Deck 3: Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Question 1

A debit to the Factory Overhead account represents actual overhead costs.

Answer 1

True

Question 2

Absorption costing is commonly used for external reporting.

Answer 2

True

Question 3

If overapplied factory overhead is immaterial, the account is closed by a credit to Cost of Goods Sold.

Answer 3

True

Question 4

Variable costing is commonly used for external reporting.

Question 5

In a actual cost system, factory overhead is assigned directly to products and services.

Question 6

Variable costing is commonly used for internal reporting.

Question 7

A credit to the Factory Overhead account represents actual overhead costs.

Question 8

If actual overhead exceeds applied overhead, factory overhead is said to be underapplied.

Question 9

If underapplied factory overhead is immaterial, the account is closed by a credit to Cost of Goods Sold.

Question 10

If underapplied factory overhead is immaterial, the account is closed by a debit to Cost of Goods Sold.

Question 11

If actual overhead exceeds applied overhead, factory overhead is said to be overapplied.

Question 12

If overapplied factory overhead is immaterial, the account is closed by a debit to Cost of Goods Sold.

Question 13

In an actual cost system, factory overhead is assigned to an overhead control account and then allocated to products and services.

Question 14

A debit to the Factory Overhead account represents applied overhead costs.

Question 15

Absorption costing is commonly used for internal reporting.

Question 16

If underapplied factory overhead is material, it is prorated among Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold.

Question 17

In a normal cost system, factory overhead is assigned directly to products and services.

Question 18

In a normal cost system, factory overhead is assigned to an overhead control account and then allocated to products and services.

Question 19

If overapplied factory overhead is material, the account is closed by a credit to Cost of Goods Sold.

Question 20

A credit to the Factory Overhead account represents applied overhead costs.

Question 21

Direct costing conforms with generally accepted accounting principles.

Question 22

The slope of a regression line is determined by dividing the change in activity level by the change in total cost.

Question 23

A master budget is a planning document that presents expected variable and fixed overhead costs at different activity levels.

Question 24

When using the high-low method, the variable component is computed before the fixed component is.

Question 25

Plantwide overhead rates provide a more accurate computation of factory overhead than departmental overhead rates

Question 26

When using the high-low method, fixed costs are computed before the variable component is computed.

Question 27

Absorption costing conforms with generally accepted accounting principles.

Question 28

The high-low method excludes outliers from the calculation of the slope of a regression line.

Question 29

Sales minus cost of goods sold is referred to as variable contribution margin.

Question 30

Normal capacity considers present and future production levels and cyclical fluctuations.

Question 31

Practical capacity is the capacity that can be achieved during normal working hours.

Question 32

Plantwide overhead rates provide a less accurate computation of factory overhead than departmental overhead rates

Question 33

The Internal Revenue Service allows the use of both variable and absorption costing.

Question 34

The estimated maximum potential activity for a specified time is known as theoretical capacity.

Question 35

A flexible budget is a planning document that presents expected variable and fixed overhead costs at different activity levels.

Question 36

The slope of a regression line is determined by dividing the change in total cost by the change in activity level.

Question 37

The regression equation y = a+ bX assumes that the function is curvilinear in nature.

Question 38

The regression equation y = a+ bX assumes that the function is linear in nature.

Question 39

Expected capacity is a long-run measure of activity.

Question 40

Practical capacity does not adjust for routine downtime in a production process.

Question 41

If actual overhead exceeds applied overhead, factory overhead is said to be ____________________.

Question 42

A performance measure that encompasses a firm's long-run average activity is referred to as ____________________ capacity.

Question 43

If underapplied or overapplied factory overhead is material, it is prorated among ________________________________________, ________________________________________, and ___________________________________.

Question 44

Consider the regression equation y = a + bX. The portion of the equation that represents the variable rate is __________.

Question 45

If actual overhead is less than applied overhead, factory overhead is said to be ____________________.

Question 46

If sales exceed production, absorption costing net income is less than variable costing net income.

Question 47

If production exceeds sales, absorption costing net income is less than variable costing net income.

Question 48

Phantom profits result when absorption costing is used and sales exceed production.

Question 49

The performance measure that considers routine interruptions is known as ____________________ capacity.

Question 50

If underapplied or overapplied factory overhead is immaterial, it is charged to ______________________________.

Question 51

A performance measure that assumes all production factors are operating perfectly is referred to as ____________________ capacity.

Question 52

A performance measure that is short-run in nature and represents a firm's anticipated activity level for the upcoming period is ____________________ capacity.

Question 53

In a(n) ____________________ cost system, factory overhead is assigned to an overhead control account and then allocated to products and services.

Question 54

If production exceeds sales, absorption costing net income exceeds variable costing net income.

Question 55

Consider the regression equation y = a + bX. The portion of the equation that represents the activity base is __________.

Question 56

Phantom profits result when absorption costing is used and production exceeds sales.

Question 57

The dollar amount of overhead assigned to work-in-process inventory using a predetermined rate is known as ____________________ overhead.

Question 58

Consider the regression equation y = a + bX. The portion of the equation that represents fixed costs is __________.

Question 59

If sales exceed production, absorption costing net income exceeds variable costing net income.

Question 60

In a(n) ____________________ cost system, factory overhead is assigned directly to products and services.

Question 61

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

Question 62

The costing technique that treats fixed manufacturing overhead as a period cost is referred to as ______________ or ____________ costing.
or

Question 63

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.

Question 64

Temporary profits that result when absorption costing is used and production exceeds sales are referred to as _________________________.

Question 65

In the formula y = a + bX, a represents

A) mixed cost.
B) variable cost.
C) total cost.
D) fixed cost.

Question 66

Sales less variable cost of goods sold is referred to as ________________________________________.

Question 67

When a relationship between one independent variable and one dependent variable is analyzed, the regression is referred to as ____________________.

Question 68

In the formula y = a + bX, y represents

A) fixed costs.
B) total cost.
C) variable costs.
D) mixed costs.

Question 69

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

Question 70

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

Question 71

An observation that is found outside the relevant range is referred to as a(n) ____________________.

Question 72

When a relationship between several independent variables and one dependent variable is analyzed, the regression is referred to as ____________________.

Question 73

A mixed cost has which of the following components?

A) yes no
B) yes yes
C) no no
D) no yes

Question 74

In relationship to changes in activity, variable overhead changes

A) no no
B) no yes
C) yes yes
D) yes no

Question 75

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.

Question 76

Predetermined overhead rates are computed based on

A) yes yes
B) yes no
C) no yes
D) no no

Question 77

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

Question 78

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.

Question 79

A ______________________________ is a planning document that presents expected variable and fixed overhead costs at different activity levels.

Question 80

The costing technique that treats all manufacturing costs as inventoriable is referred to as _________________ or ___________ costing.
or