Question 1

In order to achieve higher quality cost information from the assignment of overhead costs to products manufactured, the use of a predetermined overhead rate is being replaced by:
A)absorption costing.
B)job order costing.
C)activity-based costing.
D)process costing.

Accepted Answer

Activity-based costing (ABC) provides more accurate cost information by assigning overhead costs to products based on the actual activities and resources consumed, rather than using a broad predetermined overhead rate.

Question 2

Direct costing may be used for:
A)internal reporting purposes.
B)external financial reporting purposes.
C)income tax reporting purposes.
D)All of the answers are correct.

Accepted Answer

Direct costing is typically used for internal reporting purposes to aid in decision-making and management analysis. It is not generally accepted for external financial reporting or income tax reporting.

Question 3

The three components of product costs are:
A)direct material, supervisor salaries, selling expenses.
B)direct labor, manufacturing overhead, indirect material.
C)direct material, direct labor, manufacturing overhead.
D)manufacturing overhead, indirect material, indirect labor.

Accepted Answer

The three components of product costs are direct material, direct labor, and manufacturing overhead. These are the costs directly associated with the production of goods.

Question 4

The three sections of a statement of cost of goods manufactured include:
A)raw material, direct labor, manufacturing overhead.
B)variable expenses, contribution margin, fixed expenses.
C)sales revenue, gross profit, selling and administrative expenses.
D)direct costs, indirect costs, operating profit.

Accepted Answer

The statement of cost of goods manufactured includes raw material, direct labor, and manufacturing overhead, which are the primary components of manufacturing costs.

Question 5

The change in the amount of manufacturing overhead costs applied to a company's mix of products that are produced when using a single cost driver rate as compared to using activity-based cost driver rates is known as:
A)under/over applied overhead.
B)cost dysfunction.
C)cost absorption.
D)cost distortion.

Accepted Answer

Cost distortion occurs when a single cost driver rate inaccurately allocates overhead costs across products, leading to some products being over-costed and others under-costed compared to using activity-based costing.

Question 6

Which of the following is a true statement regarding absorption and/or direct costing?
A)A firm can choose to use either absorption or direct costing for income tax purposes.
B)A firm can choose to use either absorption or direct costing for financial reporting purposes.
C)Direct costing assigns only direct materials and direct labor to products.
D)Absorption costing includes fixed overhead in product costs whereas direct costing does not.

Accepted Answer

Absorption costing includes all manufacturing costs, including fixed overhead, in product costs, while direct costing (also known as variable costing) only includes variable costs.

Question 7

Total manufacturing costs for the month on the statement of costs of goods manufactured equals:
A)variable costs + fixed costs + mixed costs.
B)work in process inventory - finished goods inventory.
C)cost of goods sold - cost of goods manufactured.
D)cost of raw material used + direct labor cost incurred + manufacturing overhead applied.

Accepted Answer

Total manufacturing costs include the cost of raw materials used, direct labor costs incurred, and manufacturing overhead applied.

Question 8

If all units produced during March are sold, and there is no change in the number of units in the beginning finished goods inventory, then:
A)income determined with absorption costing will equal income determined with direct costing.
B)ending work in process inventory will increase with absorption costing.
C)income determined with absorption costing will be higher than income determined with direct costing.
D)ending finished goods inventory will increase.

Accepted Answer

When all units produced are sold and there is no change in beginning finished goods inventory, both absorption and direct costing will result in the same income because there are no inventory changes to affect the cost allocation.

Question 9

The predetermined overhead application rate based on direct labor hours is computed as:
A)actual total overhead costs divided by actual direct labor hours.
B)estimated total overhead costs divided by estimated direct labor hours.
C)actual total overhead costs divided by estimated direct labor hours.
D)estimated total overhead costs divided by actual direct labor hours.

Accepted Answer

The predetermined overhead application rate is calculated by dividing estimated total overhead costs by estimated direct labor hours to allocate overhead costs to products or job orders.

Question 10

Absorption costing and direct costing differ in the treatment of:
A)direct labor costs.
B)variable manufacturing overhead.
C)fixed manufacturing overhead.
D)selling expenses.

Accepted Answer

Absorption costing includes fixed manufacturing overhead in product costs, while direct costing treats it as a period expense.

Question 11

Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing?
A)units produced equal units sold.
B)units produced are greater than units sold.
C)units produced are less than units sold.
D)income determined with absorption costing will always equal income determined with direct costing.

Accepted Answer

When units produced are greater than units sold, some fixed manufacturing overhead costs are deferred in inventory under absorption costing, leading to higher income compared to direct costing, where all fixed costs are expensed in the period incurred.

Question 12

A debit balance in the manufacturing overhead account at the end of the period indicates that:
A)manufacturing overhead is overapplied.
B)manufacturing overhead is underapplied.
C)manufacturing overhead has been accurately applied.
D)None of the answers are correct.

Accepted Answer

A debit balance in the manufacturing overhead account indicates that the actual overhead costs were greater than the applied overhead costs, meaning overhead is underapplied.

Question 13

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a:
A)cost driver.
B)cost applier.
C)direct cost.
D)cost object.

Accepted Answer

A cost driver is the activity that causes the incurrence of a cost in an activity-based costing system.

Question 14

Which of the following describes the correct sequence of flow of costs for a manufacturing firm?
A)Raw materials, finished goods, work-in-process, cost of goods sold.
B)Work-in-process, raw materials, finished goods, cost of goods sold.
C)Raw materials, work-in-process, finished goods, cost of goods sold.
D)Raw materials, work-in-process, cost of goods sold, finished goods.

Accepted Answer

The correct sequence is: Raw materials are used in production, becoming Work-in-Process, which are then completed as Finished Goods, and finally sold, becoming Cost of Goods Sold.

Question 15

A predetermined manufacturing overhead rate is used to:
A)accumulate actual manufacturing overhead costs as they are incurred.
B)assign indirect costs to the units produced.
C)establish predetermined selling prices for manufactured products.
D)assign selling and administrative expenses to total manufacturing costs.

Accepted Answer

A predetermined manufacturing overhead rate is used to allocate indirect costs to products based on a consistent basis, typically using a cost driver like machine hours or labor hours.

Question 16

An excess of cost of goods manufactured over cost of goods sold for the period represents:
A)an increase in gross profit.
B)a decrease in work in process inventory.
C)overapplied manufacturing overhead.
D)an increase in finished goods inventory.

Accepted Answer

An excess of cost of goods manufactured over cost of goods sold indicates that more goods were produced than sold, leading to an increase in finished goods inventory.

Question 17

On the statement of cost of goods manufactured, which of the following items would not be reported?
A)ending work in process inventory.
B)raw materials used.
C)direct labor costs.
D)gross profit.

Accepted Answer

Gross profit is not reported on the statement of cost of goods manufactured; it is reported on the income statement.

Question 18

The inventory accounts for a manufacturing company would not include:
A)Manufacturing overhead.
B)Work-in-process.
C)Raw materials.
D)Finished goods.

Accepted Answer

Manufacturing overhead is a cost account, not an inventory account. Inventory accounts include raw materials, work-in-process, and finished goods.

Question 19

Which of the following is not an account that over/under applied overhead is transferred to at the end of an accounting period?
A)Cost of Goods Sold.
B)Work-in-Process.
C)Raw Materials.
D)Finished Goods.

Accepted Answer

Raw Materials is not an account that over/under applied overhead is transferred to; it typically involves inventory accounts like Cost of Goods Sold, Work-in-Process, and Finished Goods.

Question 20

Which of the following costs are included in the "for product costing purposes" in the big-picture cost classification model?
A)Variable cost and fixed cost.
B)Differential cost and opportunity cost.
C)Product cost and period cost.
D)Committed cost and controllable cost.

Accepted Answer

Product cost and period cost are included in product costing as they relate to manufacturing and non-manufacturing costs, respectively.

Quiz 13: Cost Accounting and Reporting

In order to achieve higher quality cost information from the assignment of overhead costs to products manufactured, the use of a predetermined overhead rate is being replaced by:

Direct costing may be used for:

The three components of product costs are:

The three sections of a statement of cost of goods manufactured include:

The change in the amount of manufacturing overhead costs applied to a company's mix of products that are produced when using a single cost driver rate as compared to using activity-based cost driver rates is known as:

Which of the following is a true statement regarding absorption and/or direct costing?

Total manufacturing costs for the month on the statement of costs of goods manufactured equals:

If all units produced during March are sold, and there is no change in the number of units in the beginning finished goods inventory, then:

The predetermined overhead application rate based on direct labor hours is computed as:

Absorption costing and direct costing differ in the treatment of:

Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing?

A debit balance in the manufacturing overhead account at the end of the period indicates that:

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a:

Which of the following describes the correct sequence of flow of costs for a manufacturing firm?

A predetermined manufacturing overhead rate is used to:

An excess of cost of goods manufactured over cost of goods sold for the period represents:

On the statement of cost of goods manufactured, which of the following items would not be reported?

The inventory accounts for a manufacturing company would not include:

Which of the following is not an account that over/under applied overhead is transferred to at the end of an accounting period?

Which of the following costs are included in the "for product costing purposes" in the big-picture cost classification model?