Accounting 231

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

Companies who uses Activity Based Cost systems, will have lower overhead costs on products that have less production volumes.

False

Entry (16) in the below T-account represents the cost of goods manufactured transferred to Finished Goods from Work in Process.

False

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

To calculate POHR, which of the following information is not used? The estimated total manufacturing overhead cost The estimated total fixed manufacturing overhead cost The variable manufacturing overhead cost per unit The estimated total amount of the allocation base

The variable manufacturing overhead cost per unit

The journal entry to record applying overhead during the production process is:

Work in Process Manufacturing Overhead

Factory overhead is typically a(n):

mixed cost

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

False

Indirect costs, such as manufacturing overhead, are variable costs

False

Two of the reasons why manufacturing overhead may be underapplied are: (1) the estimated total manufacturing overhead cost may have been too high; and (2) the estimated total amount of the allocation base may have been too low.

False

As the level of activity increases, how will a mixed cost in total and per unit behave?

In total - increase, per unit - decrease

In a job-order costing system, indirect labor cost is usually recorded as a debit to:

Manufacturing overhead

What effect will the overapplied overhead have on PearCo's net operating income?

Net operating income will decrease

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

True

An activity measure in activity-based costing expresses how much of an activity is carried out and it is used as the allocation base for assigning overhead costs to products and services.

True

An activity-based costing system is generally more difficult to set up and run than a traditional cost system.

True

Instead of allocating cost evenly across each production line, Job-Order costing system allocate manufacturing overhead to each job based on the labor hour or machine hour produced by each job.

True

Opportunity costs at a manufacturing company are not part of manufacturing overhead.

True

Rather than using a single allocation base such as direct labor-hours or machine-hours, in activity-based costing a company uses a number of allocation bases for assigning costs to products.

True

Suppose you are trying to decide whether to drive or take the train to Portland to attend a concert. You have ample cash to do either, but you don't want to waste money needlessly. Is the cost of the train ticket relevant in this decision? In other words, should the cost of the train ticket affect the decision of whether you drive or take the train to Portland?

Yes, the cost of the train ticket is relevant

All of the following are examples of product costs except: depreciation on the company's retail outlets salary of the plant manager insurance on the factory equipment costs of factory equipment

depreciation on the company's retail outlets

Which of the following costs would be variable with respect to the number of cones sold at Ferdinand? The cost of electricity in store The cost of the store manager The cost of ice-cream The cost of the refrigerator

the cost of ice cream

Actual overhead is known at the beginning of the period. So there is no need to use estimated number to determine ROHR.

true