Question 1

Beal Company uses direct labor cost as a basis for computing its predetermined overhead rate.In computing the predetermined overhead rate for 2010,the company misclassified a portion of direct labor cost as indirect labor.The effect of this misclassification will be to

Accepted Answer

The misclassification of direct labor cost as indirect labor will result in a higher denominator (total overhead cost) and a lower numerator (direct labor cost) in the calculation of the predetermined overhead rate. This will lead to an overstatement of the predetermined overhead rate.

Question 2

A system that provides information about the costs of processes,products,and services used and produced by an organization is a

Accepted Answer

A cost management system provides information about the costs of processes, products, and services used and produced by an organization. It helps in identifying the cost drivers and making informed decisions about pricing, budgeting, and resource allocation. Continuous flow process, two-stage allocation system, and operations cost are not necessarily focused on providing cost information but rather refer to certain types of processes or costs within an organization.

Question 3

The process of first allocating costs to intermediate cost pools and then to the individual cost objects using different allocation bases is:

Accepted Answer

The process described is a two-stage allocation system, where costs are allocated first to intermediate cost pools and then to individual cost objects using different allocation bases. This is a common method used in cost accounting to allocate costs accurately and fairly. The other answer choices are not applicable to the described process.

Question 4

A company is considering the use of a single-stage cost allocation process.Under what conditions would this choice be justified?

Accepted Answer

A single-stage cost allocation process is most appropriate when a company produces a few products with similar characteristics in a few departments. This is because in such a case, it is easy to allocate costs directly to the department or product without the need for complex allocation methods. In the other scenarios, either there are too many service departments or too many production departments, which would require more complex allocation processes. Or the company produces a wide selection of differing products, which makes it difficult to allocate costs accurately using a single-stage cost allocation method.

Question 5

Which of the following statements regarding the two-stage cost allocation process is (are)false? (A)If a company has three cost pools,then it should also have three different cost allocation bases.
(B)The selection of an appropriate cost allocation base is more important for single-stage cost allocation systems than for two-stage cost allocation systems.

Accepted Answer

The answer of Which of the following statements regarding the...

Question 6

A system that mass-produces a single,homogenous output in a continuous process is:

Accepted Answer

A continuous flow process is designed to produce a large volume of a single, homogeneous product in a continuous manner, such as in the production of chemicals, steel, or refined oil. The process is highly automated and operates 24/7, with little or no variation in the product output. The other options do not fit the description of a production process.

Question 7

When a manufacturing company has a highly automated manufacturing plant producing many different products,what is probably the most appropriate basis of applying overhead costs to work-in-process?

Accepted Answer

In a highly automated manufacturing plant, machines are likely to be the primary driver of overhead costs. Therefore, applying overhead based on machine hours would be the most appropriate basis for allocating costs to work-in-process. Direct labor hours or dollars may not accurately reflect the true overhead costs incurred since machines may be doing more of the work. Cost of materials used is not a good basis for applying overhead costs, since materials do not directly drive overhead expenses.

Question 8

Which of the following would be the least appropriate allocation base for allocating overhead in a highly automated (i.e.,capital-intensive)manufacturing company?

Accepted Answer

Direct labor hours would be the least appropriate allocation base for a highly automated manufacturing company because machines are doing most of the work, which means there is minimal direct labor involved. Using direct labor hours as allocation base would result in over-allocation of overhead costs to products that do not require significant human involvement. A better allocation base would be machine hours, as it directly reflects the usage of the equipment which is a major cost driver in a capital-intensive company.

Question 9

The basic cost flow model is:

Accepted Answer

The basic cost flow model equation is EB = BB + TI - TO. This means that the ending balance (EB) is equal to the beginning balance (BB) plus total inflows (TI) minus total outflows (TO). Option C represents this equation correctly.

Question 10

In a labor intensive company in which more overhead is used by the more highly skilled and paid employees,which activity base would be most appropriate for applying overhead to production?

Accepted Answer

In a labor-intensive company where overhead is closely related to the skills and pay of employees, direct labor cost is the most appropriate activity base for applying overhead, as it directly correlates with the labor expenses incurred.

Question 11

Which of the following statements is (are)true regarding product costing? (A)Individual product costs are relevant for managerial decision-making but irrelevant for preparing the financial statements.
(B)A common decision facing managers is determining the price at which to sell their product or provide their services.

Accepted Answer

Individual product costs are relevant for both managerial decision-making and preparing financial statements. Managers often need to determine the price at which to sell their products or services, making statement B true.

Question 12

The basic cost flow model is:

Accepted Answer

The basic cost flow model is EB + TO = TI + BB, where EB is the ending balance, TO is the total outflow, TI is the total inflow, and BB is the beginning balance.

Question 13

Which of the following statements is true?

Accepted Answer

Process costing aggregates costs across all units produced within a given period, rather than separately recording costs for each unit. This is because process costing is used in situations where products are identical or nearly identical, such as in continuous flow processing environments where large volumes of identical products are produced. Job costing, on the other hand, is used when products are unique or when a specific order or batch is produced. Therefore, statement A and C are false, and statement B is irrelevant to the question.

Question 14

The basic cost flow model is:

Accepted Answer

The answer of The basic cost flow model is:
...

Question 15

Cost pools are:

Accepted Answer

Cost pools are accumulated before being allocated to cost objects on some common basis. This means that costs are grouped together into pools based on similar characteristics (such as labor costs or overhead costs), and are then allocated to cost objects (such as products or services) based on some common basis (such as number of labor hours or square footage).

Question 16

The Cost Flow Diagram for product costing includes all of the following costs except:

Accepted Answer

The cost flow diagram for product costing includes only those costs that are directly related to the production of a product. Selling expenses are not part of the product cost, as they are incurred after the product is manufactured and are associated with the marketing and distribution of the product. The other options listed, B) direct materials, C) direct labor, D) fixed manufacturing overhead, and E) variable manufacturing overhead, are all part of the product cost and are included in the cost flow diagram.

Question 17

Which of the following statements is (are)false regarding cost allocations and product costing? (A)It is easier to determine the individual product cost for a manufacturer than it is for a wholesaler.
(B)In general,indirect costs are assigned,while direct costs are allocated.

Accepted Answer

A is false because it is actually easier for a wholesaler to determine individual product cost since they do not have the added complexity of manufacturing overhead costs. 
B is false because indirect costs are allocated, while direct costs are assigned.

Question 18

A hybrid costing system that is often used when manufacturing goods that have some common characteristics plus some individual characteristics is called:

Accepted Answer

The answer of A hybrid costing system that is often...

Question 19

For which of the following businesses would the job order cost system be appropriate?

Accepted Answer

The answer of For which of the following businesses would...

Question 20

The basic cost flow model is:

Accepted Answer

The basic cost flow model is BB (Beginning Balance) plus TI (Total Input) minus TO (Total Output) equals EB (Ending Balance). Therefore, the correct equation is BB + TI - TO = EB, which is represented by choice D.

Quiz 6: Fundamentals of Product and Service Costing

Beal Company uses direct labor cost as a basis for computing its predetermined overhead rate.In computing the predetermined overhead rate for 2010,the company misclassified a portion of direct labor cost as indirect labor.The effect of this misclassification will be to

A system that provides information about the costs of processes,products,and services used and produced by an organization is a

The process of first allocating costs to intermediate cost pools and then to the individual cost objects using different allocation bases is:

A company is considering the use of a single-stage cost allocation process.Under what conditions would this choice be justified?

A system that mass-produces a single,homogenous output in a continuous process is:

When a manufacturing company has a highly automated manufacturing plant producing many different products,what is probably the most appropriate basis of applying overhead costs to work-in-process?

Which of the following would be the least appropriate allocation base for allocating overhead in a highly automated (i.e.,capital-intensive) manufacturing company?

The basic cost flow model is:

In a labor intensive company in which more overhead is used by the more highly skilled and paid employees,which activity base would be most appropriate for applying overhead to production?

The basic cost flow model is:

Which of the following statements is true?

The basic cost flow model is:

Cost pools are:

The Cost Flow Diagram for product costing includes all of the following costs except:

Which of the following statements is (are) false regarding cost allocations and product costing? (A) It is easier to determine the individual product cost for a manufacturer than it is for a wholesaler. (B) In general,indirect costs are assigned,while direct costs are allocated.

A hybrid costing system that is often used when manufacturing goods that have some common characteristics plus some individual characteristics is called:

For which of the following businesses would the job order cost system be appropriate?

The basic cost flow model is: