Quiz 3: Predetermined Overhead Rates,Flexible Budgets,and Absorptionvariable Costing
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Q 7Q 7
In a normal cost system,factory overhead is assigned to an overhead control account and then allocated to products and services.
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Q 8Q 8
In an actual cost system,factory overhead is assigned to an overhead control account and then allocated to products and services.
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Q 15Q 15
If overapplied factory overhead is immaterial,the account is closed by a credit to Cost of Goods Sold.
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Q 16Q 16
If overapplied factory overhead is material,the account is closed by a credit to Cost of Goods Sold.
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Q 17Q 17
If overapplied factory overhead is immaterial,the account is closed by a debit to Cost of Goods Sold.
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Q 18Q 18
If underapplied factory overhead is immaterial,the account is closed by a debit to Cost of Goods Sold.
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Q 19Q 19
If underapplied factory overhead is immaterial,the account is closed by a credit to Cost of Goods Sold.
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Q 20Q 20
If underapplied factory overhead is material,it is prorated among Work in Process Inventory,Finished Goods Inventory,and Cost of Goods Sold.
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Q 21Q 21
The estimated maximum potential activity for a specified time is known as theoretical capacity.
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Q 28Q 28
The slope of a regression line is determined by dividing the change in activity level by the change in total cost.
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Q 29Q 29
The slope of a regression line is determined by dividing the change in total cost by the change in activity level.
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Q 30Q 30
The high-low method excludes outliers from the calculation of the slope of a regression line.
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Q 31Q 31
When using the high-low method,fixed costs are computed before the variable component is computed.
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Q 32Q 32
When using the high-low method,the variable component is computed before computing the fixed component.
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Q 33Q 33
A flexible budget is a planning document that presents expected variable and fixed overhead costs at different activity levels.
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Q 34Q 34
A master budget is a planning document that presents expected variable and fixed overhead costs at different activity levels.
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Q 35Q 35
Plantwide overhead rates provide a more accurate computation of factory overhead than departmental overhead rates
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Q 36Q 36
Plantwide overhead rates provide a less accurate computation of factory overhead than departmental overhead rates
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Q 43Q 43
If production exceeds sales,absorption costing net income exceeds variable costing net income.
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Q 44Q 44
If production exceeds sales,absorption costing net income is less than variable costing net income.
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Q 45Q 45
If sales exceed production,absorption costing net income is less than variable costing net income.
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Q 46Q 46
If sales exceed production,absorption costing net income exceeds variable costing net income.
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Q 47Q 47
In a(n)____________________ cost system,factory overhead is assigned directly to products and services.
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Q 48Q 48
In a(n)____________________ cost system,factory overhead is assigned to an overhead control account and then allocated to products and services.
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Q 49Q 49
The dollar amount of overhead assigned to work-in-process inventory using a predetermined rate is known as ____________________ overhead.
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Q 50Q 50
If actual overhead exceeds applied overhead,factory overhead is said to be ____________________.
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Q 51Q 51
If actual overhead is less than applied overhead,factory overhead is said to be ____________________.
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Q 52Q 52
If underapplied or overapplied factory overhead is material,it is prorated among ________________________________________,________________________________________,and ___________________________________.
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Q 53Q 53
If underapplied or overapplied factory overhead is immaterial,it is charged to ______________________________.
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Q 54Q 54
The performance measure that considers routine interruptions is known as ____________________ capacity.
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Q 55Q 55
A performance measure that encompasses a firm's long-run average activity is referred to as ____________________ capacity.
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Q 56Q 56
A performance measure that assumes all production factors are operating perfectly is referred to as ____________________ capacity.
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Q 57Q 57
A performance measure that is short-run in nature and represents a firm's anticipated activity level for the upcoming period is ____________________ capacity.
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Q 58Q 58
Consider the regression equation y = a + bX.The portion of the equation that represents fixed costs is __________.
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Q 59Q 59
Consider the regression equation y = a + bX.The portion of the equation that represents the variable rate is __________.
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Q 60Q 60
Consider the regression equation y = a + bX.The portion of the equation that represents the activity base is __________.
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Q 61Q 61
An observation that is found outside the relevant range is referred to as a(n)____________________.
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Q 62Q 62
When a relationship between several independent variables and one dependent variable is analyzed,the regression is referred to as ____________________.
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Q 63Q 63
When a relationship between one independent variable and one dependent variable is analyzed,the regression is referred to as ____________________.
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Q 64Q 64
A ______________________________ is a planning document that presents expected variable and fixed overhead costs at different activity levels.
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Q 65Q 65
The costing technique that treats fixed manufacturing overhead as a period cost is referred to as ______________ or ____________ costing.
or
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Q 66Q 66
The costing technique that treats all manufacturing costs as inventoriable is referred to as _________________ or ___________ costing.
or
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Q 67Q 67
Sales less variable cost of goods sold is referred to as ________________________________________.
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Q 68Q 68
Temporary profits that result when absorption costing is used and production exceeds sales are referred to as _________________________.
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Q 69Q 69
Since overhead costs are indirect costs,
A)they require some process of allocation.
B)they can be easily traced to production.
C)a predetermined overhead rate is not advantageous.
D)they cannot be allocateD.
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Multiple Choice
Q 70Q 70
Cost allocation is the assignment of ____ costs to one or more products using a reasonable basis.
A)yes yes
B)yes no
C)no no
D)no yes
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Multiple Choice
Q 71Q 71
An actual cost system differs from a normal cost system in that an actual cost system
A)assigns overhead as it occurs during the manufacturing cycle.
B)assigns overhead at the end of the manufacturing process.
C)does not assign overhead at all.
D)does not use an Overhead Control account.
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Q 72Q 72
In a normal cost system,which of the following is used?
A)yes no yes
B)yes yes yes
C)yes yes no
D)no yes no
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Q 74Q 74
One reason annual overhead application rates are used is
A)because of seasonal variability of overhead costs.
B)to help budget overhead costs.
C)to minimize the overhead cost assigned to products.
D)to maximize the overhead cost assigned to products.
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Multiple Choice
Q 75Q 75
Which of the following is not a reason to use predetermined overhead rates?
A)to overcome the problems of assigning overhead to diverse types of products
B)to compensate for fluctuations in monthly overhead costs
C)to provide a means for assigning overhead during the period rather than at the end of the period
D)to smooth out the amount of overhead cost assigned to products when monthly production activity differs
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Q 76Q 76
When a manufacturing company has a highly automated manufacturing plant producing many different products,which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process?
A)direct labor hours
B)direct labor dollars
C)machine hours
D)cost of materials used
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Q 78Q 78
In the formula y = a + bX,y represents
A)fixed costs.
B)total cost.
C)variable costs.
D)mixed costs.
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Q 79Q 79
In the formula y = a + bX,a represents
A)mixed cost.
B)variable cost.
C)total cost.
D)fixed cost.
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Q 80Q 80
In relationship to changes in activity,variable overhead changes
A)no no
B)no yes
C)yes yes
D)yes no
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Q 81Q 81
In relationship to changes in activity,fixed overhead changes
A)yes yes
B)no no
C)no yes
D)yes no
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Q 82Q 82
If the level of activity increases,
A)variable cost per unit and total fixed costs increase.
B)fixed cost per unit and total variable cost increase.
C)total cost will increase and fixed cost per unit will decrease.
D)variable cost per unit and total cost increase.
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Multiple Choice
Q 83Q 83
Weaknesses of the high-low method include all of the following except
A)only two observations are used to develop the cost function.
B)the high and low activity levels may not be representative.
C)the method does not detect if the cost behavior is nonlinear.
D)the mathematical calculations are relatively complex.
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Multiple Choice
Q 84Q 84
If there is no "a" value in a linear cost equation,this is an indication that the cost is
A)fixed.
B)mixed.
C)variable.
D)either fixed or mixeD.
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Q 85Q 85
An outlier is
A)something that happens outside the organization that does not affect production.
B)always used in analyzing a mixed cost.
C)something that happens inside the organization that does not affect production.
D)typically not used in analyzing a mixed cost.
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Multiple Choice
Q 86Q 86
Applied overhead consists of which of the following?
A)actual activity times predetermined overhead rate
B)estimated activity times predetermined overhead rate
C)actual activity times actual overhead rate
D)estimated activity times actual overhead rate
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Q 87Q 87
If a company used two overhead accounts (actual overhead and applied overhead),the one that would receive the most debits would be
A)actual overhead.
B)applied overhead.
C)both would receive an equal number of debits.
D)impossible to determine without additional information.
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Q 88Q 88
If underapplied overhead is considered to be immaterial,it is closed to which of the following accounts?
A)yes yes yes
B)no yes yes
C)yes no no
D)no no yes
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Q 89Q 89
Overapplied overhead will result if
A)the plant is operated at less than expected capacity.
B)overhead costs incurred were greater than estimated overhead costs.
C)overhead costs incurred were less than overhead costs charged to production.
D)overhead costs incurred were greater than overhead charged to production.
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Q 90Q 90
Actual overhead exceeds applied overhead and the amount is immaterial.Which of the following will be true? Upon closing,
A)underapplied increase
B)overapplied decrease
C)overapplied increase
D)underapplied decrease
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Q 91Q 91
If actual overhead is less than applied overhead,which of the following will be true? Upon closing,
A)underapplied credited
B)underapplied debited
C)overapplied debited
D)overapplied credited
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Q 92Q 92
The estimated maximum potential activity for a specified time is:
A)theoretical capacity
B)practical capacity
C)normal capacity
D)expected capacity
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Q 93Q 93
The measure of activity that allows for routine variations in manufacturing activity is:
A)theoretical capacity
B)practical capacity
C)normal capacity
D)expected capacity
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Q 94Q 94
The measure of production that considers historical and estimated future production levels and cyclical fluctuations is referred to as:
A)theoretical capacity
B)practical capacity
C)normal capacity
D)expected capacity
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Multiple Choice
Q 95Q 95
A short-run measure of activity that represents a firm's anticipated activity level for an upcoming period based upon expected demand is referred to as:
A)theoretical capacity
B)practical capacity
C)normal capacity
D)expected capacity
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Q 96Q 96
An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a
A)mixed cost.
B)predictor.
C)direct cost.
D)cost driver.
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Multiple Choice
Q 97Q 97
Thibodeaux Tailors has gathered information on utility costs for the past year.The controller has decided that utilities are a function of the hours worked during the month.The following information is available and representative of the company's utility costs:
If 1,425 hours are worked in a month,total utility cost (rounded to the nearest dollar)using the high-low method should be
A)$947.
B)$954.
C)$959.
D)$976.
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Multiple Choice
Q 98Q 98
Welch Corporation uses a predetermined overhead application rate of $.30 per direct labor hour.During the year it incurred $345,000 dollars of actual overhead,but it planned to incur $360,000 of overhead.The company applied $363,000 of overhead during the year.How many direct labor hours did the company plan to incur?
A)1,150,000
B)1,190,000
C)1,200,000
D)1,210,000
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Multiple Choice
Q 99Q 99
Machine Master,Inc.had the following data regarding monthly power costs:
Assume that management expects 500 machine hours in May.Using the high-low method,calculate May's power cost using machine hours as the basis for prediction.
A)$700
B)$705
C)$710
D)$1,320
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Multiple Choice
Q 100Q 100
Davis Corporation has developed the following flexible budget formula for monthly overhead:
How much overhead should Davis expect if the firm plans to produce 200,000 units?
A)$52,600
B)$59,000
C)$196,600
D)$203,000
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Multiple Choice
Q 101Q 101
Landon Corporation wishes to develop a single predetermined overhead rate.The company's expected annual fixed overhead is $340,000 and its variable overhead cost per machine hour is $2.The company's relevant range is from 200,000 to 600,000 machine hours.Landon expects to operate at 425,000 machine hours for the coming year.The plant's theoretical capacity is 850,000.The predetermined overhead rate per machine hour should be
A)$2.40.
B)$2.57.
C)$2.80.
D)$2.85.
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Multiple Choice
Q 102Q 102
Lawson Corporation
Lawson Corporation has the following data for use of its machinery
Refer to Lawson Corporation.Using the high-low method,compute the variable cost element.
A)$1.02
B)$.98
C)$1.31
D)$1.19
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Multiple Choice
Q 103Q 103
Lawson Corporation
Lawson Corporation has the following data for use of its machinery
Refer to Lawson Corporation.Using the high-low method,compute the fixed cost element (to the nearest whole dollar).
A)$225
B)$138
C)$411
D)$364
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Multiple Choice
Q 104Q 104
Phoenix Corporation
The records of Phoenix Corporation revealed the following data for the current year.
Refer to Phoenix Corporation.Assume,for this question only,actual overhead is $98,700 and applied overhead is $93,250.Manufacturing overhead is:
A)overapplied by $12,900.
B)underapplied by $18,350.
C)overapplied by $5,450.
D)underapplied by $5,450.
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Multiple Choice
Q 105Q 105
Phoenix Corporation
The records of Phoenix Corporation revealed the following data for the current year.
Refer to Phoenix Corporation.Assume that Phoenix has underapplied overhead of $37,200 and that this amount is material.What journal entry is needed to close the overhead account? (Round decimals to nearest whole percent. )
A)Debit Work in Process $8,456;Finished Goods $13,294;Cost of Goods Sold $15,450 and credit Overhead $37,200
B)Debit Overhead $37,200 and credit Work in Process $8,456;Finished Goods $13,294;Cost of Goods Sold $15,450
C)Debit Work in Process $37,200 and credit Overhead $37,200
D)Debit Cost of Goods Sold $37,200 and credit Overhead $37,200
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Multiple Choice
Q 106Q 106
Phoenix Corporation
The records of Phoenix Corporation revealed the following data for the current year.
Refer to Phoenix Corporation.Assume that Phoenix has underapplied overhead of $10,000 and that this amount is immaterial.What is the balance in Cost of Goods Sold after the underapplied overhead is closed?
A)$133,650
B)$123,650
C)$143,650
D)$137,803
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Multiple Choice
Q 107Q 107
Phoenix Corporation
The records of Phoenix Corporation revealed the following data for the current year.
Refer to Phoenix Corporation.Assume that Phoenix has overapplied overhead of $25,000 and that this amount is material.What is the balance in Cost of Goods Sold after the overapplied overhead is closed?
A)$123,267
B)$144,033
C)$158,650
D)$108,650
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Multiple Choice
Q 108Q 108
Ryan Corporation is relocating its facilities.The company estimates that it will take three trucks to move office contents.If the per truck rental charge is $1,000 plus 25 cents per mile,what is the expected cost to move 800 miles?
A)$1,000
B)$1,200
C)$2,400
D)$3,600
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Multiple Choice
Q 109Q 109
Texoma Trucking Company is exploring different prediction models that can be used to forecast indirect labor costs.One independent variable under consideration is machine hours.Following are matching observations on indirect labor costs and machine hours for the past six months:
In a high-low model,which months' observations would be used to compute the model's parameters?
A)2 and 5
B)1 and 6
C)2 and 6
D)4 and 5
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Multiple Choice
Q 110Q 110
Consider the following three product costing alternatives: process costing,job order costing,and standard costing.Which of these can be used in conjunction with absorption costing?
A)job order costing
B)standard costing
C)process costing
D)all of the above
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Multiple Choice
Q 111Q 111
Another name for absorption costing is
A)full costing.
B)direct costing.
C)job order costing.
D)fixed costing.
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Multiple Choice
Q 112Q 112
If a firm produces more units than it sells,absorption costing,relative to variable costing,will result in
A)higher income and assets.
B)higher income but lower assets.
C)lower income but higher assets.
D)lower income and assets.
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Multiple Choice
Q 113Q 113
Under absorption costing,fixed manufacturing overhead could be found in all of the following except the
A)work-in-process account.
B)finished goods inventory account.
C)Cost of Goods Sold.
D)period costs.
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Multiple Choice
Q 114Q 114
If a firm uses absorption costing,fixed manufacturing overhead will be included
A)only on the balance sheet.
B)only on the income statement.
C)on both the balance sheet and income statement.
D)on neither the balance sheet nor income statement.
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Multiple Choice
Q 115Q 115
Under absorption costing,if sales remain constant from period 1 to period 2,the company will report a larger income in period 2 when
A)period 2 production exceeds period 1 production.
B)period 1 production exceeds period 2 production.
C)variable production costs are larger in period 2 than period 1.
D)fixed production costs are larger in period 2 than period 1.
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Multiple Choice
Q 116Q 116
The FASB requires which of the following to be used in preparation of external financial statements?
A)variable costing
B)standard costing
C)activity-based costing
D)absorption costing
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Multiple Choice
Q 117Q 117
An ending inventory valuation on an absorption costing balance sheet would
A)sometimes be less than the ending inventory valuation under variable costing.
B)always be less than the ending inventory valuation under variable costing.
C)always be the same as the ending inventory valuation under variable costing.
D)always be greater than or equal to the ending inventory valuation under variable costing.
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Multiple Choice
Q 118Q 118
Absorption costing differs from variable costing in all of the following except
A)treatment of fixed manufacturing overhead.
B)treatment of variable production costs.
C)acceptability for external reporting.
D)arrangement of the income statement.
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Multiple Choice
Q 119Q 119
Which of the following is not associated with absorption costing?
A)functional format
B)gross margin
C)period costs
D)contribution margin
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Multiple Choice
Q 120Q 120
Unabsorbed fixed overhead costs in an absorption costing system are
A)fixed manufacturing costs not allocated to units produced.
B)variable overhead costs not allocated to units produced.
C)excess variable overhead costs.
D)costs that cannot be controlleD.
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Multiple Choice
Q 121Q 121
Profit under absorption costing may differ from profit determined under variable costing.How is this difference calculated?
A)Change in the quantity of all units in inventory times the relevant fixed costs per unit.
B)Change in the quantity of all units produced times the relevant fixed costs per unit.
C)Change in the quantity of all units in inventory times the relevant variable cost per unit.
D)Change in the quantity of all units produced times the relevant variable cost per unit.
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Multiple Choice
Q 122Q 122
What factor,related to manufacturing costs,causes the difference in net earnings computed using absorption costing and net earnings computed using variable costing?
A)Absorption costing considers all costs in the determination of net earnings,whereas variable costing considers fixed costs to be period costs.
B)Absorption costing allocates fixed overhead costs between cost of goods sold and inventories,and variable costing considers all fixed costs to be period costs.
C)Absorption costing "inventories" all direct costs,but variable costing considers direct costs to be period costs.
D)Absorption costing "inventories" all fixed costs for the period in ending finished goods inventory,but variable costing expenses all fixed costs.
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Multiple Choice
Q 123Q 123
The costing system that classifies costs by functional group only is
A)standard costing.
B)job order costing.
C)variable costing.
D)absorption costing.
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Multiple Choice
Q 124Q 124
A functional classification of costs would classify "depreciation on office equipment" as a
A)product cost.
B)general and administrative expense.
C)selling expense.
D)variable cost.
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Multiple Choice
Q 125Q 125
The costing system that classifies costs by both functional group and behavior is
A)process costing.
B)job order costing.
C)variable costing.
D)absorption costing.
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Multiple Choice
Q 126Q 126
Under variable costing,which of the following are costs that can be inventoried?
A)variable selling and administrative expense
B)variable manufacturing overhead
C)fixed manufacturing overhead
D)fixed selling and administrative expense
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Multiple Choice
Q 127Q 127
Consider the following three product costing alternatives: process costing,job order costing,and standard costing.Which of these can be used in conjunction with variable costing?
A)job order costing
B)standard costing
C)process costing
D)all of them
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Multiple Choice
Q 128Q 128
Another name for variable costing is
A)full costing.
B)direct costing.
C)standard costing.
D)adjustable costing.
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Multiple Choice
Q 129Q 129
If a firm uses variable costing,fixed manufacturing overhead will be included
A)only on the balance sheet.
B)only on the income statement.
C)on both the balance sheet and income statement.
D)on neither the balance sheet nor income statement.
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Multiple Choice
Q 130Q 130
When variable costing is used,
A)all product costs are considered to be variable.
B)all period costs are considered to be variable.
C)all product costs are considered to be fixed.
D)product costs are separated into fixed and variable components.
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Multiple Choice
Q 131Q 131
How will a favorable volume variance affect net income under each of the following methods?
A)reduce no effect
B)reduce increase
C)increase no effect
D)increase reduce
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Multiple Choice
Q 132Q 132
Variable costing considers which of the following to be product costs?
A)yes no yes no
B)yes no yes yes
C)no no yes yes
D)no no yes no
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Multiple Choice
Q 133Q 133
The variable costing format is often more useful to managers than the absorption costing format because
A)costs are classified by their behavior.
B)costs are always lower.
C)it is required for external reporting.
D)it justifies higher product prices.
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Multiple Choice
Q 134Q 134
The difference between the reported income under absorption and variable costing is attributable to the difference in the
A)income statement formats.
B)treatment of fixed manufacturing overhead.
C)treatment of variable manufacturing overhead.
D)treatment of variable selling,general,and administrative expenses.
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Multiple Choice
Q 135Q 135
Which of the following costs will vary directly with the level of production?
A)total manufacturing costs
B)total period costs
C)variable period costs
D)variable product costs
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Multiple Choice
Q 136Q 136
On the variable costing income statement,the difference between the "contribution margin" and "income before income taxes" is equal to
A)the total variable costs.
B)the Cost of Goods Sold.
C)total fixed costs.
D)the gross margin.
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Multiple Choice
Q 137Q 137
For financial reporting to the IRS and other external users,manufacturing overhead costs are
A)deducted in the period that they are incurred.
B)inventoried until the related products are sold.
C)treated like period costs.
D)inventoried until the related products have been completeD.
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Multiple Choice
Q 138Q 138
In the application of "variable costing" as a cost-allocation process in manufacturing,
A)variable direct costs are treated as period costs.
B)nonvariable indirect manufacturing costs are treated as product costs.
C)variable indirect manufacturing costs are treated as product costs.
D)nonvariable direct costs are treated as product costs.
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Multiple Choice
Q 139Q 139
A basic concept of variable costing is that period costs should be currently expensed.What is the rationale behind this procedure?
A)Period costs are uncontrollable and should not be charged to a specific product.
B)Period costs are generally immaterial in amount and the cost of assigning the amounts to specific products would outweigh the benefits.
C)Allocation of period costs is arbitrary at best and could lead to erroneous decision by management.
D)Because period costs will occur whether production occurs,it is improper to allocate these costs to production and defer a current cost of doing business.
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Multiple Choice
Q 140Q 140
Which of the following is a term more descriptive of the term "direct costing"?
A)out-of-pocket costing
B)variable costing
C)relevant costing
D)prime costing
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Multiple Choice
Q 141Q 141
What costs are treated as product costs under variable (direct)costing?
A)only direct costs
B)only variable production costs
C)all variable costs
D)all variable and fixed manufacturing costs
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Multiple Choice
Q 142Q 142
Which of the following must be known about a production process in order to institute a variable costing system?
A)the variable and fixed components of all costs related to production
B)the controllable and non-controllable components of all costs related to production
C)standard production rates and times for all elements of production
D)contribution margin and break-even point for all goods in production
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Multiple Choice
Q 143Q 143
Why is variable costing not in accordance with generally accepted accounting principles?
A)Fixed manufacturing costs are treated as period costs under variable costing.
B)Variable costing procedures are not well known in industry.
C)Net earnings are always overstated when using variable costing procedures.
D)Variable costing ignores the concept of lower of cost or market when valuing inventory.
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Multiple Choice
Q 144Q 144
Which of the following is an argument against the use of direct (variable)costing?
A)Absorption costing overstates the balance sheet value of inventories.
B)Variable factory overhead is a period cost.
C)Fixed manufacturing overhead is difficult to allocate properly.
D)Fixed manufacturing overhead is necessary for the production of a product.
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Multiple Choice
Q 145Q 145
Which of the following statements is true for a firm that uses variable costing?
A)The cost of a unit of product changes because of changes in the number of units manufactured.
B)Profits fluctuate with sales.
C)An idle facility variation is calculated.
D)None of the above.
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Multiple Choice
Q 146Q 146
An income statement is prepared as an internal report.Under which of the following methods would the term contribution margin appear?
A)no no
B)no yes
C)yes no
D)yes yes
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Multiple Choice
Q 147Q 147
In an income statement prepared as an internal report using the variable costing method,fixed manufacturing overhead would
A)not be used.
B)be used in the computation of operating income but not in the computation of the contribution margin.
C)be used in the computation of the contribution margin.
D)be treated the same as variable manufacturing overheaD.
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Multiple Choice
Q 148Q 148
Variable costing has an advantage over absorption costing for which of the following purposes?
A)analysis of profitability of products,territories,and other segments of a business
B)determining the CVP relationship among the major factors of selling price,sales mix,and sales volume
C)minimizing the effects of inventory changes on net income
D)all of the above
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Multiple Choice
Q 149Q 149
In the variable costing income statement,which line separates the variable and fixed costs?
A)selling expenses
B)general and administrative expense
C)product contribution margin
D)total contribution margin
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Multiple Choice
Q 150Q 150
A firm presently has total sales of $100,000.If its sales rise,its
A)net income based on variable costing will go up more than its net income based on absorption costing.
B)net income based on absorption costing will go up more than its net income based on variable costing.
C)fixed costs will also rise.
D)per unit variable costs will rise.
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Multiple Choice
Q 151Q 151
Wyatt Corporation
Wyatt Corporation has the following standard costs associated with the manufacture and sale of one of its products:
Refer to Wyatt Corporation.Under absorption costing,the standard production cost per unit for the current year was
A)$ 7.30.
B)$11.30.
C)$11.55.
D)$13.05.
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Multiple Choice
Q 152Q 152
Wyatt Corporation
Wyatt Corporation has the following standard costs associated with the manufacture and sale of one of its products:
Refer to Wyatt Corporation.The volume variance under absorption costing is
A)$8,000 F.
B)$4,000 F.
C)$4,000 U.
D)$8,000 U.
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Q 153Q 153
Wyatt Corporation
Wyatt Corporation has the following standard costs associated with the manufacture and sale of one of its products:
Refer to Wyatt Corporation.Under variable costing,the standard production cost per unit for the current year was
A)$11.30.
B)$7.30.
C)$7.55.
D)$11.55.
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Multiple Choice
Q 154Q 154
Wyatt Corporation
Wyatt Corporation has the following standard costs associated with the manufacture and sale of one of its products:
Refer to Wyatt Corporation.Based on variable costing,the income before income taxes for the year was
A)$570,600.
B)$560,000.
C)$562,600.
D)$547,500.
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Multiple Choice
Q 155Q 155
Richardson Company
The following information is available for Richardson Company for its first year of operations:
Refer to Richardson Company.If Richardson Company had used variable costing,what amount of income before income taxes would it have reported?
A)$30,000
B)($7,500)
C)$67,500
D)cannot be determined from the information given
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Multiple Choice
Q 156Q 156
Richardson Company
The following information is available for Richardson Company for its first year of operations:
Refer to Richardson Company.What was the total amount of Selling,General and Administrative expense incurred by Richardson Company?
A)$30,000
B)$62,500
C)$6,000
D)can't be determined from the information given
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Multiple Choice
Q 157Q 157
Richardson Company
The following information is available for Richardson Company for its first year of operations:
Refer to Richardson Company.If Richardson Company were using variable costing,what would it show as the value of ending inventory?
A)$120,000
B)$64,500
C)$27,000
D)$24,000
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Multiple Choice
Q 158Q 158
Truman Corporation
The following information has been extracted from the financial records of Truman Corporation for its first year of operations:
Refer to Truman Corporation.Based on absorption costing,Truman Corporation's income in its first year of operations will be
A)$21,000 higher than it would be under variable costing.
B)$70,000 higher than it would be under variable costing.
C)$30,000 higher than it would be under variable costing.
D)higher than it would be under variable costing,but the exact difference cannot be determined from the information given.
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Multiple Choice
Q 159Q 159
Truman Corporation
The following information has been extracted from the financial records of Truman Corporation for its first year of operations:
Refer to Truman Corporation.Based on absorption costing,the Cost of Goods Manufactured for Truman Corporation's first year would be
A)$200,000.
B)$270,000.
C)$300,000.
D)$210,000.
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Multiple Choice
Q 160Q 160
Truman Corporation
The following information has been extracted from the financial records of Truman Corporation for its first year of operations:
Refer to Truman Corporation.Based on absorption costing,what amount of period costs will Truman Corporation deduct?
A)$70,000
B)$79,000
C)$30,000
D)$58,000
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Multiple Choice
Q 161Q 161
For its most recent fiscal year,a firm reported that its contribution margin was equal to 40 percent of sales and that its net income amounted to 10 percent of sales.If its fixed costs for the year were $60,000,how much were sales?
A)$150,000
B)$200,000
C)$600,000
D)can't be determined from the information given
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Multiple Choice
Q 162Q 162
At its present level of operations,a small manufacturing firm has total variable costs equal to 75 percent of sales and total fixed costs equal to 15 percent of sales.Based on variable costing,if sales change by $1.00,income will change by
A)$0.25.
B)$0.10.
C)$0.75.
D)can't be determined from the information given.
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Multiple Choice
Q 163Q 163
The following information regarding fixed production costs from a manufacturing firm is available for the current year:
Which of the following statements is not true?
A)The maximum amount of fixed production costs that this firm could deduct using absorption costs in the current year is $116,000.
B)The maximum difference between this firm's the current year income based on absorption costing and its income based on variable costing is $16,000.
C)Using variable costing,this firm will deduct no more than $16,000 for fixed production costs.
D)If this firm produced substantially more units than it sold in the current year,variable costing will probably yield a lower income than absorption costing.
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Multiple Choice
Q 164Q 164
Ellis Corporation
The following information was extracted from the first year absorption-based accounting records of Ellis Corporation
Refer to Ellis Corporation.What is Cost of Goods Sold for Ellis Corporation's first year?
A)$80,000
B)$90,000
C)$48,000
D)can't be determined from the information given
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Multiple Choice
Q 165Q 165
Ellis Corporation
The following information was extracted from the first year absorption-based accounting records of Ellis Corporation
Refer to Ellis Corporation.If Ellis Corporation had used variable costing in its first year of operations,how much income (loss)before income taxes would it have reported?
A)($6,000)
B)$54,000
C)$26,000
D)$ 2,000
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Multiple Choice
Q 166Q 166
Ellis Corporation
The following information was extracted from the first year absorption-based accounting records of Ellis Corporation
Refer to Ellis Corporation.Based on variable costing,if Ellis had sold 12,001 units instead of 12,000,its income before income taxes would have been
A)$9.50 higher.
B)$11.00 higher.
C)$8.50 higher.
D)$8.33 higher.
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Multiple Choice
Q 167Q 167
Rosewood Corporation
Rosewood Corporation produces a single product.The following cost structure applied to its first year of operations:
Refer to Rosewood Corporation.Assume for this question only that during the current year Rosewood Corporation manufactured 5,000 units and sold 3,800.There was no beginning or ending work-in-process inventory.How much larger or smaller would Rosewood Corporation's income be if it uses absorption rather than variable costing?
A)The absorption costing income would be $6,000 larger.
B)The absorption costing income would be $6,000 smaller.
C)The absorption costing income would be $4,800 larger.
D)The absorption costing income would be $4,000 smaller.
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Multiple Choice
Q 168Q 168
Rosewood Corporation
Rosewood Corporation produces a single product.The following cost structure applied to its first year of operations:
Refer to Rosewood Corporation.Assume for this question only that Rosewood Corporation manufactured and sold 5,000 units in the current year.At this level of activity it had an income of $30,000 using variable costing.What was the sales price per unit?
A)$16.00
B)$18.80
C)$12.80
D)$14.80
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Multiple Choice
Q 169Q 169
Rosewood Corporation
Rosewood Corporation produces a single product.The following cost structure applied to its first year of operations:
Refer to Rosewood Corporation.Assume for this question only that Rosewood Corporation produced 5,000 units and sold 4,500 units in the current year.If Rosewood uses absorption costing,it would deduct period costs of
A)$24,000.
B)$34,000.
C)$27,000.
D)$23,000.
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Multiple Choice
Q 170Q 170
Rosewood Corporation
Rosewood Corporation produces a single product.The following cost structure applied to its first year of operations:
Refer to Rosewood Corporation.Assume for this question only that Rosewood Corporation manufactured 5,000 units and sold 4,000 in the current year.If Rosewood employs a costing system based on variable costs,the company would end the current year with a finished goods inventory of
A)$4,000.
B)$8,000.
C)$6,000.
D)$5,000.
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Multiple Choice
Q 171Q 171
Delta,Epilson,and Sigma Companies
Three new companies (Delta,Epilson,and Sigma)began operations on January 1 of the current year.Consider the following operating costs that were incurred by these companies during the complete calendar year:
Refer to Delta,Epilson,and Sigma Companies.Based on sales of 7,000 units,which company will report the greater income before income taxes if absorption costing is used?
A)Delta Company
B)Epsilon Company
C)Sigma Company
D)All of the companies will report the same income.
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Multiple Choice
Q 172Q 172
Delta,Epilson,and Sigma Companies
Three new companies (Delta,Epilson,and Sigma)began operations on January 1 of the current year.Consider the following operating costs that were incurred by these companies during the complete calendar year:
Refer to Delta,Epilson,and Sigma Companies.Based on sales of 7,000 units,which company will report the greater income before income taxes if variable costing is used?
A)Delta Company
B)Epsilon Company
C)Sigma Company
D)All of the companies will report the same income.
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Multiple Choice
Q 173Q 173
Delta,Epilson,and Sigma Companies
Three new companies (Delta,Epilson,and Sigma)began operations on January 1 of the current year.Consider the following operating costs that were incurred by these companies during the complete calendar year:
Refer to Delta,Epilson,and Sigma Companies.Based on sales of 10,000 units,which company will report the greater income before income taxes if variable costing is used?
A)Delta Company
B)Epsilon Company
C)Sigma Company
D)All of the companies will report the same income before income taxes.
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Multiple Choice
Q 174Q 174
A firm has fixed costs of $200,000 and variable costs per unit of $6.It plans on selling 40,000 units in the coming year.To realize a profit of $20,000,the firm must have a sales price per unit of at least
A)$11.00.
B)$11.50.
C)$10.00.
D)$10.50.
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Multiple Choice
Q 175Q 175
Hahn Corporation
Hahn Corporation produces a single product that sells for $7.00 per unit.Standard capacity is 100,000 units per year;100,000 units were produced and 80,000 units were sold during the year.Manufacturing costs and selling and administrative expenses are presented below.
There were no variances from the standard variable costs.Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.
Hahn Corporation had no inventory at the beginning of the year.
Refer to Hahn Corporation.In presenting inventory on the balance sheet at December 31,the unit cost under absorption costing is
A)$2.50.
B)$3.00.
C)$3.50.
D)$4.50.
Free
Multiple Choice
Q 176Q 176
Hahn Corporation
Hahn Corporation produces a single product that sells for $7.00 per unit.Standard capacity is 100,000 units per year;100,000 units were produced and 80,000 units were sold during the year.Manufacturing costs and selling and administrative expenses are presented below.
There were no variances from the standard variable costs.Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.
Hahn Corporation had no inventory at the beginning of the year.
Refer to Hahn Corporation.What is the net income under variable costing?
A)$50,000
B)$80,000
C)$90,000
D)$120,000
Free
Multiple Choice
Q 177Q 177
Hahn Corporation
Hahn Corporation produces a single product that sells for $7.00 per unit.Standard capacity is 100,000 units per year;100,000 units were produced and 80,000 units were sold during the year.Manufacturing costs and selling and administrative expenses are presented below.
There were no variances from the standard variable costs.Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.
Hahn Corporation had no inventory at the beginning of the year.
Refer to Hahn Corporation.What is the net income under absorption costing?
A)$50,000
B)$80,000
C)$90,000
D)$120,000
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Multiple Choice
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Q 181Q 181
Discuss underapplied and overapplied overhead and its disposition at the end of the period.
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Q 184Q 184
Why do managers frequently prefer variable costing to absorption costing for internal use?
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Q 186Q 186
How can a company produce both variable and absorption costing information from a single accounting system?
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Q 189Q 189
How do differences in sales and production level affect net income computed under absorption costing and variable costing?
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Q 190Q 190
Cooper Industries has the following data for the current year:
What is the amount of under- or overapplied overhead? Prepare the necessary journal entry to dispose of under- or overapplied overhead.
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Q 191Q 191
Terrell Corporation has the following data relating to its power usage for the first six months of the current year.
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Q 192Q 192
Crafton Corporation applies overhead at the rate of 70 percent of direct labor.Crafton incurred $450,000 of direct labor during the current year.Crafton incurred actual overhead of $367,000.
(a)Compute the amount of under- or overapplied overhead for Crafton Corporation for the current year
(b)Prepare the necessary journal entry to dispose of the under- or overapplied overhead (assuming that the amount is immaterial).
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Q 193Q 193
Dollarwise Trainers provides a personalized training program that is popular with many companies.The number of programs offered over the last five months,and the costs of offering these programs are as follows:
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Q 194Q 194
The facility manager of Tovar Corporation asked the systems analyst for information to help in forecasting handling costs.The following printout was generated using the least squares regression method.
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Q 195Q 195
Buxton Office Supply Company has the following information available regarding costs and revenues for two recent months.Selling price is $20.
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Q 196Q 196
Thompson Enterprises owns two luxury automobiles that are used by employees on company business.Mileage and expenses,excluding depreciation,by quarters for the most recent year are presented below:
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Q 197Q 197
On December 30,a fire destroyed most of the accounting records of the Stone Division,a small one-product manufacturing division that uses standard costs and flexible budgets.All variances are written off as additions to (or deductions from)income;none are pro-rated to inventories.You have the task of reconstructing the records for the year.The general manager informs you that the accountant has been experimenting with both absorption costing and variable costing.
The following information is available for the current year:
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Q 198Q 198
Owens Athletics,Inc.has developed a new design to produce hurdles that are used in track and field competition.The company's hurdle design is innovative in that the hurdle yields when hit by a runner and its height is extraordinarily easy to adjust.Management estimates expected annual capacity to be 90,000 units;overhead is applied using expected annual capacity.The company's cost accountant predicts the following current year activities and related costs:
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Q 199Q 199
Dynamic Designs,Inc.has developed a new design to produce track shoes that are used in cross-country races.The company's shoe design is innovative in that the insole is made od a product that provides a greater cushion and adapts more easily to a runner's foot.Management estimates expected annual capacity to be 80,000 units;overhead is applied using expected annual capacity.The company's cost accountant predicts the following current year activities and related costs:
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Q 200Q 200
Vidal Corporation produces a single product.The following is a cost structure applied to its first year of operations.
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Q 201Q 201
Terry Smith Corporation used least squares regression analysis to obtain the following
output:
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