate to apply overhead to production.Direct labor costs are the cost driver for overhead costs.The following data are available for the year ending December 31,2010:
Required:

A)Compute the budgeted factory overhead rate.
B)Compute the applied overhead costs.
C)What is the overhead variance?
D)Prorate the overhead variance to the appropriate accounts.

Question 53

To compute contribution margin under variable costing,we deduct ________ and ________ from sales.

A)variable manufacturing costs; fixed manufacturing costs
B)variable selling costs; fixed manufacturing costs
C)variable administrative costs; variable selling costs
D)variable manufacturing costs; variable selling and administrative costs

Question 54

The following information was gathered for Elliott Company:
Required:

A)Compute the budgeted factory overhead rate.
B)Compute the factory overhead applied.
C)Compute the amount of underapplied or overapplied factory overhead.

Question 55

The only difference between the net income between variable costing and absorption costing is the treatment of ________.

A)variable selling costs
B)variable administrative costs
C)fixed selling costs
D)fixed manufacturing overhead costs

Question 56

________ is used for external reporting.

A)Absorption costing
B)Variable costing
C)Direct costing
D)Activity-based costing

Question 57

Ohio Company reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the cost of finished goods ending inventory is ________.

A)$64,000
B)$68,000
C)$80,000
D)$90,000

Question 58

Illinois Company reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the variable manufacturing cost of goods sold is ________.

A)$256,000
B)$272,000
C)$320,000
D)$360,000

Question 59

Product costs for variable costing include direct materials,direct labor and ________.

A)variable selling costs
B)fixed manufacturing overhead costs
C)variable manufacturing overhead costs
D)variable manufacturing overhead costs plus variable selling costs

Question 60

Northern Industries Inc.reported the following information about the production and sale of its only product during the first month of operations: ________ units were sold and ________ units were produced.

A)400; 400
B)1,575; 1,575
C)1,800; 2,200
D)2,000; 2,200

Question 61

The variable-costing method regards fixed manufacturing costs as a period expense when incurred.

Question 62

Becker Industries Inc.reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,what is the product cost per unit?

A)$52.50
B)$54.38
C)$56.88
D)$97.50

Question 63

Donald Trump Company prepared the following absorption-costing income statement for the first year of operations.The income statement is for the fiscal year ended May 31,2015:
Additional data follow:
Required:
Assume actual fixed costs were equal to budgeted fixed costs.Prepare a variable-costing income statement for the year ended May 31,2015.

Question 64

The variable-costing income statement separates costs into fixed costs and variable costs.

Question 65

The variable-costing income statement uses the contribution-approach format.

Question 66

Gross margin is a subtotal on a variable-costing income statement.

Question 67

Variable costing is more important for external reports than internal reports.

Question 68

A direct-costing income statement has a subtotal for ________ whereas an absorption-costing income statement has a subtotal for ________.

A)gross profit; contribution margin
B)contribution margin; gross profit
C)variable expenses; fixed expenses
D)fixed expenses; variable expenses

Question 69

Goldberg Industries reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the contribution margin is ________.

A)$7,000
B)$21,000
C)$33,000
D)$34,500

Question 70

Wrobel Industries Inc.reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,what is the cost of the finished goods ending inventory?

A)$63,000
B)$72,000
C)$126,000
D)$144,000

Question 71

The variable-costing method does not include fixed overhead costs in a product's costs.

Question 72

Johnsen Industries Inc.reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,what is the variable manufacturing cost of goods sold?

A)$63,000
B)$72,000
C)$126,000
D)$144,000

Question 73

Brucker Industries Inc.reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,the variable manufacturing cost of goods sold is ________.

A)$42,000
B)$48,000
C)$84,000
D)$96,000

Question 74

Absorption costing assigns ________ to the product.

A)variable manufacturing costs only
B)fixed manufacturing costs only
C)variable manufacturing costs and variable selling costs
D)variable and fixed manufacturing costs

Question 75

Under variable costing,________ is NOT an inventoriable cost.

A)direct materials
B)variable manufacturing overhead
C)variable selling and administrative expenses
D)direct labor

Question 76

BOTH variable-costing and absorption-costing include ________ as product costs.

A)indirect manufacturing costs
B)variable selling and administrative expenses
C)fixed selling and administrative expenses
D)direct manufacturing costs

Question 77

Product costs for absorption costing include direct materials,direct labor and ________.

A)fixed manufacturing overhead costs
B)variable manufacturing overhead costs
C)fixed and variable selling costs
D)fixed and variable manufacturing overhead costs

Question 78

The production volume variance appears when ________.

A)the actual production volume equals the expected production volume used in computing the fixed overhead rate
B)the actual production volume deviates from the expected production volume used in computing the fixed overhead rate
C)the actual production volume deviates from the expected production volume used in computing the variable overhead rate
D)the actual production volume equals the expected production volume used in computing the variable overhead rate

Question 79

Fixed factory overhead costs appear on the absorption-costing income statements as ________.

A)a fixed expense
B)part of cost of goods sold
C)a production volume variance
D)part of cost of goods sold and a production volume variance

Question 80

Christian Industries Inc.reported the following information about the production and sale of its only product during the first month of operations: Under variable costing,what is the total contribution margin?

A)$10,500
B)$31,500
C)$49,500
D)$54,000