Principles of Accounting 2 - Test 1
activity cost pool
A cost bucket in which costs related to a particular activity measure are accumulated is called a(n) ______.
a factor that causes overhead costs to occur
A cost driver is
underapplied
A debit balance in Manufacturing overhead means overhead was
issuance of materials
A journal entry that debits Work in process and Manufacturing overhead and credits Raw materials records the
application of manufacturing overhead costs
A journal entry that debits Work in process and credits Manufacturing overhead is recording the
reflects differences in how overhead costs are incurred within departments
A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it
overstated for purposes of decision making
A significant limitation of the ABC model is that the product costs computed will most likely be ______.
debited
Actual manufacturing overhead is Blank______ to the Manufacturing overhead account.
allocation
An activity measure in activity-based costing is used as a(n) ______________ base for applying overhead costs to products and services.
unit-level activity
An activity that must be done for each item produced is a(n)
be common to all the company's products and services
An essential quality of an overhead allocation base is that it must
helping target areas for process improvement more accurate product costs helping target areas for process improvement
Benefits of activity-based costing include ______.
an actual rate is not known until the end of the period
Companies use a predetermined overhead rate rather than an actual overhead rate because
finished goods
Completed units that have not yet been sold are found in
both variable and fixed
Costs assigned to units of product in absorption costing include Blank______ manufacturing costs.
work in process
Costs of partially completed units are accounted for in
product
Designing and advertising a good are both ______-level activities.
materials are issued to the job
Direct materials costs are recorded on the job cost sheet when the
Manufacturing overhead $8,000 and credit Accounts payable $8,000
If a company incurs $2,000 of factory rent, $1,000 of factory utilities, and $5,000 of miscellaneous factory costs, the journal entry to record these transactions would be to debit
should be done by a cross-functional team requires substantial resources requires taking employees away from other tasks
Implementing activity-based costing ______.
administrative costs -
Includes all costs associated with the general management of an organization. Administrative costs can be either direct or indirect costs.
selling costs
Includes all costs necessary to secure customer orders and get the finished product into the hands of the customer. Selling costs can be either direct or indirect costs.
manufacturing overhead
Includes all manufacturing costs except direct materials and direct labor
period costs
Includes all selling and administrative costs. These costs are expensed on the Income Statement during the period incurred.
product costs
Includes all the costs that are involved in acquiring or making a product
840
Job XYZ has a total manufacturing cost of $600. If the mark-up percentage is 40%, the job will sell for $
construction company
Job-order costing would most likely be used in a(n)
manufacturing overhead and indirect labor
Labor charges that cannot be easily traced to a job are considered
manufacturing and nonmanufacturing costs
Manufacturing companies separate their costs into two broad categories
many different kinds of indirect costs
Manufacturing overhead consists of
the factory supervisor's salary factory insurance
Manufacturing overhead costs include
selling and administrative expenses; gross margin
Net operating income is calculated by subtracting ______ from ______.
batch
Processing purchase orders is considered to be a(n) ______-level activity.
direct materials
Raw materials that become an integral part of the finished product and whose costs can be conveniently traced to it.
total cost in the activity cost pool; activity level in the activity cost pool
The activity rate is computed by dividing the ______ by the ______.
increases cost of goods sold and decreases net operating income
The adjustment for underapplied overhead ______.
estimated total manufacturing overhead cost ÷ estimated total allocation base
The formula for a predetermined overhead rate is
predetermined overhead rate ×
The formula for applying overhead to a specific job is: Blank______ amount of allocation base incurred by job.
Manufacturing overhead and credits Property taxes payable
The journal entry to record accrued property taxes for a factory building debits
an expense account and credits Cash or a liability
The journal entry to record selling and administrative salaries debits
raw materials
The journal entry to record the purchase of materials debits
X =
The level of activity.
direct labor cost. direct materials cost. predetermined manufacturing overhead.
The total cost of a job includes:
a =
The total fixed cost (the vertical intercept of the line).
Y =
The total mixed cost.
bill of materials
The type and quantity of each type of direct material needed to complete a unit of product is listed on the
b =
The variable cost per unit of activity (the slope of the line).
ending raw materials inventory and Indirect materials used
To calculate direct materials on the schedule of cost of goods manufactured, add purchases to beginning raw materials inventory and subtract ______.
30
Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plantwide overhead rate is $ ________ per machine hour.
ending finished goods inventory from goods available for sale.
Unadjusted cost of goods sold is calculated by subtracting:
overcosts; undercosts
Usually, traditional costing Blank______ high-volume products and Blank______ low-volume products.
Close it to Cost of goods sold. Closed proportionally to Work in process, Finished goods, and Cost of goods sold.
What methods can be used to dispose of underapplied or overapplied manufacturing overhead?
activity-based
When a company creates overhead rates based on the actions it performs, it is employing an approach called ______-______ costing.
Finished Goods
When a job is completed, its costs are transferred into ______.
subsidary ledger
When all of a company's job cost sheets are viewed collectively, they form what is known as a(n)
only direct
When labor costs are incurred, Blank______ labor costs are added directly to the Work in Process account.
unit product cost is used to calculate the amount transferred from finished goods to cost of goods sold
When only a portion of the units involved in a job are sold, the
Raw materials inventory represents the cost of materials not yet used in production. When materials are purchased they are recorded in the Raw materials inventory account.
Which of the following statements are true?
Paperwork at a law firm
Which of the following would be considered direct materials in a service firm that uses job-order costing?
accounting hours
Which of the following would not be a good allocation base for manufacturing overhead?
Nonmanufacturing costs
Which of the following would not be charged to the Manufacturing overhead account?
The salary of the manager at a hair salon.
Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing?
Closing to Cost of goods sold is simpler, and allocating is more accurate.
Which of the statements regarding closing out over or underapplied overhead is correct?
$300 is reported as expense and $900 is reported as an asset
a company purchased a 12 month insuracne policy on october 1 for $1,200. on the december 31 annual financial statements, ________
direct ; indirect
a cost that can be easily and conveniently traced to a specific cost object is a(n) ________ cost of that object, whereas cost that cannot be easily and conveniently traced to that specific cost object are _______ costs.
mixed
a cost that contains both variable and fixed cost elements is a ______ cost.
mixed cost
a cost that contains both variable and fixed elements.
sunk cost
a cost that has already been incurred and that cannot be changed now or in the future. Sunk costs are not relevant to decisions
fixed cost
a cost that remains constant, in total, regardless of changes in the level of the activity
variable cost
a cost that varies, in total, in direct proportion to changes in the level of activity.
manufacturing overhead and indirect materials
a dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of
manufacturing overhead
a factory costs such as cleaning supplies, taxes, insurance, and janitor wages as
in total
a fixed cost remains fixed ____ within the relevant range of activity.
direct material
a laptop computer manufacturer would con sider the computers processor chip to be a(n) ________ cost.
Overhead is underapplied
actual overhead is more than applied overhead if
executive compensation and public relations costs
administrative costs include
traditional ; contribution
an income statement focusing on product and period costs has been prepared using a(n) _____ format, while a(n) _______ format income statement makes a distinction between fixed and variable costs.
cost object
anything for which cost data are desired including products, customers, jobs, organizational subunits, etc.
fixed
as the level of activity moves outside of the relevant range, ____ costs increase or decrease in discrete steps rather than an linear fashion.
real estate taxes and top management salaries
committed fixed costs include _____
sales revenue minus variable costs
contribution margin is ____
direct costs
costs that can be easily and conveniently traced to a specified cost object.
indirect costs
costs that cannot be easily and conveniently traced to a specified cost object.
differential (or incremental) costs
costs that differ between any two alternatives
Underapplied or overapplied overhead
difference between overhead applied to work in process and actual overhead
the difference in cost between two alternatives and also known as incremental cost
differential cost is
decision making
differential costs, opportunity costs, and incremental costs are all cost classifications used in _______
conversion cost
direct labor cost plus manufacturing overhead costs (these costs are incurred to convert raw materials into a finished product)
prime cost
direct materials cost plus direct labor cost.
product
direct materials, direct labor, and manufacturing overhead are all ______ costs.
behavior
how individual costs react to changes in activity level is referred to as a cost _____
activity base
is a measure of what causes the incurrence of variable costs.
relevant range
is that range of activity within which the assumptions made about cost behavior are valid.
the cost of goods finished
is the sum of all amounts transferred from Work in process to Finished goods during a period
direct labor
labor costs that can be easily traced to individual units of product (also called touch labor).
activity based
management involves focusing on activities to eliminate waste, decrease processing time, and reduce defects.
direct materials, direct labor, and manufacturing overhead
manufacturing costs include
indirect materials, factory supervisors' salaries, and factory depreciation
manufacturing overhead costs include
should be considered in decision making and are benefits lost when choosing one option over another
opportunity costs
are expensed in the period incurred and include all costs that re not product costs
period costs _____
direct materials and direct labor
prime cost include
committed fixed costs
represent investments with a multi-year planning horizon that cannot be easily adjusted in the short term
indirect
salaries of factory supervisors and factory maintenance personnel are examples of _____ labor costs.
The schedule of cost of goods sold
summarizes the portions of those costs that remain in ending Finished Goods inventory and that are transferred out of Finished Goods into Cost of Goods Sold.
true
the finished product of one company can become raw materials for another company.
opportunity cost
the potential benefit that is given up when one alternative is selected over another.
marginal
the revenue obtained from selling one additional unit of product is called _______ revenue
discretionary fixed costs
usually arise from annual decisions by management and they can be easily reduced in the short term
factory rent, factory insurance, and administrative salaries
which of the following are most likely fixed costs?
fixed costs remain constant in total and vary per unit and the assumption that cost behavior is strictly linear in reasonably valid
within the relevant range of activity ________
variable
within the relevant range, a cost that changes in direct proportion to changes in the activity level a _____ cost.