Act 206 Exam True or false

A cost driver is a factor, such as machine-hours, beds occupied, computer time, or flight-hours, that causes direct costs.

False

A job cost sheet is used to record how much a customer pays for the job once the job is completed.

False

Administrative costs are indirect costs.

False

Companies use three common approaches to assign overhead costs to products—plantwide overhead rate, departmental overhead rates, and activity-based costing. The most accurate of these three approaches is the plantwide overhead rate.

False

Depreciation is always considered a period cost for external financial reporting purposes in a manufacturing company.

False

Entry (16) in the below T-account represents the cost of goods manufactured transferred to Finished Goods from Work in Process. Finished GoodsBal.40,000(16)520,000(15)540,000 Bal.60,000

False

In a job-order costing system, costs are traced to individual units of product. The sum total of such traced costs is called the unit product cost.

False

In a manufacturing company, all costs are period costs.

False

On a manufacturing company's income statement, direct labor is separately listed as an expense.

False

The $10,000 balance in the T-account below represents overapplied manufacturing overhead for the period. Manufacturing Overhead(2)4,000(7)180,000(3)30,000 (4)80,000 (5)40,000 (6)36,000 190,000 180,000Bal.10,000

False

The challenge in designing an activity-based costing system is to identify all of the activities that explain the variation in overhead costs.

False

The formula for computing the predetermined overhead rate is:Predetermined overhead rate = Estimated total amount of the allocation base ÷ Estimated total manufacturing overhead cost

False

A bill of materials is a document that lists the type and quantity of each type of direct material needed to complete a unit of product.

True

A direct cost is a cost that can be easily traced to the particular cost object under consideration.

True

A factory supervisor's salary would be classified as an indirect cost with respect to a unit of product

True

A fixed cost is not constant per unit of product.

True

Activity-based costing involves a two-stage allocation process in which overhead costs are first assigned to activity cost pools and then allocated to products using activity measures.

True

Actual overhead costs are not assigned to jobs in a job costing system.

True

Advertising costs should NOT be charged to the Manufacturing Overhead account.

True

Advertising is not considered a product cost even if it promotes a specific product.

True

An activity cost pool in activity-based costing is a "cost bucket" in which costs related to a particular activity measure are accumulated.

True

Conversion cost is the sum of direct labor cost and manufacturing overhead cost.

True

Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost.

True

In activity-based costing, a separate activity rate (i.e., predetermined overhead rate) is computed for each activity cost pool by dividing the estimated overhead cost in the activity cost pool by the total expected activity for the activity cost pool.

True

In the Schedule of Cost of Goods Manufactured, Cost of goods manufactured = Total manufacturing costs + Beginning work in process inventory - Ending work in process inventory.

True

In the Schedule of Cost of Goods Sold, Unadjusted cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured − Ending finished goods inventory.

True

The costs attached to products that have not been sold are included in ending inventory on the balance sheet.

True

The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies.

True

The three cost elements ordinarily included in product costs are direct materials, direct labor, and manufacturing overhead.

True

Wages paid to production supervisors would be classified as manufacturing overhead.

True

When raw materials are purchased, they are recorded as an asset.

True