Final Exam Acc 213

T/F: Departmental overhead rates will correctly assign overhead costs in situations where a company has a range of products that differ in volume, lot size, or complexity of production.

False

T/F: Generally speaking, when going through the process of computing a predetermined overhead rate, the estimated total manufacturing overhead cost is determined before estimating the amount of the allocation base.

False

T/F: If a company closes any underapplied or overapplied manufacturing overhead to the Cost of Goods Sold account, then Cost of Goods Sold will be debited if manufacturing overhead is overapplied for the period.

False

T/F: If the overhead rate is computed annually based on the actual costs and activity for the year, the manufacturing overhead assigned to any particular job can be computed as soon as the job is completed.

False

T/F: In a contribution format income statement for a manufacturing company, the cost of goods sold is deducted from sales to arrive at the contribution margin.

False

T/F: In the Schedule of Cost of Goods Sold, Cost of goods available for sale = Ending finished goods inventory + Cost of goods manufactured.

False

T/F: In two companies making the same product and with the same total sales and total expenses, the contribution margin ratio will be lower in the company with a higher proportion of fixed expenses in its cost structure.

False

T/F: Job cost sheets contain entries for actual direct material, actual direct labor, and actual manufacturing overhead cost incurred in completing a job.

False

T/F: On a manufacturing company's income statement, direct labor is separately listed as an expense.

False

T/F: Organization-sustaining activities relate to specific customers and are not tied to any specific products.

False

T/F: The entire difference between the actual manufacturing overhead cost for a period and the applied manufacturing overhead cost is typically closed to the Work In Process account.

False

T/F: The potential benefit that is given up when one alternative is selected over another is called a sunk cost.

False

T/F: Two companies with the same margin of safety in dollars will also have the same total contribution margin.

False

T/F: Under variable costing, fixed manufacturing overhead is treated as a product cost.

False

T/F: Using a predetermined overhead rate based on the estimated level of activity for the current period provides more accurate costs for decision-making than if the predetermined overhead rate was based on the level of activity at capacity.

False

T/F: When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high-volume products.

False

T/F: When net income is positive, the degree of operating leverage in a company is smallest near the break-even point and increases as sales volumes rise.

False

T/F: When using segmented income statements, the dollar sales for a company to break even equals the traceable fixed expenses divided by the overall CM ratio.

False

T/F: Within the relevant range, a change in activity results in a change in variable cost per unit and total fixed cost.

False

When closing overapplied manufacturing overhead to Cost of Goods Sold, which of the following would be true? A. Gross margin will increase. B. Work in Process will decrease. C. Net income will decrease. D. Cost of Goods Sold will increase.

A. Gross margin will increase.

Which of the following statements is false? A. Manufacturing overhead is incurred only to support some jobs. B. Manufacturing overhead is an indirect cost that is difficult to trace to a particular job. C. Manufacturing overhead consists of both variable and fixed costs. D. Manufacturing overhead is applied to Work in Process using a predetermined overhead rate.

A. Manufacturing overhead is incurred only to support some jobs.

If activity-based costing is used, insurance on the factory would be classified as a(n A. Organization-sustaining activity. B. product-sustaining activity. C. unit-level activity. D. batch-level activity

A. Organization-sustaining activity.

Which of the following is true of a company that uses absorption costing? A. Unit product costs can change as a result of changes in the number of units manufactured. B. Net operating income fluctuates directly with changes in sales volume. C. Fixed production and fixed selling costs are considered to be product costs. D. Variable selling expenses are included in product costs.

A. Unit product costs can change as a result of changes in the number of units manufactured.

Generally speaking, net operating income under variable and absorption costing will A. be equal when production and sales are equal. B. always be equal. C. be equal when production D. exceeds sales. never be equal.

A. be equal when production and sales are equal.

A $2.00 increase in a product's variable expense per unit accompanied by a $2.00 increase in its selling price per unit will A. have no effect on the break-even volume in units. B. have no effect on the contribution margin ratio. C. decrease the contribution margin. C. decrease the degree of operating leverage.

A. have no effect on the break-even volume in units.

Which of the following would not affect the break-even point? A. number of units sold. B. total fixed expense. C. variable expense per unit. D. selling price per unit.

A. number of units sold.

When switching from a traditional costing system to an activity-based costing system that contains some batch-level costs A. the unit product costs of high-volume products typically decrease and the unit product costs of low volume products typically increase. B. the unit product costs of high-volume products typically increase and the unit product costs of low-volume products typically decrease. C. the unit product costs of both high and low volume products typically decrease. D. the unit product costs of both high and low volume products typically increase.

A. the unit product costs of high-volume products typically decrease and the unit product costs of low volume products typically increase.

Mexico Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measure of activity to use for allocating the costs of inspecting the finished products at Mexico? A. Machine-hours. B. Direct labor-hours. C. Inspection hours. D. Number of inspections.

C. Inspection hours.

Which of the following statements concerning multiple overhead rate systems is false? A. A multiple overhead rate system is more complex than a system based on a single plantwide overhead rate. B. In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours. C. A multiple overhead rate system is usually more accurate than a system based on a single plantwide overhead rate. D. A company may choose to create a separate overhead rate for each of its production departments.

B. In departments that are relatively labor-intensive, their overhead costs should be applied to jobs based on machine-hours rather than on direct labor-hours.

Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a _________ percentage of total product cost and where there is ___________ diversity among the various products that they produce. A. low; little. B. high; considerable. C. high; little. D. low; considerable.

B. high; considerable.

Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as: A. a period cost. B. manufacturing overhead. C. direct materials. D. administrative expense.

B. manufacturing overhead.

Jameson Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores? A. store manager salaries. B. the cost of corporate advertising aired during the Super Bowl. C. cost of goods sold at each store. D. store building depreciation exp

B. the cost of corporate advertising aired during the Super Bowl.

The following statement is a strength of the high-low method because A. the high and low activity levels may not be representative of the entire population. B. the method is relatively simple and easy to apply. C. the method does not detect if the cost behavior is nonlinear. D. only two observations are used to develop the cost function.

B. the method is relatively simple and easy to apply.

Which of the following is an assumption underlying standard CVP analysis? A. The price of a product or service is expected to change as volume changes. B. Fixed expenses will change as volume increases. C. In multiproduct companies, the sales mix is constant. D. In manufacturing companies, inventories always change.

C. In multiproduct companies, the sales mix is constant.

Which of the following statements about using a plantwide overhead rate based on direct labor is correct? A. Using a plantwide overhead rate based on direct labor costs will ensure that direct labor costs are correctly traced to jobs. B. The labor theory of value ensures that using a plantwide overhead rate based on direct labor will do a reasonably good job of assigning all overhead costs to jobs. C. It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver. D. It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

C. It is often overly simplistic and incorrect to assume that direct labor-hours is a company's only manufacturing overhead cost driver.

Which of the following statements concerning direct and indirect costs is false? A. A direct cost is one that can be easily traced to the particular cost object. B. A particular cost may be direct or indirect, depending on the cost object. C. Whether a particular cost is classified as direct or indirect does not depend on the cost object. D. The factory manager's salary would be classified as an indirect cost of producing one unit of product.

C. Whether a particular cost is classified as direct or indirect does not depend on the cost object.

To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used A. Fixed expenses/Contribution margin per unit. B. Target net profit/Contribution margin ratio. C. (Fixed expenses + Target net profit)/Total contribution margin. D. (Fixed expenses + Target net profit)/Contribution margin ratio.

D. (Fixed expenses + Target net profit)/Contribution margin ratio.

In a job-order costing system, indirect labor cost is usually recorded as a debit to: A. Finished Goods B. Cost Of Goods Sold C. Work in Process D. Manufacturing overhead

D. Manufacturing overhead

In describing the cost formula equation, Y = a + bX, which of the following is correct? A. a" is the variable rate. B. "Y" is the independent variable. C. "a" and "b" are valid for all levels of activity. D. in the high-low method, "b" equals the change in cost divided by the change in activity.

D. in the high-low method, "b" equals the change in cost divided by the change in activity.

If manufacturing overhead is underapplied, then: A. actual manufacturing overhead cost is less than the estimated manufacturing overhead cost. B. the predetermined overhead rate is too high. C. the Manufacturing Overhead account will have a credit balance at the end of the year. D. the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.

D. the amount of manufacturing overhead cost applied to Work in Process is less than the actual manufacturing overhead cost incurred.

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because: A. activity-based costing results in less accurate costs than more traditional costing methods based on direct labor-hours or machine-hours. B. under activity-based costing, the sum of all product costs does not equal the total costs of the company. C. activity-based costing has not been approved by the United Nation's International Accounting Board. D. under activity-based costing, some manufacturing costs (i.e., the cost of idle capacity and organization-sustaining costs) may not be assigned to products.

D. under activity-based costing, some manufacturing costs (i.e., the cost of idle capacity and organization-sustaining costs) may not be assigned to products.

A cost that would be included in product costs under both absorption costing and variable costing is A. supervisory salaries. B. factory rent. C. variable selling expenses. D. variable manufacturing costs

D. variable manufacturing costs

T/F: Allocating common fixed costs to segments on segmented income statements increases the usefulness of such statements.

False

T/F: A company will improve job cost accuracy by using multiple overhead rates even if it cannot identify more than one overhead cost driver.

False

T/F: A duration driver provides a simple count of the number of times that an activity occurs.

False

T/F: A major advantage of the high-low method of cost estimation is that it omits all data from the analysis other than the lowest and highest costs.

False

T/F: A shift in the sales mix from low-margin items to high-margin items will decrease total profits even though total sales increase.

False

T/F: A company has two divisions, each selling several products. If segment reports are prepared for each product, the division managers' salaries should be considered as common fixed costs of the products.

True

T/F: A credit balance in the Manufacturing Overhead account at the end of the year means that manufacturing overhead was overapplied.

True

T/F: A factory supervisor's salary would be classified as an indirect cost with respect to a unit of product.

True

T/F: Advertising is not considered a product cost even if it promotes a specific product.

True

T/F: If the predetermined overhead rate is based on the estimated level of activity for the current period, the overhead charged to each product includes the cost of unused capacity.

True

T/F: If the predetermined overhead rate is based on the level of activity at capacity, the overhead charged to each product is normally lower than if the predetermined overhead rate had been based on the estimated level of activity for the current period.

True

T/F: In general, when production exceeds sales for the period, absorption costing net operating income will exceed variable costing net operating income.

True

T/F: 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

T/F: The sum of all manufacturing costs except for direct materials and direct labor is called manufacturing overhead.

True

T/F: Variable costing net operating income is usually closer to the net cash flow of a period than is absorption costing net operating income.

True

T/F: When expressed on a per unit basis, fixed costs can mislead decision makers into thinking of them as variable costs.

True

T/F: When the fixed costs of capacity are spread over the estimated activity of the period rather than the level of activity at capacity, the units that are produced must shoulder the costs of unused capacity.

True