Cost CH 4

Costs that are subject to short-run fluctuations for given jobs are ________. A) actual costs B) budgeted direct costs C) budgeted indirect costs D) normal costs

A) actual costs

________ is the process of distributing indirect costs to products. A) Cost allocation B) Job cost recording C) Cost pooling D) Cost tracing

A) Cost allocation

Which of the following statements regarding manufacturing overhead allocation is true? A) It includes all manufacturing costs that cannot be directly traced to a product or service. B) The costs can be grouped only as a single indirect-cost pool. C) Total costs are unknown at the end of the accounting period. D) Allocated amounts are debited to Manufacturing Overhead Control.

A) It includes all manufacturing costs that cannot be directly traced to a product or service.

The ________ adjusts individual job-cost records to account for underallocated or overallocated overhead. A) adjusted allocation-rate B) proration approach C) write-off to cost of goods sold approach D) weighted-average cost approach

A) adjusted allocation-rate

Which of the following items is debited to the Work-in-Process account? A) allocated manufacturing overhead B) completed goods transferred out of the plant C) accumulated depreciation on fixed assets D) accounts receivable

A) allocated manufacturing overhead

Process costing ________. A) allocates all product costs, including materials, and labor B) results in different costs for different units produced C) is commonly used by general contractors who construct custom-built homes D) is used exclusively in manufacturing

A) allocates all product costs, including materials, and labor

Which of the following companies will use a process costing system? A) an oil refining company B) a manufacturer of ships C) a custom watch manufacturer D) an advertising firm

A) an oil refining company

The budgeted indirect-cost rate is calculated ________. A) at the beginning of the year B) during the year C) at the end of each quarter D) at the end of the year

A) at the beginning of the year

The budgeted indirect-cost rate for each cost pool is computed as ________. A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base B) budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs C) actual annual indirect costs divided by budgeted annual quantity of cost allocation base D) budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base

A) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base

When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base. A) budgeted; actual B) budgeted; budgeted C) actual; budgeted D) actual; actual

A) budgeted; actual

A ________ links an indirect cost to a cost object. A) cost-allocation base B) cost pool C) cost assignment D) cost tracing

A) cost-allocation base

The Materials Control account is increased when ________. A) direct materials are purchased B) indirect materials are sold C) materials are requisitioned for production D) materials are converted to finished goods

A) direct materials are purchased

The actual indirect-cost rate is calculated by ________. A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base B) multiplying actual total indirect costs by the actual total quantity of the cost-allocation base C) dividing the actual total quantity of the cost allocation base by actual total indirect costs D) multiplying the actual total quantity of the cost allocation base by actual total indirect costs

A) dividing actual total indirect costs by the actual total quantity of the cost-allocation base

The ending balance in the Work-in-Process Control account represents the costs of all jobs that ________. A) have not been completed B) have been completed but not sold C) have been completed and sold to customers D) are reported on the income statement

A) have not been completed

A company would use multiple cost-allocation bases ________. A) if managers believed the benefits exceeded the additional costs of that costing system B) because there is more than one way to allocate overhead C) because this is a simpler approach than using one cost allocation base D) if managers believe that using multiple cost-allocation bases is the only acceptable method

A) if managers believed the benefits exceeded the additional costs of that costing system

Problems with costing occur when ________. A) incorrect job numbers are recorded on source documents B) bar coding is used to record materials used on the job C) a computer screen requests an employee number before that employee is able to work on information related to a specific job D) incorrect product delivery forms are entered into the system

A) incorrect job numbers are recorded on source documents

Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost rates? A) shorter the period, the greater is the influence of seasonal patterns on the amount of costs B) longer the period, the greater is the influence of seasonal patterns on the amount of costs C) shorter the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs D) longer the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs

A) shorter the period, the greater is the influence of seasonal patterns on the amount of costs

The adjusted allocation approach yields the benefits of ________. A) timeliness and convenience of normal costing B) allocating budgeted manufacturing overhead costs at the end of the year C) write-off to the cost of goods sold approach D) the proration approach

A) timeliness and convenience of normal costing

Each indirect-cost pool of a manufacturing firm ________. A) utilizes a separate cost-allocation rate B) is a subset of total direct costs C) relates to multiple cost centres D) utilizes the same cost-allocation rate for all costs incurred

A) utilizes a separate cost-allocation rate

When a normal costing system is used, clients using proportionately more full-time employees than trainees will ________. A) be overbilled for actual resources used B) be underbilled for actual resources used C) be billed accurately for actual resources used D) result in an underallocation of direct costs

B) be underbilled for actual resources used

Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Identify indirect costs B. Compute the total cost of the job C. Select cost-allocation bases D. Compute the indirect cost rate A) ACDB B) CADB C) BACD D) DCAB

B) CADB

When a job is complete ________. A) actual indirect manufacturing labor is excluded from the total cost of the job B) Finished Goods Control is debited C) the cost of the job is transferred to Manufacturing Overhead Control D) it is reduced from Manufacturing Overhead Control account

B) Finished Goods Control is debited

Which of the following is true of plant utility costs? A) It increases the Materials Control account. B) It increases the Manufacturing Overhead Control account. C) It increases the Work-in-Process Control account. D) It is a direct cost.

B) It increases the Manufacturing Overhead Control account.

Which of the following is true of the Work-in-Process Control account? A) It tracks all direct material purchases. B) Its balance is the sum of amounts from all in-process individual job-cost records. C) It is an expense account. D) It tracks overhead costs in-process from beginning through completion

B) Its balance is the sum of amounts from all in-process individual job-cost records.

Payment of the factory rent increases the ________. A) Work-in-Process Control account B) Manufacturing Overhead Control account C) Cost of Goods Sold account D) Factory Depreciation account

B) Manufacturing Overhead Control account

When direct materials are requisitioned the ________ account is increased. A) Manufacturing Overhead Control B) Work-in-Process Control C) Materials Control D) Accounts Payable Control

B) Work-in-Process Control

Which of the following general ledger accounts will have a subsidiary ledger account? A) Cost of Goods Sold account B) Work-in-Process Control account C) Joe's Accounts Receivable subsidiary account D) Operating Expenses account

B) Work-in-Process Control account

Job-costing is likely to be used by________. A) oil refining companies B) advertising agencies C) postal service companies D) beverage production companies

B) advertising agencies

For externally reported inventory costs, the Work-in-Process Control account is increased (debited) by ________. A) marketing costs B) allocated plant utility costs C) the purchase costs of direct and indirect materials D) customer-service costs

B) allocated plant utility costs

Direct costs ________. A) are anything for which a measurement of costs is desired B) are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner C) focus specifically on the costing needs of the CFO D) are costs related to a particular cost object that cannot be traced to that cost object in a cost-effective manner

B) are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner

One reason indirect costs may be overapplied is because ________. A) the actual allocation base quantity exceeds the budgeted quantity B) budgeted indirect costs exceed actual indirect costs C) requisitioned direct materials exceed budgeted material costs D) Both A and B are correct.

B) budgeted indirect costs exceed actual indirect costs

During an accounting period, job costs are computed on an ongoing basis by the use of ________. A) actual allocation rates B) budgeted indirect-cost rates C) overallocated indirect-cost rates D) underallocated indirect-cost rates

B) budgeted indirect-cost rates

A job-cost sheet details the ________. A) direct materials purchased and paid B) direct labor costs incurred C) indirect labor costs incurred D) actual indirect overhead costs incurred

B) direct labor costs incurred

A job that shows low profitability may be the result of ________. A) excessive usage of direct materials B) inefficient direct manufacturing labor C) overpricing the job D) insurance claim of the damaged goods

B) inefficient direct manufacturing labor

If indirect-cost rates are calculated monthly, distortions might occur because of ________. A) rental costs paid monthly B) property tax payments made in July and December C) routine monthly preventive-maintenance costs that benefit future months D) salary hikes at the beginning of the financial year

B) property tax payments made in July and December

For a given job the direct costs associated with the job are ________. A) actual overhead B) raw materials C) sunk costs D) fixed costs

B) raw materials

Job costing ________. A) cannot be used by the service industry B) records the flow of costs for each product or service C) allocates an equal amount of cost to each unit made during a time period D) is used when each unit of output is identical

B) records the flow of costs for each product or service

The spreading of underallocated or overallocated overhead among ending work-in-process, finished goods, and cost of goods sold is called ________. A) the adjusted allocation rate approach B) the proration approach C) the write-off of cost of goods sold approach D) the weighted-average cost approach

B) the proration approach

Job costing is ________. A) used by businesses to price identical products B) used by businesses to price unique products for different jobs C) used to calculate equivalent units D) used to calculate the percentage of work completed

B) used by businesses to price unique products for different jobs

Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $25 per direct manufacturing labor hour. Calculate the profit earned on 50 units if each unit sells for $9,000. A) $65,000 B) $80,000 C) $75,000 D) $2,500

C) $75,000

Actual (rather than allocated) manufacturing overhead costs are first recorded in the ________. A) Work-in-Process Control account B) Finished Goods Control account C) Manufacturing Overhead Control account D) Cost of Goods Sold account

C) Manufacturing Overhead Control account

Which of the following differentiates job costing from process costing? A) Job costing is used when each unit of output is identical, and process costing deals with unique products. B) Job costing is used when each unit of output is identical and not produced in batches, and process costing deals with unique products produced on large scale. C) Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches. D) Job costing is used by manufacturing industries, and process costing is used by service industries

C) Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.

In a costing system, ________. A) cost tracing allocates indirect costs B) cost allocation assigns direct costs C) a cost-allocation base can be either financial or nonfinancial D) a cost object should be a product and not a department or a geographic territory

C) a cost-allocation base can be either financial or nonfinancial

A job-cost record uses information from ________. A) a materials-requisition record to record raw material purchases from suppliers B) a materials-requisition report to record the type and quantity of item received in an order from a supplier C) a labor-time card to record an employee's wage rate and hours spent on a particular job D) the bill of materials to ensure the goods are of the prescribed quality

C) a labor-time card to record an employee's wage rate and hours spent on a particular job

Which of the following includes both traced direct costs and allocated indirect costs? A) cost tracing B) cost pools C) cost assignments D) cost allocations

C) cost assignments

A ________ is a grouping of individual indirect cost items. A) cost allocation base B) cost assignment C) cost pool D) job-costing system

C) cost pool

Product costing information will include ________. A) to increase profits B) to increase sales and image of the company C) for cost management D) for efficient human resource management

C) for cost management

Job costing information is used ________. A) to determine target customers B) to calculate the percentage of completion C) for internal financial reporting D) to enhance public relations

C) for internal financial reporting

The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________. A) adjusted allocation-rate approach B) proration approach C) write-off to cost of goods sold approach D) adjusted write-off approach

C) write-off to cost of goods sold approach

An example of a denominator reason for calculating annual indirect-cost rates includes ________. A) higher heating bills in the winter B) semi-annual insurance payments in March and September C) higher levels of output demanded during the fall months D) All of these answers are correct

C) higher levels of output demanded during the fall months

An increase in direct labor cost per unit ________. A) increases the fixed cost B) increases profits C) increases the variable cost D) increases overhead costs

C) increases the variable cost

The advantage of using normal costing instead of actual costing is ________. A) indirect costs are assigned at the end of the year when they are known B) the job cost is more accurate under normal costing C) indirect costs are assigned to a job on a timely basis D) normal costing provides a higher gross profit margin

C) indirect costs are assigned to a job on a timely basis

The basic source document for direct manufacturing labor is the ________. A) job-cost record B) materials-requisition record C) labor-time record D) labor-requisition record

C) labor-time record

In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job. A) direct materials B) direct labor C) manufacturing overhead costs D) total costs

C) manufacturing overhead costs

The difference between actual costing and normal costing is ________. A) normal costing uses actual quantities of direct-costs B) actual costing uses actual quantities of direct-costs C) normal costing uses budgeted indirect-costs D) actual costing uses actual quantities of cost-allocation bases

C) normal costing uses budgeted indirect-costs

Managers and accountants collect most of the cost information that goes into their systems through ________. A) an information databank B) computer programs C) source documents D) time surveys

C) source documents

When the allocated amount of indirect costs are less than the actual amount, indirect costs have been ________. A) within budget B) overallocated C) underallocated D) perfectly allocated

C) underallocated

Process costing is ________. A) used to enhance employees' job satisfaction B) used by businesses to price unique products or identical products produced in batches C) used by businesses to price identical products D) used by businesses when manufacturing goods above normal capacity

C) used by businesses to price identical products

Actual costing is a costing system that traces direct costs to a cost object by ________. A) using the budgeted direct cost rates times the budgeted quantities of direct-cost inputs B) using the actual direct costs rates times the budgeted quantities of the direct-cost inputs C) using the actual direct cost rates times the actual quantities of the direct-cost inputs D) using the budgeted direct cost rates times the actual quantities of the direct cost inputs

C) using the actual direct cost rates times the actual quantities of the direct-cost inputs

Bernard Company's budgeted manufacturing overhead is $3,300,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 60,000. What is the manufacturing overhead rate? A) $47.00 B) $56.00 C) $75.00 D) $55.00

D) $55.00

Which of the following statements about actual costing is true? A) Manufacturing costs of a job are available earlier under actual costing. B) Corrective actions can be implemented sooner under actual costing. C) Actual costing uses budgeted indirect-cost rates calculated annually. D) Actual costing uses actual indirect-cost rates calculated annually

D) Actual costing uses actual indirect-cost rates calculated annually

Which account is debited if materials costing $100,000 are sold? A) Revenues account B) Work-in-Process Control account C) Materials Control account D) Cost of Goods Sold account

D) Cost of Goods Sold account

Which of the following statements about normal costing is true? A) Direct costs and indirect costs are traced using an actual rate. B) Direct costs and indirect costs are traced using budgeted rates. C) Direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate. D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate

D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate

Which account is credited to write off the difference between allocated and actual overhead using the proration approach? A) Work-in Process Control B) Manufacturing Overhead Allocated C) Finished Goods Control D) Manufacturing Overhead Control

D) Manufacturing Overhead Control

Which account is credited if direct materials of $20,000 and indirect materials of $3,000 are sent to the manufacturing plant floor? A) Manufacturing Overhead Control for $23,000 B) Work-in-Process Control for $23,000 C) Accounts Payable Control for $17,000 D) Materials Control for $23,000

D) Materials Control for $23,000

The ________ approach carries the underallocated or overallocated amounts to overhead accounts in the following year. A) adjusted allocation-rate B) proration C) write-off to cost of goods sold D) None of these answers are correct

D) None of these answers are correct

Assigning direct costs to a cost object is called ________. A) cost allocation B) cost assignment C) cost pooling D) cost tracing

D) cost tracing

Which of the following increases (are debited to) the Work-in-Process Control account? A) actual plant insurance costs B) customer services costs C) marketing expenses D) direct manufacturing labor costs

D) direct manufacturing labor costs

The cost allocation base ________. A) is a grouping of individual indirect cost items B) are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way C) is anything for which a measurement of costs is desired D) is a systematic way to link an indirect cost or group of indirect costs to cost objects

D) is a systematic way to link an indirect cost or group of indirect costs to cost objects

In a normal costing system, the Manufacturing Overhead Control account ________. A) is increased by allocated manufacturing overhead B) is credited with amounts transferred to Work-in-Process C) is decreased by allocated manufacturing overhead D) is debited with actual overhead costs

D) is debited with actual overhead costs

An example of a numerator reason for calculating annual indirect-cost rates includes ________. A) fewer production workdays in a month B) cost of raw materials purchased C) higher snow-removal costs during the winter D) the number of units produced

D) the number of units produced