Managerial Reporting Exam 2

The use of activity-based costing normally results in:

Substantially greater costs for low-volume products than is reported by traditional product costing.

Which of the following items is a unit-level activity?

Direct labor assembling products

Which of the following product costs would not be charged to WIP assuming a normal costing system?

Actual overhead costs

The best method for disposing of significant undersupplied or over applied factory is to

Apportion it between cost of goods sold, finished goods, and work in process

What are the basic objectives of process costing?

Compute an average cost per unit since units are homogeneous, allocate production costs between whole unites and partial units, determine the amount of production costs that should be transferred to the next department.

A collection of overhead costs, typically organized by department or activity, is called a:

Cost pool

Which of the following would least likely use a process costing system? small appliance manufacturer, cruise ship manufacturer, paint manufacturer, cereal manufacturer

Cruise ship manufacturer

Select the incorrect statement regarding equivalent units of production.

EUP equals an approximation of the number of whole units of output that could have been produced during a period from the actual effort expended & EUP computations are only needed when a department has units in beginning inventory.

Overhead costs are allocated to products to

Eliminate the problems caused by delays in obtaining actual cost data, make the overall allocation process more effective, and allocate a uniform amount of overhead to goods or services based on related production efforts

The weighted average costing method assumes that units in beginning inventory are the first units transferred. T/F

False

The weighted average method separates beginning inventory and current production to compute cost per unit of production. T/F

False

Which of the following shows the steps required to implement activity-based costing in the correct order?

Identify costly activities to complete products; assign overhead costs to activities; identify cost drivers for each activity; calculate a predetermined OH rate for each activity; and allocate overhead costs to products.

Which of the following serves at a subsidiary ledger for the work in process account?

Job order cost sheet

When would you use a job order cost system?

Low volume, heterogeneous units that can clearly be distinguished

Which of the following items is a facility-level activity?

Maintenance performed on the factory building.

All of the following are non-value-added time except: inspection moving processing wait

Processing time

Which of the following would most likely be a value-added activity?

Producing goods

Which of the following would be the best allocation base for the direct materials used by workers to assemble products?

Quantity of materials used

Select the response that represents the correct flow of costs through the accounts assuming a job order costing system

Raw materials, work in process, finished goods, cost of goods sold

A predetermined overhead rate allows overhead to be assigned during the period to the goods produced or sold and to the services rendered rather than having to wait until the end of the period for cost information. T/F

True

Both manufacturing and service organizations use activity-based costing. T/F

True

Equivalent units are computed to assign costs to partially completed units. T/F

True

Process costing is most appropriate when manufacturing large batches of homogeneous products. T/F

True

The journal entry to apply overhead to production would include:

a credit to Manufacturing Overhead Control

The first step in determining the cost per EUP per cost component under weighted average method is to:

add the beginning WIP inventory cost to the current period's production costs.

In a process costing system using the weighted average method, cost per equivalent unit for a given cost component is found by dividing which of the following by EUP?

current period cost plus the cost of beginning inventory

Which is not one of the 3 'primary' source documents in a job order costing system?

kan-ban card

Equivalent units of production are equal to the

number of whole units that could have been completed if all work of the period had been used to produce whole units