Managerial Accounting

The predetermined overhead rate is usually calculated a. at the end of each month. b. at the beginning of the year. c. at the beginning of each month. d. at the end of the year.

b. at the beginning of the year.

Using only unit-based activity drivers to assign nonunit-related overhead costs can cause a. product diversity. b. distorted product costs. c. efficiency. d. activity sharing. e. None of these.

b. distorted product costs.

At the beginning of the year, Kyla Inc estimated that overhead would be $880,000 and direct labor hours would be 220,000. At the end of the year, actual overhead was $920,600 and there were actually 230,000 direct labor hours. What is the overhead variance? a. $200 underapplied. b. $600 underapplied. c. $400 overapplied. d. $600 overapplied.

b. $600 underapplied.

Which of the following is not a cost of manufacturing? a. overhead b. advertising expense c. direct materials d. direct labor

b. advertising expense

Figure 7-5.Rizzo Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows: Product. Machine Hours. Setups. Receiving Orders. Packing Orders. 35mm 10,000. 100. 200. 400. Digital. 10,000. 250. 800. 2,000. Costs. $60,000. $40,000. $8,000. $24,000 Refer to Figure 7-5. Using an activity rate for receiving based on receiving orders, assign receiving costs to the 35mm camera. a. $1,800 b. $2,000 c. $1,600 d. $1,200 e. $4,000

c. $1,600

Which of the following is NOT a characteristic of job-order costing? a. Wide variety of distinct products. b. Costs are accumulated by the job. c. Typically, the cost of one job is different that that of another job. d. Unit cost is computed by dividing process costs of the period by the units produced in the period.

d. Unit cost is computed by dividing process costs of the period by the units produced in the period.

The identification and elimination of activities that fail to add value refers to a. external failures. b. activity reduction. c. internal failures. d. activity elimination.

d. activity elimination.

Which of the following costs is not included on a job-order cost sheet? a. applied plantwide overhead costs. b. direct labor costs c. direct materials costs d. actual plantwide overhead costs

d. actual plantwide overhead costs

Last year, Stevita Inc. shipped 3,000,000 kilograms of goods to customers at a cost of $2,400,000. If an individual customer orders 20,000 kilograms and produces $400,000 of revenue (total revenue is $40 million), the amount of shipping cost assigned to the customer using activity-based costing would be a. $16,000. b. $8,000. c. $24,000. d. $4,000. e. $60,000.

a. $16,000.

On February 1, Job 12 had a beginning balance of $200. During February, direct materials of $500 and direct labor of $200 were added to the job. Overhead is applied to production at a rate of 55% of direct labor. There are 5 units in Job 12. What is the unit cost? a. $202 b. $1,010 c. $162 d. $810

a. $202

Carlson Company uses a predetermined rate to apply overhead. At the beginning of the year, Carlson estimated it's overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000 and actual machine hours were 11,000. If the predetermined overhead rate is based on machine hour, what is the total amount credited to the plantwide overhead account for the year for Carlson? a. $264,000 b. $246,000 c. $240,000 d. $249,280

a. $264,000

At the beginning of the year, Kyla Inc estimated that overhead would be $880,000 and direct labor hours would be 220,000. At the end of the year, actual overhead was $920,600 and there were actually 230,000 direct labor hours. What is the predetermined overhead rate? a. $4 per direct labor hour b. $880,000 c. $2.63 per direct labor hour d. $4.18 per direct labor hour

a. $4 per direct labor hour

Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates overhead to be $620,000, machine hours to be 180,000, and direct labor hours to be 40,000. During February, Morrow has 4,200 direct labor hours and 8,000 machine hours. If the actual overhead for February is $64.700, what is the overhead variance and is it overapplied or underapplied? a. $400 overapplied b. $200 overapplied c. $1,000 underapplied d. $400 underapplied

a. $400 overapplied

Which of the following statements is true about overhead? a. Overhead costs are not incurred uniformly throughout the year. b. Overhead costs have a definite, identifiable relationship with units produced. c. Low production in one month would give rise to low unit overhead costs. d. None of these statements are correct.

a. Overhead costs are not incurred uniformly throughout the year.

A costing system that first assigns costs to activities and then to products is a. activity-based costing. b. job-order costing. c. activity-based management. d. volume based costing. e. nonunit-level costing.

a. activity-based costing.

Nonvalue-added activities a. are unnecessary inputs. b. are valued outputs to internal users. c. are valued outputs to external users. d. help meet the organization's needs, not the product needs.

a. are unnecessary inputs.

The document that lists the total cost for a single job is a a. job-order cost sheet. b. purchase order. c. materials requisition form. d. time ticket.

a. job-order cost sheet.

To calculate an activity rate, the ____ of each activity must be determined. a. practical capacity b. expenditure level c. processing ratio d. value

a. practical capacity

Activity drivers can be classified as either ____ or ____. a. unit-level; nonunit-level b. exact; inexact c. inputs; outputs d. right; wrong

a. unit-level; nonunit-level

Rollo Company has developed cost formulas for the drivers of the following production activities: Driver. Activity. Fixed. Variable. Labor hours. Materials. -0- 20. Labor hours. Labor. -0- 10. Machine hours. Maintenance. 10,000. 8. Machine hours. Machining. 50,000. 2. Number of setups. Inspections. 30,000. 200. Number of setups. Setups. -0- 300. Number of purchase orders. Purchasing. 75,000. 3. The budgeted inspection cost for 20 setups is a. $175,860. b. $40,000. c. $34,000. d. $30,000.

c. $34,000.

Producing 10,000 units of a cell phone requires $300,000 of prime costs, uses 2,000 machine hours, and takes 1,200 setup hours. The activity rates are $40 per machine hour and $100 per setup hour. What is the unit cost of a cell phone? a. $60 b. $40 c. $50 d. $100 e. $30

c. $50

Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates overhead to be $620,000, machine hours to be 180,000, and direct labor hours to be 40,000. During February, Morrow has 4,200 direct labor hours and 8,000 machine hours. What is the amount of applied overhead for February? a. $42,000 b. $78,200 c. $65,100 d. $24,000

c. $65,100

Inspection time for a plant is 10,000 hours per year. The cost of inspection consists of salaries of four inspectors, totaling $60,000. Inspection also used supplies costing $3 per inspection hour. The company has a close to zero defect state and has eliminated the need for any inspection activity. Calculate the nonvalue-added cost of inspection per year. a. $30,000 b. $60,000 c. $90,000 d. $120,000

c. $90,000

____ is concerned with identifying the root causes of activity costs. a. Direct analysis b. Activity analysis c. Driver analysis d. Causal analysis e. None of these.

c. Driver analysis

____ costs in many firms represent a much higher percentage of product costs than direct labor. a. Nonvalue-added b. Failure c. Overhead d. Appraisal e. Control

c. Overhead

____ is concerned with doing the activity right the first time it is performed. a. Time b. Efficiency c. Quality d. Velocity e. None of these.

c. Quality

Which of the following is a value-added activity? a. moving b. inspection c. processing d. waiting

c. processing

Morrow Company applies overhead based on direct labor hours. At the beginning of the year, Morrow estimates overhead to be $620,000, machine hours to be 180,000, and direct labor hours to be 40,000. During February, Morrow has 4,200 direct labor hours and 8,000 machine hours. What is the predetermined overhead rate? a. $3.44 per direct machine hour b. $77.50 per direct labor hour. c. $147.62 per direct labor hour. d. $15.50 per direct labor hour.

d. $15.50 per direct labor hour.

The moving activity has an expected cost of $160,000. Expected direct labor hours are 40,000, and the expected number of moves is 80,000. The best activity rate for moving is a. $4 per move. b. $1.33 per hour-move. c. $4 per hour. d. $2 per move.

d. $2 per move.

The Kraig Corporation manufactures custom-made purses. The following data pertains to Job XY5: Direct Materials placed into production, $4,000 Direct Labor Hours worked, 50 hours Direct Labor rate per hour, $15 Machine hours worked, 100 hours Plantwide overhead is applied using a plant-wide rate based on direct labor hours. Plantwide overhead was budgeted at $60,000 for the year and the direct labor hours were estimated to be 15,000. Job XY5 consists of 50 units. What is the overhead cost assigned to Job XY5? a. $400 b. $750 c. $1,500 d. $200

d. $200

At the beginning of the year, Wilson Company estimated the following: Overhead $360,000 Direct Labor Hours 60,000 Wilson used normal costing and applies overhead on the basis of direct labor hour. For the month of September, direct labor hours equaled 9,350 and actual overhead equaled $46,750. Calculate the overhead applied to production in September. a. $5 per direct labor hour b. $46,750 c. $30,000 d. $56,100

d. $56,100

Figure 7-5.Rizzo Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows: Product. Machine Hours. Setups. Receiving Orders. Packing Orders. 35mm 10,000. 100. 200. 400. Digital. 10,000. 250. 800. 2,000. Costs. $60,000. $40,000. $8,000. $24,000 Refer to Figure 7-5. Calculate a consumption ratio for setups on the digital cameras. a. 0.688 b. 0.730 c. 0.700 d. 0.714 e. 0.500

d. 0.714

Smith has applied overhead of $73,000 and actual overhead of $87,600 for the month of November. It applies overhead based on direct labor hours and those equaled 14,600 in November. Overhead for the year was estimated to be $900,000. How many direct labor hours were estimated for the year? a. $5 b. 175,200 c. 150,000 d. 180,000

d. 180,000

Production costs do NOT include a. direct materials. b. direct labor. c. fixed and variable overhead. d. all of these are production costs.

d. all of these are production costs.

Manufacturing overhead a. consists of all costs other than direct materials. b. consists of all manufacturing costs other than direct materials. c. consists of all costs other than direct materials and direct labor. d. consists of all manufacturing costs other than direct materials and direct labor.

d. consists of all manufacturing costs other than direct materials and direct labor.

The time required to produce one unit of a product is the a. efficiency. b. velocity. c. speed. d. cycle time.

d. cycle time.

Which of the following are easy to trace to individual jobs? a. direct materials and overhead b. direct labor and overhead c. depreciation on machinery and indirect labor. d. direct materials and direct labor

d. direct materials and direct labor

The predetermined overhead rate is calculated by a. estimated annual overhead divided by estimated manufacturing costs. b. actual annual overhead divided by estimated annual activity level. c. estimated annual overhead divided by actual annual activity level. d. estimated annual overhead divided by estimated annual activity level.

d. estimated annual overhead divided by estimated annual activity level.

Assume that a company takes 3,500 hours to produce 10,000 units of a product. What is the cycle time? a. 0.45 hour b. 1 hour c. 0.5 hour d. 3 hours e. 0.35 hour

e. 0.35 hour

____ can help a company become more competitive by providing more accurate cost data. a. Unit-based costing b. Volume-based costing c. Kaizen costing d. Production costing e. Activity-based costing

e. Activity-based costing