Practice Exam

A concept which is commonly employed with allocation bases related to size is: Cost shifting. Benefit received. Equity share. Cause-and-effect relationship. Ability-to-bear.

Ability-to-bear

An alternative concept of fairness in cost allocation, absent the cause-and-effect basis, includes: Ability-to-bear. Efficiency. Different costs for different purposes. Consistency. Equity share.

Ability-to-bear

The journal entry to record incurred direct labor would include a credit to: Work-in-Process Inventory. Accrued Payroll. Factory Overhead. Materials Inventory. Finished Goods Inventory.

Accrued Payroll

In an activity-based costing system, overhead costs are divided into separate: Cost objects. Activity cost pools. Resource consumption and activity consumption cost drivers. Product-line cost pools. Plantwide or departmental cost pools.

Activity cost pools

Which of the following is not true regarding activity-based costing (ABC) systems? Activity-Based Costing can provide more accurate product costs. Activity-Based Costing identifies more costs as indirect costs than do traditional volume-based systems. Activity-Based Costing is likely to be more time-consuming than volume-based systems. Activity-Based Costing is used in both manufacturing and non-manufacturing companies. Activity-Based Costing is likely to have more overhead rates than volume-based systems.

Activity-Based Costing identifies more costs as indirect costs than do traditional volume-based systems.

Which of the following can produce unit product costs that fluctuate significantly? Actual costing system. Standard costing system. Normal costing system. Industry costing system. Overhead costing system.

Actual costing system

If a budgeted activity base is used as the base in cost allocation, each department's cost allocation will be predictable, and not influenced by the: Actual total cost. Change in activity. Variations from budget. Errors in calculations. Actual usage in other departments.

Actual usuage in other departments

Which of the following is not true about joint products? All joint products can be sold at the split-off point. There is no market value attached to some products at the split-off point. The net realizable value of a product is the ultimate net sales value that is estimated at the split-off point. An important decision for management to make in regard to separable costs is whether the company should incur the separable costs and process the product further. Sometimes it is desirable that the company have joint products with constant or equal gross margin percentages.

All joint products can be sold at the split-off point

Backflush costing: Is a simplified approach to determining product cost that is used when there is little or no work-in-process inventory. Involves the use of standard costing. Allows product costs to be quickly and conveniently calculated. Is an approach to determining product cost that is used when JIT is used. All of these answer choices are correct.

All of these answers are correct

Which of the following about joint costs is not true? Joint costs are the cost of resources employed jointly in the production of two or more outputs. Joint costs are incurred in a service department. The costs cannot be directly assigned to any one of the outputs involved. Allocation is not always needed when joint costs are involved. Assignment is made through one or more consistent allocation procedures.

Allocation is not always needed when joint costs are involved

A measure of frequency and intensity of demands placed on activities by cost objects is: A quantity driver. A resource consumption cost driver. Not a cost driver. An activity consumption cost driver. A consumption cost driver.

An activity consumption cost driver

Which of the following is a step in developing an Activity-Based Costing System? Talk to management for cost details. Research commonly used cost drivers. Determine which products will use activity-based costing and which will not. Assign activity costs to cost objects. Hire a management accountant to find effective cost drivers.

Assign activity costs to cost objects

Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as: Output-unit-level costs. Batch-level costs. Product-level costs. Facility-level costs. Vendor costs.

Batch-level costs

Purchase order, set-up, and inspection costs are examples of: Unit-level costs. Batch-level costs. Product-level costs. Facility-level costs. Department-level costs.

Batch-level costs

The key difference between weighted-average and FIFO process costing methods is the handling of the partially completed: Beginning direct materials inventory. Ending direct materials inventory. Beginning work-in-process inventory. Ending work-in-process inventory. Beginning finished goods inventory.

Beginning oork-in-process inventory

More accurate and informative product costs describes which ebenfit of activity-based costing? Process improvement. Better profitability measures. Improved planning. Better decision making. Identification of the cost of unused capacity.

Better profitability measures

Volume-based rates produce inaccurate product cost when: A large portion of factory overhead cost is not volume-based. Firms produce a diverse mix of products. Large volumes of a product are manufactured. Both a lack of volume-based overhead and there is a large range of products. None of these answer choices are correct.

Both a lack of volume-based overhead and there is a large range of products

Dual allocation is a cost allocation approach that separates direct and indirect costs, tracing the direct costs directly to the cost object that: Can bear the cost. Relates best to the cost. Is first identified with the cost. Caused the cost. Is most impacted by the cost.

Caused the cost

Which of the following is not a reason that a firm needs accurate cost information to be competitive? Competitor analysis. Product pricing. Profitability analysis of individual products. Evaluation of management performance. Refinement of strategic goals.

Competitor analysis

The contribution by profit center (CPC) expands the contribution margin income statement by distinguishing: Variable and fixed costs. Short-term and long-term fixed costs. Controllable and noncontrollable fixed costs. Noncontrollable and untraceable fixed costs. Controllable, noncontrollable, and untraceable fixed costs.

Controllable, noncontrollable, and untraceable fixed costs

Factory overhead and direct labor costs are often combined and called: Process Costs. Conversion Costs. Total Overhead Costs. Labor Costs. Direct Costs.

Conversion costs

Which of the following is not a level that a firm classifies its activities at? Unit-level corporate-level batch level product-level facility-level

Corporate-level

What is a choice a management accountant must make when developing a costing system for a specific firm? Cost decreasing method. Cost measurement method. Cost application method. Cost spreading method. Overhead accumulation method.

Cost measurement method

Cost system design/selection should consider all except which one of the following? Cost/benefit of system design. A firm's strategy and management information needs. Customer needs. Nature of the industry, product, or service. Cost/benefit of system operation.

Customer needs

In calculating unit cost in a process costing system, "conversion cost" is defined as the sum of: Direct and indirect material costs. Direct and indirect labor costs. Direct labor and factory overhead costs. Indirect labor and factory overhead costs. Indirect material and factory overhead costs.

Direct labor and factory overhead costs

. The number of the same or similar units that could have been produced given the amount of work actually performed on both complete and partially complete units is referred to as: Physical units. Completed units. Equivalent units. Produced units. Units to account for.

Equivalent units

Which of the following characteristics applies to process costing but not to job costing? Identifiable batches of production. Average costs. Equivalent units. Application of overhead. Use of standard costs

Equivalent units

A normal costing system uses actual costs for direct materials and direct labor, and: Actual costs for factory overhead. Estimated factory overhead costs based on material cost. Estimated costs that the firm should attain. Estimated costs for factory overhead. Charges actual factory overhead as a lump sum.

Estimated costs for factory overhead

Which of the following is a benefit of activity-based costing? Reduced overhead costs. More accurate measures of production volume. Facilitate better product pricing decisions. Having fewer cost drivers than volume-based costing systems. More streamlined manufacturing processes

Facilitate better product pricing decisions

The journal entry to record the application of factory overhead to work in process would include a credit to: Work-in-Process. Cost of Goods Sold. Factory Overhead. Materials Inventory. Finished Goods Inventory.

Factory overhead

The use of activity-based costing is most appropriate for: Firms that manufacture multiple product lines. Firms that have very low manufacturing overhead costs relative to other costs of production. Firms with high levels of production activity. Firms that are labor intensive. Firms that manufacture a small number of product lines.

Firms that manufacture multiple product lines

The direct method of departmental cost allocation is the simplest of the three methods because it: Ignores the reciprocal flows. Uses the service flows only to service departments. Uses a sequence of steps to allocate service department costs. Doesn't require any calculations. All of these answer choices are correct.

Ignores the reciprocal flows

In making decisions about whether to sell or further process joint products or by-products, allocation of common or joint costs is: Essential. Useful. Irrelevant and should be ignored. Useful depending on the method chosen. The only way to get the true total product cost.

Irrelevant and should be ignored

Volume-based rates are appropriate in situations where the incurrence of factory overhead: Is related to multiple cost drivers. Is related to several non-homogeneous cost drivers. Is related to a single, common cost driver. Varies considerably from period to period. Is relatively small in amount.

Is related to a single, common cost driver

How is the department to be allocated first usually chosen in the step method? It is the department that employs the most people. It is the smallest department. It provides the highest percentage of service to other service departments. It is the department with the least amount of costs. It provides the smallest percentage of service to other service departments.

It provides the highest percentage of service to other service departments

Backflush costing is a method used with: Just-in-time systems. Weighted Average methods. First-in, first-out methods. Overhead costs. Normal Costing.

Just-in-time systems

Activity-based costing for manufacturing operations is used to assign: Direct material and direct labor costs to products. Direct labor and manufacturing overhead costs to products. Manufacturing overhead costs to products. Selling and general administrative overhead costs to products. Selling and general administrative overhead and manufacturing overhead costs to products.

Manufacturing overhead costs to products.

When is it most appropriate to use the first-in, first-out method? When Work-in-Process Inventory is relatively small or when direct materials prices and conversion costs are stable. It doesn't matter what method you use because they both give you the same answer. When you sell very little inventory during the period. When you want to use the most simple method. When direct materials prices, conversion costs, or inventory levels fluctuate significantly.

When direct materials prices, conversion costs, or inventory levels fluctuate significantly.

When is a job costing system appropriate to use?

When most costs incurred for the job can be readily identified with a specific product

When gathering activity data, which of the following would not be a question that Activity-Based Costing project team members typically ask employees or managers? Time spent performing the activity Resources required for the activity Where the activity takes place Value the activity has for the customer Work or activities performed

Where the activity takes place

Which of the following is not an indirect manufacturing cost of producing wooden tables? Manufacturing supervision. Equipment maintenance. Wood acquisition costs. Wood used in the manufacturing process. Wood storage and handling.

Wood used in the manufacturing process

In job costing, the job might consist of: a single product. a batch of identical products. a batch of similar products. a single, well-defined project. a single product, a batch of products, or a single well-defined project.

a single product, a batch of products, or a single well-defined project

Which of the following describes a cost driver? A factor that causes or relates to a change in the total cost of an activity. A costing approach that assigns resource costs to cost objects based on activities performed for the cost objects. A measure of the frequency and intensity of demand placed on a resource by an activity. A measure of the demand placed on the resources by products, services, or customers. An activity performed for each unit of the cost object.

A factor that causes or relates to a change in the total cost of an activity.

Which type of firm is most likely to require a very accurate costing system? A firm in a process industry. A firm in a professional services industry. A firm in a competitive environment. A global firm. A new firm.

A firm in a competitive environment

The system where the cost of a product or service is obtained by assigning costs to masses of similar units in each department and then computing unit cost on an average basis is called: A process costing system. A job costing system. An activity-based costing system. An inventory materials control system. None of these answers are correct.

A process costing system

Which of the following is not an ethical issue managers encounter with cost allocation? Products that are produced for both a competitive market and a public agency. Governmental agency provides a free service to the public. Governmental agency reimburses the costs of a private institution. Costs of products sold to or from foreign subsidiaries. The equity or fair share issue.

Governmental agency provides a free service to the public

Activity-based costing helps an organization implement its strategy through all of the following means except: Providing accurate cost information. Identifying the most profitable products and customers. Helping improve cycle time. Identifying value added and non-value added activities. Providing a basis for effective utilization of capacity.

Helping improve cycle time

Firms that use process costing operate in which sort of competitive environment? low-volume, high price. high-volume, low-price. high-volume, high price. low-volume, low price. None of these answers are correct.

High volume, low price

Process cost systems are used in all of the following industries except: Chemicals. Home building. Oil refining. Textiles. Steel.

Home building

Product costing provides useful cost information for all the following except: Both manufacturing and non-manufacturing firms. For non-manufacturing firms. Management planning, cost control, and performance evaluation. Financial statement reporting. Identifying and hiring competent managers.

Identifying and hiring competent managers

Which of the following is not one of the four objectives of cost allocation? Lower costs in the manufacturing process by finding areas of waste. Provide the right incentive for managers to make decisions that are consistent with the goals of top management. Determine accurate departmental and product costs as a basis for the evaluation of the cost efficiency of departments and the profitability of different products, financial reporting, and tax compliance. Fairly determine the rewards earned by the managers for their effort and skill and for the effectiveness of their decision making. Motivate managers to exert a high level of effort to achieve the goals of top management.

Lower costs in the manufacturing process by finding areas of waste.

Which of the following would be the most appropriate cost driver to allocate factory electricity costs to products? Machinery depreciation expense. Machinery maintenance work orders. Machinery down-time. Machine hours. Machine productivity.

Machine hours

The journal entry to record requisitioned and usage of direct materials would include a credit to: Work-in-Process Inventory. Accrued Payroll. Factory Overhead. Materials Inventory. Finished Goods Inventory.

Materials Inventory

The objectives of cost allocation are to: Motivate effort, provide incentives, and fairly determine rewards. Accurately define, divide and spread direct costs. Value, measure, and interpret cost data. Connect, communicate, and discern information. Define, refine, and re-define indirect costs.

Motivate effort, provide incentives, and fairly determine rewards

Which of the following costing systems is the only one to use estimated costs? Actual Costing. Standard Costing. Estimated Costing. Normal Costing. None of these answer choices are correct.

Normal Costing

Which of the following proportions is not used for volume-based costing? Number of activities in production. Units of production. Direct labor hours. Machine Hours. None of these answers are the correct choice.

Number of activities in production

What is the resource consumption cost driver for the storeroom of a company? Time worked. Number of items picked for an order. Number of new codes developed. Square footage. Number of workers.

Number of items picked for an order

Which of the following would likely be the most appropriate cost driver of electric power used by machines? Number of units. Machine size. Number of machine hours. Number of production runs. Purchase cost of machines.

Number of machine hours

Which of the following is a batch-level cost driver? Output units. Number of employees. Number of orders. Number of parts. Machine hours.

Number of orders

Which of the following is most likely to be the cost driver for the packaging and shipping activity? Number of setups. Number of components. Number of orders. Hours of testing. Number of production runs.

Number of orders

Which of the following would likely be the most appropriate cost driver to allocate machine set-up costs to products? Machine hours. Direct labor hours. Number of production runs. Number of products. Number of purchase orders.

Number of production runs

A volume-based rate is an appropriate overhead application base when: Several well-differentiated products are manufactured. Direct labor costs are large. Direct material costs are large relative to direct labor costs incurred. Only one product is manufactured. Manufacturing is process-based.

Only one product is manufactured

Which one of the following is the amount of factory overhead applied that exceeds the actual factory overhead cost? Factory overhead applied. Actual factory overhead. Overapplied overhead. Allocated factory overhead. Underapplied overhead.

Overapplied overhead

Standard costing systems provide a basis for which of the following? Timely estimates. Accurate costs. Performance evaluation. Overhead assignment method. Project costing.

Performance evaluation

Which one of the following methods of allocating joint costs uses a measure of weight, size or number of units to allocate joint costs to joint products? Net realizable value method. Physical measure method. Product measure method. Cost measure method. Sales value at split-off method.

Physical measure method

Which of the following would not be considered a facility-level activity? Providing security for the plant. Factory property taxes and insurance. Closing the books each month. Placing purchase orders.

Placing purchase orders

Standard costs are: Planned costs the firm should attain. Associated with direct materials and factory overhead only. Associated with direct labor and factory overhead only. Targeted low costs the firm should strive for. Estimates of a portion of overhead.

Planned costs the firm should attain

The Activity-Based costs assigned to cost objects are based on what? Activity cost pools. Actual levels of spending. Actual levels of capacity usage. Planned levels of spending and capacity usage. The size of the cost object.

Planned levels of spending and capacity usage

Which cost element is not included in the Work-In-Process Inventory of a company with multiple departments? Transferred-in costs. Process costs. Direct materials. Factory overhead. Direct labor.

Process costs

An activity that is performed to support the production of a new custom-order product is a: Product-level activity. Facility-level activity. Unit-level activity. Customer-support activity. Batch-level activity.

Product-level activity

Engineering change orders, maintenance of equipment used in manufacturing, and product design costs are examples of: Unit costs. Batch costs. Product-level costs. Facility-level costs. Unit, batch, and customer-sustaining costs, respectively.

Product-level costs

The two main advantages of using predetermined factory overhead rates are to provide more accurate unit cost information and to: Simplify the accounting process. Provide cost information on a timely basis. Insure transmission of correct data. Extend the useful life of the cost data. Adjust for variances in data sources.

Provide cost information on a timely basis

Which of the following methods accurately represents the process below? A customer orders twenty cases of nails, and the firm then produces the nails: Pull method. Push method. Order method. Overhead assignment method. Labor decision method.

Pull method

Allocation of service department costs to producing departments is the most complex of the allocation phase of departmental cost allocation because of the likely presence of: Manager bias. Formula distracters. Repetitive steps. Reciprocal flows. Non-value adding activities.

Reciprocal flows

JIT (Just in time) methods are designed primarily to: Reduce costs. Reduce inventory levels. Improve product design. Improve the accuracy of product costs. Speed up production.

Reduce inventory levels

From the industries listed below, which one is most likely to use process costing in accounting for production costs? Printing shop. Accounting firm. Electrical contractor. Steel mill. Automobile repair shop.

Steel mill

A key ethical issue in cost allocation involves costing in an international context, because the choice of a cost allocation method can affect: Management reward systems. Management fraud. Taxes in domestic and foreign countries. The firm's financial statements. The fair share of cost by a governmental unit.

Taxes in domestic and foreign countries

The key distinction between job costing and process costing is: The difference in detail required by each approach. The use made of the collected data. The journal entries required. The accumulation of costs to assign to cost objects. The standards applied.

The accumulation of costs to assign to cost objects

What is the key implementation issue for cost allocation? The managers' bias. The complexity of the equations. The time-intensive calculations. The changes to reporting in the financial statements. The choice of the most accurate allocation method.

The choice of the most accurate allocation method

What is the split-off point? A process that yields multiple outputs from a common resource input. A method that uses a physical measure such as pounds, gallons, yards, or units of volume produced at the split-off point to allocate the joint costs to joint products. The point in a joint production process where products with individual identities emerge. A method that uses units of output to allocate costs to products. The point in cost allocation that managers decide to split costs.

The point in a joint production process where products with individual identifies emerge

A job in which a quantity of products is ordered by a single customer is more likely to be an example of: the pull method of production. the resource-based method. the push method of production. the lean method of production. the single method of production.

The pull method of production (pull method - customers push method - warehouse/sales)

The reciprocal method of departmental cost allocation is preferred over the step method because it takes into account all the reciprocal flows between: The service departments. The producing departments. Multiple products. Competing departments. Similar, but separate products.

The service departments

Cost allocation is an important strategic issue for U.S. manufacturing firms with foreign subsidiaries because of: The tax implications. Quality concerns. Import restrictions. Cultural differences. The company's desire to grow.

The tax implications

Volume-based cost accounting systems often do not provide sufficiently accurate product costing because they: Use only volume-based cost drivers. Fail to recognize the impact of overhead in product cost. Often do not reflect changes in major cost categories caused by plant automation. Too often use an allocation base that does not have a cause-effect relationship to resource usage. Have both fixed and variable product costs.

Too often use an allocation base that does not have a cause-effect relationship to resource usage

What is the first phase of departmental allocation? Select which departments the company will allocate costs to. The step method. Trace the direct costs and allocate the indirect manufacturing costs in the plant to each service and production department. The direct method. Decide which method to use for cost allocation.

Trace the direct costs and allocate the indirect manufacturing costs in the plant to each service and production department

Which one of the following is the amount that actual factory overhead exceeds the factory overhead applied? Factory overhead applied. Actual factory overhead. Overapplied overhead. Allocated factory overhead. Underapplied overhead.

Underapplied overhead

An activity that is performed for each unit of production is a(n): Product-level activity. Facility-level activity. Unit-level activity. Performance-level activity. Batch-level activity.

Unit-level activity

Under job costing, factory overhead costs are assigned to products or services using labor or machine hours which are: Multiple cost pools. A homogeneous cost pool. Volume-based cost drivers. Non-volume-based cost drivers only. Activity-based cost drivers.

Volume-based cost drivers

If the usage of project activities is not proportional to the number of units produced, then some managers will be overcharged and others undercharged under: Activity-based costing. Volume-based costing. Overhead costing. Process costing. Materials costing.

Volume-based costing

Costs at the unit-level of activity should be allocated to products using cost drivers that are: Customer-oriented. Design-related. Volume-related. Product-related. Order-related.

Volume-related

In performing activity analysis during the design of an activity based costing system, the management accountant studies

the resources, activities, and cost drivers in operation