ACCT 302 chap 4

8) ________ is the process of distributing indirect costs to products. A) Cost allocation B) Job cost recording C) Cost pooling D) Cost tracing Answer:

A) Cost allocation

13) Costs that are subject to short-run fluctuations for given jobs are ________. A) actual costs B) budgeted direct costs C) budgeted indirect costs D) normal costs Answer:

A) actual costs

2) Process costing ________. A) allocates all product costs, including materials, and labor B) results in different costs for different units produced C) is commonly used by general contractors who construct custom-built homes D) is used exclusively in manufacturing Answer:

A) allocates all product costs, including materials, and labor

7) Which of the following companies will use a process costing system? A) an oil refining company B) a manufacturer of ships C) a custom watch manufacturer D) an advertising firm Answer:

A) an oil refining company

1) The budgeted indirect-cost rate is calculated ________. A) at the beginning of the year B) during the year C) at the end of each quarter D) at the end of the year Answer:

A) at the beginning of the year

6) The budgeted indirect-cost rate for each cost pool is computed as ________. A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base Answer:

A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base

4) When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base. A) budgeted; actual B) budgeted; budgeted C) actual; budgeted D) actual; actual Answer: A

A) budgeted; actual

9) A ________ links an indirect cost to a cost object. A) cost-allocation base B) cost pool C) cost assignment D) cost tracing Answer:

A) cost-allocation base

2) The actual indirect-cost rate is calculated by ________. A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base B) multiplying actual total indirect costs by the actual total quantity of the cost-allocation base C) dividing the actual total quantity of the cost allocation base by actual total indirect costs D) multiplying the actual total quantity of the cost allocation base by actual total indirect costs Answer:

A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base

5) Problems with costing occur when ________. A) incorrect job numbers are recorded on source documents B) bar coding is used to record materials used on the job C) a computer screen requests an employee number before that employee is able to work on information related to a specific job D) incorrect product delivery forms are entered into the system Answer:

A) incorrect job numbers are recorded on source documents

1) Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost rates? A) shorter the period, the greater is the influence of seasonal patterns on the amount of costs B) longer the period, the greater is the influence of seasonal patterns on the amount of costs C) shorter the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs D) longer the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs Answer:

A) shorter the period, the greater is the influence of seasonal patterns on the amount of costs

4) Each indirect-cost pool of a manufacturing firm ________. A) utilizes a separate cost-allocation rate B) is a subset of total direct costs C) relates to multiple cost centres D) utilizes the same cost-allocation rate for all costs incurred Answer:

A) utilizes a separate cost-allocation rate

3) Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Identify indirect costs B. Compute the total cost of the job C. Select cost-allocation bases D. Compute the indirect cost rate A) ACDB B) CADB C) BACD D) DCAB Answer:

B) CADB

5) Job-costing is likely to be used by________. A) oil refining companies B) advertising agencies C) postal service companies D) beverage production companies Answer:

B) advertising agencies

5) Direct costs ________. A) are anything for which a measurement of costs is desired B) are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner C) focus specifically on the costing needs of the CFO D) are costs related to a particular cost object that cannot be traced to that cost object in a cost-effective manner Answer:

B) are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner

20) When a normal costing system is used, clients using proportionately more full-time employees than trainees will ________. A) be overbilled for actual resources used B) be underbilled for actual resources used C) be billed accurately for actual resources used D) result in an underallocation of direct costs Answer:

B) be underbilled for actual resources used

11) A job-cost sheet details the ________. A) direct materials purchased and paid B) direct labor costs incurred C) indirect labor costs incurred D) actual indirect overhead costs incurred Answer:

B) direct labor costs incurred

1) A job that shows low profitability may be the result of ________. A) excessive usage of direct materials B) inefficient direct manufacturing labor C) overpricing the job D) insurance claim of the damaged goods Answer:

B) inefficient direct manufacturing labor

7) If indirect-cost rates are calculated monthly, distortions might occur because of ________. A) rental costs paid monthly B) property tax payments made in July and December C) routine monthly preventive-maintenance costs that benefit future months D) salary hikes at the beginning of the financial year Answer:

B) property tax payments made in July and December

2) For a given job the direct costs associated with the job are ________. A) actual overhead B) raw materials C) sunk costs D) fixed costs Answer: B

B) raw materials

4) Job costing ________. A) cannot be used by the service industry B) records the flow of costs for each product or service C) allocates an equal amount of cost to each unit made during a time period D) is used when each unit of output is identical Answer:

B) records the flow of costs for each product or service

3) Job costing is ________. A) used by businesses to price identical products B) used by businesses to price unique products for different jobs C) used to calculate equivalent units D) used to calculate the percentage of work completed Answer:

B) used by businesses to price unique products for different jobs

9) Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $25 per direct manufacturing labor hour. Calculate the profit earned on 50 units if each unit sells for $9,000. A) $65,000 B) $80,000 C) $75,000 D) $2,500 Answer:

C) $75,000

6) Which of the following differentiates job costing from process costing? A) Job costing is used when each unit of output is identical, and process costing deals with unique products. B) Job costing is used when each unit of output is identical and not produced in batches, and process costing deals with unique products produced on large scale. C) Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches. D) Job costing is used by manufacturing industries, and process costing is used by service industries

C) Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.

6) In a costing system, ________. A) cost tracing allocates indirect costs B) cost allocation assigns direct costs C) a cost-allocation base can be either financial or nonfinancial D) a cost object should be a product and not a department or a geographic territory Answer:

C) a cost-allocation base can be either financial or nonfinancial

12) A job-cost record uses information from ________. A) a materials-requisition record to record raw material purchases from suppliers B) a materials-requisition report to record the type and quantity of item received in an order from a supplier C) a labor-time card to record an employee's wage rate and hours spent on a particular job D) the bill of materials to ensure the goods are of the prescribed quality Answer:

C) a labor-time card to record an employee's wage rate and hours spent on a particular job

10) Which of the following includes both traced direct costs and allocated indirect costs? A) cost tracing B) cost pools C) cost assignments D) cost allocations Answer:

C) cost assignments

3) A ________ is a grouping of individual indirect cost items. A) cost allocation base B) cost assignment C) cost pool D) job-costing system Answer:

C) cost pool

2) Product costing information will include ________. A) to increase profits B) to increase sales and image of the company C) for cost management D) for efficient human resource management Answer:

C) for cost management

1) Job costing information is used ________. A) to determine target customers B) to calculate the percentage of completion C) for internal financial reporting D) to enhance public relations Answer:

C) for internal financial reporting

5) An example of a denominator reason for calculating annual indirect-cost rates includes ________. A) higher heating bills in the winter B) semi-annual insurance payments in March and September C) higher levels of output demanded during the fall months D) All of these answers are correct. Answer:

C) higher levels of output demanded during the fall months

14) An increase in direct labor cost per unit ________. A) increases the fixed cost B) increases profits C) increases the variable cost D) increases overhead costs Answer:

C) increases the variable cost

4) The basic source document for direct manufacturing labor is the ________. A) job-cost record B) materials-requisition record C) labor-time record D) labor-requisition record

C) labor-time record

10) In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job. A) direct materials B) direct labor C) manufacturing overhead costs D) total costs Answer:

C) manufacturing overhead costs

2) The difference between actual costing and normal costing is ________. A) normal costing uses actual quantities of direct-costs B) actual costing uses actual quantities of direct-costs C) normal costing uses budgeted indirect-costs D) actual costing uses actual quantities of cost-allocation bases Answer:

C) normal costing uses budgeted indirect-costs

16) Managers and accountants collect most of the cost information that goes into their systems through ________. A) an information databank B) computer programs C) source documents D) time surveys Answer:

C) source documents

1) Process costing is ________. A) used to enhance employees' job satisfaction B) used by businesses to price unique products or identical products produced in batches C) used by businesses to price identical products D) used by businesses when manufacturing goods above normal capacity Answer:

C) used by businesses to price identical products

3) Actual costing is a costing system that traces direct costs to a cost object by ________. A) using the budgeted direct cost rates times the budgeted quantities of direct-cost inputs B) using the actual direct costs rates times the budgeted quantities of the direct-cost inputs C) using the actual direct cost rates times the actual quantities of the direct-cost inputs D) using the budgeted direct cost rates times the actual quantities of the direct cost inputs Answer:

C) using the actual direct cost rates times the actual quantities of the direct-cost inputs

8) Bernard Company's budgeted manufacturing overhead is $3,300,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 60,000. What is the manufacturing overhead rate? A) $47.00 B) $56.00 C) $75.00 D) $55.00 Answer:

D) $55.00

5) Which of the following statements about actual costing is true? A) Manufacturing costs of a job are available earlier under actual costing. B) Corrective actions can be implemented sooner under actual costing. C) Actual costing uses budgeted indirect-cost rates calculated annually. D) Actual costing uses actual indirect-cost rates calculated annually. Answer:

D) Actual costing uses actual indirect-cost rates calculated annually.

3) Which of the following statements about normal costing is true? A) Direct costs and indirect costs are traced using an actual rate. B) Direct costs and indirect costs are traced using budgeted rates. C) Direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate. D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate. Answer:

D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.

7) Assigning direct costs to a cost object is called ________. A) cost allocation B) cost assignment C) cost pooling D) cost tracing Answer:

D) cost tracing

11) The cost allocation base ________. A) is a grouping of individual indirect cost items B) are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way C) is anything for which a measurement of costs is desired D) is a systematic way to link an indirect cost or group of indirect costs to cost objects Answer:

D) is a systematic way to link an indirect cost or group of indirect costs to cost objects

1) In a normal costing system, the Manufacturing Overhead Control account ________. A) is increased by allocated manufacturing overhead B) is credited with amounts transferred to Work-in-Process C) is decreased by allocated manufacturing overhead D) is debited with actual overhead costs

D) is debited with actual overhead costs

4) An example of a numerator reason for calculating annual indirect-cost rates includes ________. A) fewer production workdays in a month B) cost of raw materials purchased C) higher snow-removal costs during the winter D) the number of units produced

D) the number of units produced