Cost ACCT 2

The cost per unit of the allocation base used to charge overhead to products is the:

predetermined overhead rate.

What are the transfers from the Finished Goods Inventory called?

Cost of Goods Sold.

The Cost Flow Diagram for product costing includes all of the following costs except:

selling expenses.

The balance in the Work-in-Process Inventory account equals:

the balances on the job cost sheets of uncompleted jobs.

A company should use process costing, rather than job costing, if:

the product is composed of mass-produced homogeneous units.

Which of the following characteristics applies to process costing, but does not apply to job order costing?

the use of equivalent units of production.

The unused resource capacity is the difference between the resources supplied and the resources:

used

The following examples briefly describe the manufacture of two different products. Which costing method (job-order or process) would be the best method to use for each project?I. Steven Lawless manufactures Lawless Fine Wine Coolers. Steven once made the statement, "People can have any flavor of Lawless Fine Wine Coolers they want as long it's strawberry."II. Northridge Spacetronics is manufacturing three space shuttles for the country of Xanadu. Each shuttle is slightly different and production will last approximately two years.

1.. Process 2. Job-Order

The classification of cost drivers into general levels of activity, volume, batch, product, and so on is known as:

A cost hierarchy.

Which of the following companies would most likely use job costing?

Advertising agency.

In an activity-based costing (ABC) system, cost reduction is accomplished by identifying and eliminating: (CPA adapted)

All cost drivers: No Non-value-added: Yes

For which of the following businesses would a job costing system be appropriate?

Auto repair shop.

The basic cost flow model is:

BB + TI - TO = EB.

Activity analysis is an important approach to operations control and the successful implementation of activity-based cost management (ABCM). Which of the following procedures is not part of activity analysis?

Compute the predetermined rate per activity by dividing the total cost pool by the total cost drivers.

Which of the following is not an example of a prevention cost?

Correcting product defects before they are sold.

Which of the following is not an explanation of why a company would operate at less than theoretical capacity?

Customer demand is more than anticipated.

Which of the following is not a step involved in activity-based costing?

Determine how to reduce the costs of making products by cutting activities.

The basic cost flow model is:

EB = BB + TI - TO.

Which of the following is the correct formula to compute the predetermined overhead rate?

Estimated total manufacturing overhead costs divided by estimated total units in the allocation base.

Volume-based costing allocates indirect product costs based on the volume of output, using such allocation bases as direct labor hours, machine hours, or the amount of direct material used in the production process. Activity-based costing (ABC) has consistently shown that volume-based costing ___________ the cost of high-volume products and ______________ the cost of low-volume products.

High-volume: Overstates Low-Volume: Understates

Which of the following items would be classified as a volume-related cost in an activity-based cost management (ABCM) system?

Indirect materials.

A process costing system was used for a department that began operations in January 2020. Approximately the same number of physical units, at the same degree of completion, were in work-in-process at the end of both January and February. Monthly conversion costs are allocated between ending work-in-process and units completed. Compared to the FIFO method, would the weighted-average method use the same or a greater number of equivalent units to calculate the monthly allocations? (CPA adapted)

January: Same February: Greater

When a manufacturing company has a highly automated manufacturing plant producing many different products, what is probably the most appropriate basis of applying overhead costs to work-in-process?

Machine hours.

The journal entry to record the actual manufacturing overhead costs for indirect materials is:

Manufacturing Overhead Control on top Material Inventory on bottom

Which of the following accounts is used to accumulate the actual manufacturing overhead costs incurred during a period?

Manufacturing Overhead Control.

Which of the following is used as the basis for posting to the direct materials section of the job cost sheet?

Materials requisition.

Activity-based costing provides:

More detailed measures of costs than do plantwide or department allocation methods.

Which of the following would be a reasonable basis for assigning the materials handling costs to the units produced in an activity-based costing (ABC) system?

Number of components per completed unit.

Which of the following statements regarding first-in, first-out (FIFO) process costing is(are) true? (A) First-in, first-out (FIFO) process costing transfers out the costs in beginning inventory before transferring out the costs associated with units started and completed. (B) First-in, first-out process costing requires one additional step in assigning costs to the units transferred out and the ending Work-in-Process Inventory.

Only A is true.

Which of the following should not be used as the allocation base in a company that appropriately uses a single plantwide rate?

Sales volume.

Activity-based costing (ABC) is a costing technique that uses a two-stage allocation process. Which of the following statements best describes these two stages?

The costs are assigned to activities, and then to the products based upon their use of the activities.

Which of the following statements does not reflect one of the fundamental themes underlying the design of cost systems for managerial purposes?

The primary purpose of cost systems is to gather information to value inventory.

When product costs are used for decision-making, what assumption is most likely to distort the decisions?

There is a proportionality of overhead costs and output, regardless of whether a product is dropped or not.

Traditional product costing systems (e.g., job and process costing) are designed primarily:

To accumulate cost information for financial reporting.

The electricity used for production machinery would be classified as a:

Volume-related activity.

In a job costing system, direct material cost is ordinarily debited to:

Work-in-Process Inventory.

Which of the following accounts is debited when direct labor is recorded?

Work-in-Process Inventory.

In a process costing system, the application of factory overhead usually would be recorded as an increase in: (CPA adapted)

Work-in-process inventory control.

In a process costing system, manufacturing overhead applied is usually recorded as a debit to:

Work-in-process.

In order to compute equivalent units of production using the FIFO method of process costing, work for the period must be broken down to units:

completed from beginning inventory, started and completed during the month, and units in ending inventory.

A system that provides information about the costs of processes, products, and services used and produced by an organization is a:

cost management system.

The weighted-average method of process costing differs from the FIFO method of process costing in that the weighted-average method:

does not consider the degree of completion of units in the beginning work-in-process inventory when computing equivalent units of production.

Which of the following items would not be used as the cost driver for a volume-related cost in an activity-based cost management (ABCM) system?

Square footage.

Activity-based costing (ABC) information cannot be used by managerial decision-makers to evaluate the:

market potential of a product.

If the units in the beginning Work-in-Process Inventory are greater than the units in the ending Work-in-Process Inventory, then the units transferred out are:

more than the units started during the period.

Which of the following is an internal failure activity?

Delaying processes.

The following direct labor information pertains to the manufacture of product Scour: Time required to make one unit 2direct labor hours Number of direct workers 50 Number of productive hours per week, per worker 40 Weekly wages per worker$500 Workers' benefits treated as direct labor costs 20% of wages What is the standard direct labor cost per unit of product Scour? (CPA adapted)

$30.

The predetermined manufacturing overhead rate for 2020 was $4.00 per direct labor hour; employees were paid $5.00 per hour. If the estimated direct labor cost was $75,000, what was the estimated manufacturing overhead?

$60,000.

The following events took place at a manufacturing company for the current year: (1) Purchased $95,000 in direct materials. (2) Incurred labor costs as follows: (a) direct, $56,000 and (b) indirect, $13,600. (3) Other manufacturing overhead was $107,000, excluding indirect labor. (4) Transferred 80% of the materials to the manufacturing assembly line. (5) Completed 65% of the Work-in-Process during the year. (6) Sold 85% of the completed goods. (7) There were no beginning inventories. What is the value of the ending Work-in-Process Inventory?

$88,410.00.

Which of the following is a value-added activity?

Assembling items.