Accounting for Factory Overhead - Theories

c. two persons could draw different lines through the data points.

A major disadvantage of the scattergraph method of analyzing cost behavior is: a. It bases its solution on only two observations. b. It results in its analyzed cost being treated as either fixed or variable, based on which type of behavior it more closely resembles. c. two persons could draw different lines through the data points. d. It enables non-representative points, called outliers, to be identified.

d. Scattergraph method.

After the observations of cost and production data are plotted on graph paper, a line is drawn by visual inspection representing the trend shown by most of the data points using the: a. Observation method. b. High-low method. c. Method of least squares. d. Scattergraph method.

b. All manufacturing costs except direct materials and direct labor.

Factory overhead includes: a. Indirect labor but not indirect materials. b. All manufacturing costs except direct materials and direct labor. c. All manufacturing costs. d. Indirect materials but not indirect labor.

b. Is a prime cost.

Factory overhead: a. Can be a variable cost or a fixed cost. b. Is a prime cost. c. Can only be a fixed cost d. Includes all factory labor.

d. All of these are correct.

Fixed factory overhead costs include: a. Property taxes. b. Plant manager's salary. c. Factory insurance. d. All of these are correct.

b. Depreciation on machinery computed based on the units of production basis.

Fixed overhead cost includes all of the following except: a. Electricity to heat and light the factory. b. Depreciation on machinery computed based on the units of production basis. c. The plant manager's salary. d. The salary of the security guard at the front door.

a. Budget shows estimated costs at different levels of production volume.

Flexible budgeting is a reporting system wherein the: a. Budget shows estimated costs at different levels of production volume. b. Budget standards may be adjusted at will. c. Reporting dates vary according to the levels of activity reported upon. d. Statements included in the budget report vary from period to period.

b. total the accounts in the factory overhead ledger and compare the total to the balance in the Factory Overhead control account.

If a company uses a factory overhead ledger, at the end of the month, an accountant should: a. close the accounts in the factory overhead ledger to Work in Process. b. total the accounts in the factory overhead ledger and compare the total to the balance in the Factory Overhead control account. c. prepare a schedule of fixed costs. d. All of the above are true.

c. They vary in direct proportion to volume changes.

Which of the following statements about semivariable costs is not true? a. They first have to be broken down into their fixed and variable components before they can be used to predict costs at different levels of volume. b. They are sometimes called mixed costs. c. They vary in direct proportion to volume changes. d. They may remain constant over a range of production, then abruptly change.

c. Both I and II

Which of the following statements is true? I. An expense-type factory overhead analysis spreadsheet makes it possible to distribute expenses on a departmental basis as they are incurred. II. A department-type factory overhead analysis worksheet makes it possible to distribute expenses on a departmental basis as they are incurred. a. I only b. II only c. Both I and II d. Neither I nor II

a. Only statement I is an example of a semivariable cost.

Consider the following costs: I. The cost of electricity which is used to power machinery and light the plant. II. Depreciation on the building which houses both the factory and the sales office. Which of the following statements is true? a. Only statement I is an example of a semivariable cost. b. Only statement II is an example of a semivariable cost. c. Both statements I and I are examples of semivariable costs. d. Neither statement I nor II is an example of a semivariable cost.

b. Semi-variable costs.

Costs that change in relation to volume changes, but not in direct proportion to those changes, are known as: a. Variable costs. b. Semi-variable costs. c. Fixed costs. d. Curvilinear costs.

a. variable costs.

Costs that vary in proportion to direct volume changes are: a. variable costs. b. factory overhead costs. c. semi-variable costs. d. personnel costs.

b. Allocation method.

Methods for separating semivariable costs into their fixed and variable components include all of thefollowing except the: a. High-low method. b. Allocation method. c. Scattergraph method. d. Observation method.

a. $.60

Nutt Industries electricity costs and machine hours over a six-month period follow: Machine Hours Electricity Cost January 2,000 $4,800 February 2,500 5,200 March 3,000 5,400 April 2,400 5,000 May 2,800 5,600 June 2,200 5,000 Using the high-low method, what is the estimated electricity cost per machine hour? a. $.60 b. $1.67 c. $1.00 d. $.80

d. costs = $3,600 + ($.60 x number of machine hours)

Nutt Industries electricity costs and machine hours over a six-month period follow: Machine Hours Electricity Cost January 2,000 $4,800 February 2,500 5,200 March 3,000 5,400 April 2,400 5,000 May 2,800 5,600 June 2,200 5,000 Using the high-low method, what is the formula that can be used to estimate electricity costs at different levels of volume?a. Electricity costs = $2,800 + ($1.00 x number of machine hours) b. Electricity costs = $2,600 + ($1.00 x number of machine hours) c. Electricity costs = $400 + ($1.67 x number of machine hours) d. costs = $3,600 + ($.60 x number of machine hours)

d. Variable costs of $120,000 and fixed costs of $150,000.

Stanforth Company's flexible budget for 50,000 units shows $100,000 and $150,000 in variable and fixed costs, respectively. At 60,000 units, the flexible budget would show: a. Variable costs of $150,000 and fixed costs of $150,000. b. Variable costs of $120,000 and fixed costs of $180,000. c. Variable costs of $100,000 and fixed costs of $180,000. d. Variable costs of $120,000 and fixed costs of $150,000.

d. Factory supplies.

The following cost is an example of a variable factory overhead cost: a. Plant utilities. b. Material handling costs. c. Salary of the plant manager. d. Factory supplies.

c. High-low method.

The method of analyzing cost behavior that uses two data points to first determine the variable cost per unit and then the total fixed cost is the: a. Method of least squares. b. Scattergraph method. c. High-low method. d. Observation method.

d. Observation method.

The method of analyzing the behavior of semivariable costs that relies heavily on the ability of anobserver to detect a pattern of cost behavior by reviewing past cost and volume data is the: a. High-low method. b. Method of least squares. c. Scattergraph method. d. Observation method.

c. Square footage of each department.

The most appropriate basis for allocating the factory building rent to specific departments would be the: a. Number of machines in each department. b. Number of employees in each department. c. Square footage of each department. d. Amount of time the plant manager spends in the department.

b. Summary of Factory Overhead.

The report that is prepared after the posting is completed at the end of the accounting period that shows the items of expense by department and in total, and is used to prove the balance of the Factory Overhead Control account is the: a. Schedule of Fixed Cost. b. Summary of Factory Overhead. c. Flexible Budget. d. Subsidiary Ledger

c. Rental of factory building.

Variable overhead costs include all of the following except: a. Electricity to power machinery. b. Factory supplies. c. Rental of factory building. d. Small tools.

d. $2,250.

Venus Company has developed the following flexible budget formula for annual indirect labor cost: Total annual cost = $12,000 + $.25 / unit operating budgets for the current month are based on 5,000 units. Indirect labor costs included in this monthly planning budget are: a. $13,250. b. $1,250. c. $3,200. d. $2,250.

b. $8,650

Victoria is a budget analyst at Young Industries. She used the least squares regression method to separate the plant's monthly utilities cost into its fixed and variable components. The results were as follows: Y = 3,250 + .054 X X = the number of units produced R2 = .892 Based on these results, the December budget for plant utilities cost if Young Industries plans to produce 100,000 units in that month would be: a. $5,400 b. $8,650 c. $3,250 d. $8,920

d. The number of units produced explains 89.2% of the variation in the plant utilities cost.

Victoria is a budget analyst at Young Industries. She used the least squares regression method to separate the plant's monthly utilities cost into its fixed and variable components. The results were as follows: Y = 3,250 + .054 X X = the number of units produced R2 = .892 How should Victoria interpret the R2 of .892? a. The equation is a better predictor of fixed costs than of variable costs 89.2% of the time. b. The equation will accurately predict utility costs 89.2% of the time. c. Fixed costs make up 89.2% of the total semi-variable cost in any given month. d. The number of units produced explains 89.2% of the variation in the plant utilities cost.

c. X is referred to as the dependent variable.

Victoria is a budget analyst at Young Industries. She used the least squares regression method to separate the plant's monthly utilities cost into its fixed and variable components. The results were as follows: Y = 3,250 + .054 X X = the number of units produced R2 = .892 Which of the following statements is not true about Victoria's cost model? a. Y represents the total semi-variable cost. b. The total monthly fixed utilities costs are $3,250. c. X is referred to as the dependent variable. d. The equation Y = 3,250 + .054 X would be represented as a straight line on a graph.

c. Fixed costs per unit will decrease.

When preparing a flexible budget for factory overhead costs, what will occur to fixed costs (on a per-unit basis) as production increases? a. Fixed costs per unit will increase. b. Fixed costs are not considered in flexible budgeting. c. Fixed costs per unit will decrease. d. Fixed costs per unit will remain unchanged.

c. The metal used to form the legs of the desk.

Which of the following costs would not be included in factory overhead in the manufacture of a student's desk? a. The oil used to maintain the machinery. b. The salary of the supervisor of the Assembly department. c. The metal used to form the legs of the desk. d. The wages of personnel who perform inspections of incoming materials.

b. The wages of the forklift operator who moves finished desks to the finished goods warehouse.

Which of the following costs would be included in factory overhead in the manufacture of a student'sdesk? a. The wages of the operator of the machine that bends the metal legs of the desk into shape. b. The wages of the forklift operator who moves finished desks to the finished goodswarehouse. c. The cost of the plastic used to form the writing surface. d. The wages of the worker who assembles the components.