Cost Exam Review 1

TDABC

1. Capacity ratio is total costs/ total of all hours at capacity 2. Apply rate based on driver

False (not based on activity- can only use unit-level cost driver) (1) Unit-level costing first assigns overhead costs to departmental pools and then assigns these costs to products using predetermined overhead rates based on activity drivers. False (2) If actual overhead is greater than applied UNDER overhead it is called over-applied overhead. True (3) Non-unit-level drivers are factors measuring the demands that cost objects place on activities. False (4) The difference between actual overhead and applied overhead is underapplied overhead. False (5) If overhead is a significant proportion of manufacturing costs, the distortion caused by using the wrong drivers or two few drivers must not be serious. False (6) Activity-based costing system uses only non-unit level drivers for costing. True (7) Compared to a single plantwide rate based on units produced, activity-based cost assignment is the most accurate method of costing because it follows a cause-and-effect pattern of overhead consumption. True (8) An activity-based costing system traces costs to activities and then to products and other cost objects. False (9) Time driver activity-based costing requires the need to identify resource drivers to assign costs to activities. False (10) The use of unit-level cost drivers to assign costs tend to over-cost low-volume products. False (11) Heterogeneity means that services cannot be inventoried and must be consumed when performed. False (12) Manufacturing firms produce intangible products that cannot be inventoried. False (13) Cost accumulation is the determination of the dollar amounts of direct materials, direct labor and overhead costs, and cost measurement is the recognition and recording of costs. False (14) Unit cost is a critical piece of information for a manufacturing business but not for a service company. False (15) The job-order cost sheet accumulates the cost of all the jobs produced. False (16) The source document known as a time ticket assigns the direct overhead to each particular job. True (17) A job-order costing process would be applicable for an airplane manufacturer. True (18) Cost flow follows costs from the point they are incurred to the point they are recognized as an expense on the income statement. False (19) When materials are requisitioned, the costs of the materials "flow" into the materials inventory account. False (20) In a job-order costing system, direct labor costs assigned to a job are different than the costs assigned to work-in-process inventory. False (21) In a job-order costing system, overhead costs assigned to a job are different than the costs assigned to work-in-process inventory. True (22) In a job-order costing system, actual overhead costs never enter the work-in-process inventory accounts. False (23) The costs of a partially completed job are transferred from the work-in-process inventory account to the finished goods inventory account. True (24) A debit balance in overhead control implies that actual overhead costs exceed overhead applied. True (25) In job-order costing, departmental overhead rates and activity-based costing affect only the application of overhead. False (26) Abnormal spoilage is charged to the job that caused it. True (27) Costs of normal spoilage are included in overhead and applied to all units produced. False (28) Number of machine hour not an example of a unit-level cost driver. False (29) Number of machine hour not an example of an activity driver in ABC. False (30) Setting up equipment and landscaping are facility-level activities.

1. Unit Level drivers 2. Under 4. Overhead variance 5. It is serious 6. Not only 9. TDABC is simplified, does not require this step 10. Distortion, we allocate based on volume 11. Can 12. Service 13. Switch definitions 14. Distortion, we allocate based on volume 15. Sheet per job 16. Direct Labor 19. Into WIP 20. same as not different 21. same as not different 22. Side note: Put in control account- actual OH will never enter cost flow 23. fully 26. Normal goes to job that caused it 28. It is 29. It is 30. batch-level

Steps for Job order costing

Activity Rate is Costs/ Cost driver then allocate based on activity at job or unit level Note: Problems may change what the driver is

Activity-based costing uses only unit-level drivers for costing

False

Manufacturing firms produce intangible products that cannot be inventoried.

False

Predetermined overhead rates are calculated at the end of each year for the upcoming budget year using the formula: Overhead rate = Budgeted annual driver level ÷ Budgeted annual driver level.

False

Unit-based product costing assigns manufacturing and selling costs to products.

False

A job-order costing process would be applicable for an airplane manufacturer.

True

If overhead is a significant proportion of manufacturing costs, the distortion caused by using the wrong drivers or too few drivers can be serious.

True

Service firms produce intangible products that are NOT separable from the customer.

True

The costs of a completed job are transferred from the work-in-process inventory account to the finished goods inventory account.

True

Unit-based costing first assigns overhead costs to departmental pools and then assigns these costs to products using predetermined overhead rates based on unit-level drivers.

True

What system has The University of Pittsburgh Medical Center implemented? a. Activity-based costing b. Just-in-time c. Outsourcing d. Traditional unit-based costing

a. Activity-based costing

3. What is UPMC's current revenue amount? a. $12 billion b. $21 billion c. $32 billion d. $40 billion

b. $21 billion

1. Which of the following is a center of focus for cost management at the University of Pittsburg Medical Center? a. Improve hiring practices b. Increase charitable donations c. Reduce waste and increase efficiency d. Improve customer service

c. Reduce waste and increase efficiency

1. What do the companies Boeing, the Conlan Company, and Susan's Fine Catering have in common? a. They have environmental concerns. b. They have the same customers. c. They produce custom products. d. They use the same suppliers.

c. They produce custom products.

2. What costing system is used by Marvel in producing movies? a. Additive costing b. Traditional unit costing c. Activity-based costing d. Job-order costing

d. Job-order costing

5 unit level cost drivers

•FIVE unit-level cost drivers.- determines whether unit level •units produced •direct labor •direct labor hours •direct material machine hours