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

Question 1

Variable costing is commonly used for internal reporting.

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

Absorption costing is commonly used for external reporting.

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

Variable costing is commonly used for external reporting.

Question 20

Absorption costing is commonly used for internal reporting.

Question 21

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

Question 22

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

Question 23

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

Question 24

Direct costing conforms with generally accepted accounting principles.

Question 25

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

Question 26

Absorption costing conforms with generally accepted accounting principles.

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

Expected capacity is a long-run measure of activity.

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

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

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

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 63

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 64

Predetermined overhead rates are computed based on

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

Question 65

In the formula y = a + bX,y represents

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

Question 66

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

Question 67

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 68

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

Question 69

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

Question 70

In the formula y = a + bX,a represents

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

Question 71

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 72

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 73

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

Question 74

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

Question 75

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 76

A mixed cost has which of the following components?

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

Question 77

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

Question 78

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

Question 79

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

Question 80

In relationship to changes in activity,variable overhead changes

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