Accy Chapter 13

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a: A. cost driver. B. cost applier. C. direct cost. D. cost object.

a

Direct costing may be used for: A. internal reporting purposes. B. external financial reporting purposes. C. income tax reporting purposes. D. all of the above.

a

Direct costs pertain to costs that: A. are traceable to a cost object. B. are not traceable to a cost object. C. are commonly incurred. D. are variable costs.

a

For the partial value chain functions given below, which sequence is correct? A. design, production, marketing. B. marketing, production, distribution. C. research and development, production, distribution. D. customer service, marketing, distribution.

a

If all units produced during the month of September are sold, and no additional units are sold from the beginning finished goods inventory, then: A. income determined with absorption costing will equal income determined with direct costing. B. ending work in process inventory will increase. C. income determined with absorption costing will be lower than income determined with direct costing. D. ending finished goods inventory will decrease.

a

The three sections of a statement of cost of goods manufactured include: A. raw material, direct labor, manufacturing overhead. B. variable expenses, contribution margin, fixed expenses. C. sales revenue, gross profit, selling and administrative expenses. D. direct costs, indirect costs, operating profit.

a

Which of the following best describes cost accounting? A. cost accounting serves the needs of both financial and managerial accounting. B. managerial accounting is a subset of cost accounting. C. financial accounting is a subset of cost accounting. D. cost accounting is an alternative to both financial and managerial accounting.

a

Which of the following is NOT an inventory account for a manufacturing company? A. Cost of goods sold. B. Work-in-process. C. Raw materials. D. Finished goods.

a

A debit balance in the manufacturing overhead account at the end of the period indicates that: A. manufacturing overhead is overapplied. B. manufacturing overhead is underapplied. C. manufacturing overhead has been accurately applied. D. None of the above.

b

A predetermined overhead rate is used to: A. keep track of actual overhead costs as they are incurred. B. assign indirect costs to cost objects. C. establish prices for manufactured products. D. allocate selling and administrative expenses to manufactured products

b

Activity-based costing minimizes the risk of cost distortion when applying overhead by: A. using a single cost driver rate. B. using multiple cost driver rates. C. using actual activity cost rates. D. using absorption cost rates.

b

An example of a direct cost in the production of a computer is: A. depreciation of production equipment. B. production labor costs. C. salary of the vice president of production. D. material warehouse costs.

b

An organization's value chain refers to: A. the process of using cost information to manage the activities of the organization. B. the sequence of functions and related activities that add value for the customer. C. the process of collecting and recording valuable information in the accounting information system. D. None of the above.

b

Common costs pertain to costs that: A. are directly traceable to a cost object. B. are not directly traceable to a cost object. C. are commonly incurred. D. are direct costs.

b

Cost management initiatives along an organization's value chain functions begins with __________ and concludes with __________. A. marketing; production B. research and development; customer service C. design; production D. production; distribution

b

Indirect costs pertain to costs that: A. are traceable to a cost object. B. are not traceable to a cost object. C. are commonly incurred. D. are variable costs.

b

The predetermined overhead application rate based on direct labor hours is computed as: A. actual total overhead costs divided by actual direct labor hours. B. estimated total overhead costs divided by estimated direct labor hours. C. actual total overhead costs divided by estimated direct labor hours. D. estimated total overhead costs divided by actual direct labor hours.

b

The production cost of a single unit of a manufactured product is determined by: A. dividing total direct materials and direct labor for a production run by the number of units made. B. dividing total direct materials, direct labor, and manufacturing overhead for a production run by the number of units made. C. dividing total direct materials, direct labor, manufacturing overhead and selling expenses for a production run by the number of units made. D. dividing the selling price by the gross profit ratio.

b

Which of the following activities is not included in the organization's value chain? A. marketing. B. finance. C. customer service. D. research and development.

b

Which of the following costs would be classified as a period cost? A. production line maintenance costs. B. advertising expense for the product. C. plant electricity. D. indirect labor.

b

Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing? A. units produced equal units sold. B. units produced are greater than units sold. C. units produced are less than units sold. D. income determined with absorption costing will always equal income determined with direct costing.

b

An example of a cost likely to have an indirect relationship with products being manufactured is: A. production labor costs. B. raw material costs. C. electricity costs for packaging equipment. D. none of the above.

c

In order to achieve higher quality cost information from the assignment of overhead costs to products manufactured, the use of a predetermined overhead rate is being replaced by: A. absorption costing. B. job order costing. C. activity-based costing. D. process costing.

c

In the T-account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account: A. raw materials purchases are debited to work in process. B. direct labor costs are credited to work in process. C. cost of goods manufactured is debited to finished goods inventory. D. cost of goods sold is debited to finished goods inventory.

c

Product costs are inventoried and treated as assets until: A. the next accounting period. B. related liabilities no longer exist. C. the period in which the products they relate to are sold. D. none of the above.

c

The overhead component of product cost is: A. the sum of the actual overhead costs incurred in the manufacture of the product. B. likely to be the same amount for every product made by the company. C. includes all manufacturing costs except those for raw materials and direct labor. D. determined at the end of the year when actual costs and actual production are known.

c

The primary difference between absorption costing and direct costing is the treatment of: A. direct material costs. B. variable manufacturing overhead. C. fixed manufacturing overhead. D. direct labor costs.

c

The sequence of activities that add value to the organization are: A. the value processes. B. the chain of production events. C. the value chain. D. the strategic cost initiatives.

c

The three components of product costs are: A. direct material, supervisor salaries, selling expenses. B. direct labor, manufacturing overhead, indirect material. C. direct material, direct labor, manufacturing overhead. D. manufacturing overhead, indirect material, indirect labor.

c

The use of activity-based costing information to support the decision-making process is known as: A. value chain analysis. B. cost distortion analysis. C. activity-based management. D. cost-based management.

c

Which of the following costs are included in the "for cost accounting purposes" classification? A. Variable cost and fixed cost. B. Direct cost and indirect cost. C. Product cost and period cost. D. Committed cost and discretionary cost.

c

Which of the following describes the correct sequence of flow of costs for a manufacturing firm? A. Raw materials, finished goods, work-in-process, cost of goods sold. B. Work-in-process, raw materials, finished goods, cost of goods sold. C. Raw materials, work-in-process, finished goods, cost of goods sold. D. Raw materials, work-in-process, cost of goods sold, finished goods.

c

Which of the following is NOT an account that over/under applied overhead is transferred to at the end of an accounting period? A. Cost of Goods Sold. B. Work-in-Process. C. Raw Materials. D. Finished Goods.

c

Which of the following items would be reported on the Statement of Cost of Goods Manufactured? A. cost of goods sold. B. beginning finished goods inventory. C. ending work in process inventory. D. contribution margin.

c

An example of a cost that is likely to have a direct relationship with products being manufactured is: A. sales force salaries. B. depreciation of production equipment. C. salaries of production supervisors. D. production labor costs.

d

An example of a product cost is: A. advertising expense for the product. B. a portion of the president's travel expenses. C. interest expense on a loan to finance inventory. D. production line maintenance costs.

d

An excess of cost of goods manufactured over cost of goods sold for the period represents: A. an increase in gross profit. B. a decrease in work in process inventory. C. overapplied manufacturing overhead. D. an increase in finished goods inventory

d

Cost accounting is a subset of: A. financial accounting. B. process cost accounting. C. job order cost accounting. D. managerial accounting.

d

Cost accounting is concerned with: A. accumulation and determination of product, process or service cost. B. income measurement and inventory valuation. C. generally accepted accounting principles. D. all of the above.

d

Cost of Goods Manufactured can be computed as: A. ending balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied - beginning balance of work in process. B. beginning balance of work in process + raw materials purchased + direct labor costs incurred + manufacturing overhead costs applied - ending balance of work in process. C. ending balance of work in process + raw materials purchased + direct labor costs incurred + manufacturing overhead costs applied - beginning balance of work in process. D. beginning balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied - ending balance of work in process.

d

Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because: A. direct costs identified with the product or activity may not be accurately assigned. B. fixed costs will change in total if the volume of activity changes. C. all costs may not have been allocated to the product or activity. D. arbitrarily allocated costs may not behave in the way assumed in the allocation method.

d

The shift in the amount of manufacturing overhead costs applied to the mix of products produced that occurs when using a single cost driver rate as compared to using activity-based costing rates is known as: A. underapplied overhead. B. overapplied overhead. C. cost absorption. D. cost distortion

d

The term "cost" means: A. the price paid for a raw material. B. the wage paid to a worker. C. the price charged by an entity for its services. D. all of the above.

d

Total manufacturing costs for the month on the statement of costs of goods manufactured equals: A. variable costs + fixed costs + mixed costs. B. work in process inventory - finished goods inventory. C. cost of goods sold - cost of goods manufactured. D. cost of raw material used + direct labor cost incurred + manufacturing overhead applied.

d

Which of the following is a true statement regarding absorption and/or direct costing? A. A firm can choose to use either absorption or direct costing for income tax purposes. B. A firm can choose to use either absorption or direct costing for financial reporting purposes. C. Direct costing assigns only direct materials and direct labor to products. D. Absorption costing includes fixed overhead in product costs whereas direct costing does not.

d

Which of the following is more relevant to management accounting than to cost accounting? A. accumulation and determination of product or service cost. B. income measurement and inventory valuation. C. generally accepted accounting principles. D. providing managers information for planning and control purposes.

d

Which of the following items would not be reported on the statement of cost of goods manufactured? A. beginning work in process inventory. B. purchases of raw materials. C. total manufacturing costs. D. contribution margin.

d