ACC202

The ABC system for applying overhead works just like a job-order costing

True

Activity based costing

A technique that attempts to assign overhead costs more accurately to products known as

Cost of goods manufactured is the

sum of all jobs transferred from work in process to finished goods

generally, when simplifying an activity based costing system, activities and costs should only be combined if

they fall within the same level in the cost hierarchy

Cost of goods manufactured is

the cost of jobs completed during the period

In a normal costing system, the manufacturing overhead account is debited for

the cost of indirect materials and the actual overhead costs

the activity rate is computed by dividing the ___ by the __

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

The journal entry to record the issuance of direct materials into production debits

work in process

manufacturing overhead is applied with a debit to

work in process

Manufacturing overhead includes

Factory utilities, factory maintenance wages, and factory rent

Period costs flow from finished goods to cost of goods sold

False

Traditional cost tend to undercuts standard products and overcast specialty products

False

Himber, Inc. just completed a job that cost 14000 in direct materials, 1200 in direct labor, and 8000 in applied manufacturing overhead. The journal entry to record completion of the job would debit

Finished goods 34000 and credit work in process 34000

A company incurred 10000 in direct labor costs and 8000 in indirect labor costs. The journal entry to record this transaction debits

Work in process 10000 and manufacturing overhead 8000 and credits salaries and wages payable 18000

Departmental overhead rates may not correctly assign overhead costs in situations where a company has

a variety of products

The journal entry to record the purchase fo materials credits

accounts payable

a bucket in which costs are accumulated that relate to a single activity measure in the ABC system is an

activity cost pool

The formula to apply overhead to products is:

activity rate * activity

total cost of each activity divided by the total activity is the computation of

activity rates

A journal entry debiting salaries expense and crediting salaries and wages payable could record

administrative salaries

an activity measure is an ____ base in an activity-based costing system

allocation

customer orders are considered to be an ___ level activity

batch

Miltion corporation sold goods costing 50000 for 75000. journal entries should be made could include entries

cogs for 50000 and a/r for 75000

Finished goods

consists of completed, unsold goods

the amount transferred from work in process to finished goods is

cost of goods manufactured

The __ side of the manufacturing overhead account is always used to record manufacturing overhead applied to production

credit

The __ side is always used o record the actual manufacturing costs inured

debit

A journal entry that debits manufacturing overhead and credits accounts payable could not record the incurrence of

direct labor costs

If factory wide overhead costs do not move in the same direction as the plantwide activity base product costs will be

distorted

which of the following is not an ABC level of activity

employee-level

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

ending raw materials inventory and indirect materials used

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

not product cost is used to calculate the amount transferred from finished goods to cost of goods sold

When labor costs are incurred, ___ are added to the work in process account

only direct labor costs

The difference between overhead applied to work in process and actual overhead is

over applied or undersupplied overhead

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

overstated for purposes of decision making

when a job is completed, its costs are transferred into

finished goods

An ABC system,

-The cost of designing and implementing the system may outweigh the benefits of the system -The cost in each activity cost pool may not be strictly proportional to its activity measure

using direct-labor hours or another volume based cost driver to assign overhead

-may result in selling products at a loss -may result in overcharging customers for products -ignores other significant causes of overhead

departmental overhead rates

-may use different allocation bases in different departments -may not assign overhead correctly with a company that has a range of products

Benefits of Activity Based Costing

-more accurate product costs -helping target areas for process improvement -helping managers understand the nature of overhead costs

Activity-based costing is most likely to be beneficial when

-products differ in batch size and the activities hey require -overhead costs are high and increasing and no one knows why

Facility-level activities

-setting up a computer network -preparing annual reports -heating a manufacturing plant

Activity-based voting improves the accuracy of product costs by

-using a variety of activity measures to assign overhead costs to products -using cost pools that are more homogeneous than departmental cost pools -increasing the number of cost pools used to accumulate overhead cost

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

Nonmanufacturing costs

when is ABC useful to a company?

when their costs have changed since the existing cost system was developed

designing and advertising a product are ___ level activities

product

the journal entry to record the purchase of materials debits

raw materials

Any purchased materials that will go into the finished product are the first recorded in the

raw materials account

A journal entry that debits advertising expense and credits cash would record the incurrence of a

selling cost

Not a benefit of activity-based voting to managers

Managers have numerous cost pools that are identified for each major activity

any event that causes consumption of overhead resources is

an activity

a predetermined overhead rate in an activity-based costing system is called

an activity rate

An activity-based costing an activity measure is

an allocation base

The journal entry to record general selling and administrative costs debits

an expense account and credit cash or a liability

a journal entry that debits work in process and credits manufacturing overhead is recording the

application of manufacturing overhead costs

Units of product that are only part;;y complete are contained in the

work in process inventory

The transfer costs from one inventory account to the next parallels the physical transfer of goods from one inventory to the next

True

traditional costing _____ high-volume products and ___ low-volume products

overcosts; undercosts

under activity-based costing, the manufacturing overhead costs are allocated to products via ___ stage process

two