Chapter 4 Questions

Applied overhead consists of which of the following

Actual activity times predetermined overhead rate

Predetermined overhead rates are computed based on

Estimated overhead costs and estimated level of activity

The measure of production that considers historical and estimated future product levels an cyclical fluctuations is referred to as

Normal capacity

Which of the following is not a reason to use predetermined overhead rates?

To overcome to the problems of assigning overhead to diverse types of products

In a normal cost system, which of the following is used

Actual direct materials and labor; no actual overhead

If a company uses two overhead accounts (actual and applied), the one that would receive the most debits would be

Actual overhead

Relative to tradition product costing, activity-based costing differs in the way costs are

Allocated

Which is not a task typically associated with ABC systems?

Applying a single cost rate

An actual cost system differs from a normal cost system in that an actual csot system

Assigns overhead at the end of the manufacturing process

Set up time is

Batch, value-added cost; not a production cost

On reason annual overhead application rates are used is

Because of season variability of overhead costs

Cost allocation bases in the activity-based costing should be

Cost drivers

If underapplied overhead is considered to be immaterial, it is closed to which of the following accounts?

Cost of goods sold

In ABC costing, which is the correct formula for computing the overhead rate?

Estimated overhead for the activity/ estiated use of the cost driver for the activity

A short-run measure of activity that represents a firm's anticipated activity level for an upcoming period based upon expected demand is referred to as

Expected capacity

Traditional overhead allocations result in which of the following situations

High-volume products are assigned too much overhead, and low-volume products are assigned too little overhead.

The first step in designing an activity based costing system is to

Identify major activities

What is the proper order of tasks in an ABC system?

Identify the cost pools, identify the cost drivers, calculate the overhead application rate for each cost pool, assign the costs to the products

Cost allocation is the assignment of ___________ to one ore more products using a reasonable bases

Indirect

When a manufacturing company has a highly automated manufacturing plant producing many different products , which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process

Machine hours

Which of the following is typically regarded as a cost driver in the traditional accounting practices?

Number of direct labor hours worked

If actual overhead is less than applied overhead, which of the following will be true? Upon closing

Overapplied; cost of goos will be credited

Overapplied overhead will result if

Overhead costs incurred were less than overhead costs charge to production

The measure of activity that allows for routine variation

Practical capacity

In activity based costs, final cost allocation assign costs to

Products

In activity-based costing, preliminary cost allocations assign costs to

Products

The estimated maximum potential activity for a specific time is

Theoritical

Since overhead costs are indirect costs

They require some process of allocation

Actual overhead exceeds applied overhead and the amount is immaterial. Which of the following will be true upon closing

Underapplied; cost of goods will increase

Which of the following statements is not correct

When there is a single product, ABC is preferred over tradition costing systems

Which is not a step in activity-based costing?

compute a cost rate per production

ABC should be used in which of the following situations

multiple-product firms with multiple processing steps