Multiple Choice Questions
30.Which of the following is
not
a commonly used cost accounting system?
A. Manufacturing yield costing.
B. Job order costing.
C. Process costing.
D. Activity-based costing.
31.An effective cost accounting system should match processes that consume resources with the associated _____ in order to maintain competitive advantage. Select the best answer to complete the sentence.
A. Sales
B. Shareholders
C. Costs
D. Activities
32.The method used by managers when comparing unit costs with budgeted costs or other measures is broadly known as:
A. Sales management.
B. Cost control.
C. Employee evaluation.
D. Account reconciliation.
33.The basic types of cost accounting systems are:
A. Job order cost systems, activity based cost systems, and process cost systems.
B. Direct cost systems and indirect cost systems.
C. Completed job cost systems and work in process cost systems.
D. Fixed cost systems and variable cost systems.
34.A job order cost system would be appropriate in the manufacturing of:
A. Paints.
B. Custom-made furniture.
C. Breakfast cereal.
D. Standard-grade plywood.
35.Under a job order cost system, costs are accumulated for:
A. Each department in the production cycle.
B. Each batch of production, known as a job or lot.
C. Each individual unit produced.
D. Each job supervisor.
36.The type of cost accounting system best suited to a particular company depends on:
A. The nature of the company's manufacturing operations.
B. The requirements set forth by the FASB.
C. Government regulations.
D. The type of cost drivers available.
37.A job order cost system would be suitable for which of the following:
A. A manufacturer of laundry detergent.
B. A manufacturer of candy bars.
C. A sugar refinery.
D. A sailboat builder.
38.Which of the following is a characteristic of manufacturing overhead in a job order cost system?
A. It is directly traceable to specific jobs or units.
B. It includes the cost of all labor relating to manufacturing operations.
C. It is assigned to units produced by means of an overhead application rate.
D. It includes the cost of direct materials used and of indirect labor.
39.Which of the following is an advantage of developing a predetermined overhead application rate?
A. Long-run fluctuations in volume of output are eliminated.
B. In a job order system, unit costs can be determined only at the end of the period.
C. The overhead application rate facilitates assigning overhead costs to the ending inventory of work in process.
D. Actual overhead will always be less than applied overhead.
40.The advantage of using a predetermined overhead application rate is that:
A. Units produced are charged with a "normal" amount of manufacturing overhead regardless of whether they are produced in a high-volume month or a low-volume month.
B. Overhead costs will be limited to the predetermined amount.
C. Entries need not be made to record actual overhead costs incurred.
D. The unit cost of production will be lower than it would be if actual overhead costs were assigned to units produced.
41.A predetermined overhead application rate:
A. Expresses an expected relationship between overhead costs and an activity base.
B. Can be determined by dividing budgeted direct labor cost by the budgeted factory overhead costs.
C. Is computed at the end of the period once actual overhead costs are known.
D. Applies the same amount of overhead to each product or service.
42.Manufacturing overhead is:
A. A direct cost that can traced to a specific job.
B. An indirect cost that can be traced to a specific job.
C. A direct cost that cannot be traced to a specific job.
D. An indirect cost that cannot be traced to a specific job.
43.Overhead costs are assigned to production using an overhead application rate, whereas no such "application rate" is used to assign the costs of direct materials and direct labor to production. The reason for this difference in procedures is that:
A. Overhead is an indirect cost which cannot be traced easily and directly to specific units of product.
B. Overhead is always larger in dollar amount than either direct materials or direct labor.
C. The amounts of direct material and direct labor applicable to each unit of production cannot be determined as easily as the amount of overhead.
D. Overhead is always equal to a constant percentage of direct labor costs.
44.Manufacturing overhead is
not:
A. A product cost.
B. An indirect cost.
C. A manufacturing cost.
D. A period cost.
45.The cost of salaries paid to employees who work in a factory maintaining the heating system is considered:
A. Direct labor.
B. Indirect materials.
C. Factory overhead.
D. General and administrative costs.
46.Moran Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150% of direct labor cost, based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job no. 1 was charged with direct materials of $36,000 and with overhead of $27,000. What is the total cost of job no. 1?
A. $64,000.
B. $81,000.
C. $91,000.
D. Cannot be determined without additional information.
47.Doyle Co. uses a job order cost accounting system. At year-end the Work-in-Process Inventory controlling account showed a debit balance of $43,125. For the two jobs in process at year-end, one showed $6,000 in direct materials and $4,500 in direct labor. The job cost sheet for the second job showed $9,000 in direct materials and $6,750 in direct labor. If the company is using a predetermined overhead application rate based on
direct labor cost, the rate is:
A. 50%.
B. 100%.
C. 150%.
D. 200%.
48.Edwards Auto Body uses a job order cost system. Overhead is applied to jobs on the basis of direct labor hours. During the current period, Job No. 337 was charged $425 in direct materials, $475 in direct labor, and $190 in overhead. If direct labor costs an average of $16 per hour, the company's overhead application rate is:
A. $7.27 per direct labor hour.
B. $6.40 per direct labor hour.
C. $17.50 per direct labor hour.
D. $40 per direct labor hour.