Principles of Accounting 2 - Test 1

activity cost pool

A cost bucket in which costs related to a particular activity measure are accumulated is called a(n) ______.

a factor that causes overhead costs to occur

A cost driver is

underapplied

A debit balance in Manufacturing overhead means overhead was

issuance of materials

A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the

application of manufacturing overhead costs

A journal entry that debits Work in process and credits Manufacturing overhead is recording the

reflects differences in how overhead costs are incurred within departments

A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it

overstated for purposes of decision making

A significant limitation of the ABC model is that the product costs computed will most likely be ______.

debited

Actual manufacturing overhead is Blank______ to the Manufacturing overhead account.

allocation

An activity measure in activity-based costing is used as a(n) ______________ base for applying overhead costs to products and services.

unit-level activity

An activity that must be done for each item produced is a(n)

be common to all the company's products and services

An essential quality of an overhead allocation base is that it must

helping target areas for process improvement more accurate product costs helping target areas for process improvement

Benefits of activity-based costing include ______.

an actual rate is not known until the end of the period

Companies use a predetermined overhead rate rather than an actual overhead rate because

finished goods

Completed units that have not yet been sold are found in

both variable and fixed

Costs assigned to units of product in absorption costing include Blank______ manufacturing costs.

work in process

Costs of partially completed units are accounted for in

product

Designing and advertising a good are both ______-level activities.

materials are issued to the job

Direct materials costs are recorded on the job cost sheet when the

Manufacturing overhead $8,000 and credit Accounts payable $8,000

If a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit

should be done by a cross-functional team requires substantial resources requires taking employees away from other tasks

Implementing activity-based costing ______.

administrative costs -

Includes all costs associated with the general management of an organization. Administrative costs can be either direct or indirect costs.

selling costs

Includes all costs necessary to secure customer orders and get the finished product into the hands of the customer. Selling costs can be either direct or indirect costs.

manufacturing overhead

Includes all manufacturing costs except direct materials and direct labor

period costs

Includes all selling and administrative costs. These costs are expensed on the Income Statement during the period incurred.

product costs

Includes all the costs that are involved in acquiring or making a product

840

Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for $

construction company

Job-order costing would most likely be used in a(n)

manufacturing overhead and indirect labor

Labor charges that cannot be easily traced to a job are considered

manufacturing and nonmanufacturing costs

Manufacturing companies separate their costs into two broad categories

many different kinds of indirect costs

Manufacturing overhead consists of

the factory supervisor's salary factory insurance

Manufacturing overhead costs include

selling and administrative expenses; gross margin

Net operating income is calculated by subtracting ______ from ______.

batch

Processing purchase orders is considered to be a(n) ______-level activity.

direct materials

Raw materials that become an integral part of the finished product and whose costs can be conveniently traced to it.

total cost in the activity cost pool; activity level in the activity cost pool

The activity rate is computed by dividing the ______ by the ______.

increases cost of goods sold and decreases net operating income

The adjustment for underapplied overhead ______.

estimated total manufacturing overhead cost ÷ estimated total allocation base

The formula for a predetermined overhead rate is

predetermined overhead rate ×

The formula for applying overhead to a specific job is: Blank______ amount of allocation base incurred by job.

Manufacturing overhead and credits Property taxes payable

The journal entry to record accrued property taxes for a factory building debits

an expense account and credits Cash or a liability

The journal entry to record selling and administrative salaries debits

raw materials

The journal entry to record the purchase of materials debits

X =

The level of activity.

direct labor cost. direct materials cost. predetermined manufacturing overhead.

The total cost of a job includes:

a =

The total fixed cost (the vertical intercept of the line).

Y =

The total mixed cost.

bill of materials

The type and quantity of each type of direct material needed to complete a unit of product is listed on the

b =

The variable cost per unit of activity (the slope of the line).

ending raw materials inventory and Indirect materials used

To calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract ______.

30

Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plantwide overhead rate is $ ________ per machine hour.

ending finished goods inventory from goods available for sale.

Unadjusted cost of goods sold is calculated by subtracting:

overcosts; undercosts

Usually, traditional costing Blank______ high-volume products and Blank______ low-volume products.

Close it to Cost of goods sold. Closed proportionally to Work in process, Finished goods, and Cost of goods sold.

What methods can be used to dispose of underapplied or overapplied manufacturing overhead?

activity-based

When a company creates overhead rates based on the actions it performs, it is employing an approach called ______-______ costing.

Finished Goods

When a job is completed, its costs are transferred into ______.

subsidary ledger

When all of a company's job cost sheets are viewed collectively, they form what is known as a(n)

only direct

When labor costs are incurred, Blank______ labor costs are added directly to the Work in Process account.

unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold

When only a portion of the units involved in a job are sold, the

Raw materials inventory represents the cost of materials not yet used in production. When materials are purchased they are recorded in the Raw materials inventory account.

Which of the following statements are true?

Paperwork at a law firm

Which of the following would be considered direct materials in a service firm that uses job-order costing?

accounting hours

Which of the following would not be a good allocation base for manufacturing overhead?

Nonmanufacturing costs

Which of the following would not be charged to the Manufacturing overhead account?

The salary of the manager at a hair salon.

Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing?

Closing to Cost of goods sold is simpler, and allocating is more accurate.

Which of the statements regarding closing out over or underapplied overhead is correct?

$300 is reported as expense and $900 is reported as an asset

a company purchased a 12 month insuracne policy on october 1 for $1,200. on the december 31 annual financial statements, ________

direct ; indirect

a cost that can be easily and conveniently traced to a specific cost object is a(n) ________ cost of that object, whereas cost that cannot be easily and conveniently traced to that specific cost object are _______ costs.

mixed

a cost that contains both variable and fixed cost elements is a ______ cost.

mixed cost

a cost that contains both variable and fixed elements.

sunk cost

a cost that has already been incurred and that cannot be changed now or in the future. Sunk costs are not relevant to decisions

fixed cost

a cost that remains constant, in total, regardless of changes in the level of the activity

variable cost

a cost that varies, in total, in direct proportion to changes in the level of activity.

manufacturing overhead and indirect materials

a dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of

manufacturing overhead

a factory costs such as cleaning supplies, taxes, insurance, and janitor wages as

in total

a fixed cost remains fixed ____ within the relevant range of activity.

direct material

a laptop computer manufacturer would con sider the computers processor chip to be a(n) ________ cost.

Overhead is underapplied

actual overhead is more than applied overhead if

executive compensation and public relations costs

administrative costs include

traditional ; contribution

an income statement focusing on product and period costs has been prepared using a(n) _____ format, while a(n) _______ format income statement makes a distinction between fixed and variable costs.

cost object

anything for which cost data are desired including products, customers, jobs, organizational subunits, etc.

fixed

as the level of activity moves outside of the relevant range, ____ costs increase or decrease in discrete steps rather than an linear fashion.

real estate taxes and top management salaries

committed fixed costs include _____

sales revenue minus variable costs

contribution margin is ____

direct costs

costs that can be easily and conveniently traced to a specified cost object.

indirect costs

costs that cannot be easily and conveniently traced to a specified cost object.

differential (or incremental) costs

costs that differ between any two alternatives

Underapplied or overapplied overhead

difference between overhead applied to work in process and actual overhead

the difference in cost between two alternatives and also known as incremental cost

differential cost is

decision making

differential costs, opportunity costs, and incremental costs are all cost classifications used in _______

conversion cost

direct labor cost plus manufacturing overhead costs (these costs are incurred to convert raw materials into a finished product)

prime cost

direct materials cost plus direct labor cost.

product

direct materials, direct labor, and manufacturing overhead are all ______ costs.

behavior

how individual costs react to changes in activity level is referred to as a cost _____

activity base

is a measure of what causes the incurrence of variable costs.

relevant range

is that range of activity within which the assumptions made about cost behavior are valid.

the cost of goods finished

is the sum of all amounts transferred from Work in process to Finished goods during a period

direct labor

labor costs that can be easily traced to individual units of product (also called touch labor).

activity based

management involves focusing on activities to eliminate waste, decrease processing time, and reduce defects.

direct materials, direct labor, and manufacturing overhead

manufacturing costs include

indirect materials, factory supervisors' salaries, and factory depreciation

manufacturing overhead costs include

should be considered in decision making and are benefits lost when choosing one option over another

opportunity costs

are expensed in the period incurred and include all costs that re not product costs

period costs _____

direct materials and direct labor

prime cost include

committed fixed costs

represent investments with a multi-year planning horizon that cannot be easily adjusted in the short term

indirect

salaries of factory supervisors and factory maintenance personnel are examples of _____ labor costs.

The schedule of cost of goods sold

summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold.

true

the finished product of one company can become raw materials for another company.

opportunity cost

the potential benefit that is given up when one alternative is selected over another.

marginal

the revenue obtained from selling one additional unit of product is called _______ revenue

discretionary fixed costs

usually arise from annual decisions by management and they can be easily reduced in the short term

factory rent, factory insurance, and administrative salaries

which of the following are most likely fixed costs?

fixed costs remain constant in total and vary per unit and the assumption that cost behavior is strictly linear in reasonably valid

within the relevant range of activity ________

variable

within the relevant range, a cost that changes in direct proportion to changes in the activity level a _____ cost.