Question 1

In activity-based costing,only one cost driver should be used in applying overhead.

Accepted Answer

Activity-based costing allows for multiple cost drivers to be used to allocate overhead costs. This is because different activities may have different drivers that affect their costs. Therefore, using only one cost driver may not accurately represent the costs associated with each activity.

Question 2

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.

Accepted Answer

The method used by managers to compare unit costs with budgeted costs or other measures is broadly known as cost control. This involves analyzing and comparing actual costs with budgeted costs and taking necessary actions to reduce any variances. Sales management, employee evaluation, and account reconciliation are not directly related to this process.

Question 3

Activity-based costing systems always result in more accurate measurements of unit costs.

Accepted Answer

Activity-based costing systems provide a more detailed and accurate analysis of the costs associated with each activity, which helps to accurately allocate costs to products or services. This ultimately leads to more accurate measurement of unit costs compared to traditional costing methods.

Question 4

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

Accepted Answer

An effective cost accounting system should match processes that consume resources with the associated costs to accurately track and manage expenses, ensuring the company maintains a competitive advantage by optimizing resource allocation and pricing strategies.

Question 5

A debit balance in the Manufacturing Overhead account at the end of the period indicates that overhead has been under-applied to jobs.

Accepted Answer

A debit balance in the Manufacturing Overhead account means that actual overhead costs were greater than applied overhead costs. This indicates that overhead was under-applied to jobs, since not enough overhead was allocated to them during the period.

Question 6

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.

Accepted Answer

A job order cost system is suitable for custom-made products that are produced in small batches or on a per-order basis. Custom-made furniture fits this description, as each piece is unique and made to order. Paints, breakfast cereal, and standard-grade plywood are mass-produced items that would be better suited for a process cost system.

Question 7

If actual overhead costs are less than the amount of overhead applied to production,this indicates that manufacturing overhead is over-applied.

Accepted Answer

If actual overhead costs are less than the amount of overhead applied, then the applied overhead is more than what was actually incurred, indicating that manufacturing overhead is over-applied.

Question 8

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.

Accepted Answer

Under a job order cost system, costs are accumulated for each batch of production, known as a job or lot. This system is typically used in industries where customized or unique products are produced, as opposed to mass-produced products. The costs for each job are tracked separately to determine the total cost of production for that specific job.

Question 9

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.

Accepted Answer

The answer of A job order cost system would be...

Question 10

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.

Accepted Answer

Manufacturing yield costing is not a commonly used cost accounting system. The commonly used cost accounting systems are job order costing, process costing, and activity-based costing.

Question 11

If the manufacturing overhead account at month end has a credit balance before adjustment,this indicates that overhead is under-applied.

Accepted Answer

A credit balance in the manufacturing overhead account before adjustment indicates that overhead is over-applied, not under-applied.

Question 12

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.

Accepted Answer

Manufacturing overhead in a job order cost system is assigned to units produced by means of an overhead application rate, which is calculated as a percentage of a cost driver such as direct labor or machine hours. It includes indirect costs such as rent, utilities, depreciation, and supplies that cannot be directly traced to specific jobs or units. Direct materials and direct labor costs are accounted for separately. Option A is incorrect because manufacturing overhead is not directly traceable to specific jobs or units. Option B is incorrect because it only includes the cost of indirect labor, not all labor. Option D is incorrect because it includes both direct materials and indirect labor, but not all of manufacturing overhead.

Question 13

An increase in an activity base must cause an increase in actual overhead costs incurred for that base to be considered a cost driver.

Accepted Answer

The answer of An increase in an activity base must...

Question 14

Activity-based costing uses multiple activity bases to assign overhead costs to units of production.

Accepted Answer

Activity-based costing assigns overhead costs based on the activities required to produce a product or provide a service, rather than just using a single cost driver like direct labor hours or machine hours. Multiple activity bases can be used to more accurately allocate overhead costs to the actual activities that cause them.

Question 15

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.

Accepted Answer

Job order cost systems are used for products that are made in batches or customized to order, activity based cost systems allocate costs to specific activities involved in producing a product or service, and process cost systems are used for products that are produced in large quantities along a continuous production line. These are the three basic types of cost accounting systems most commonly used in business. Choice B and C are not complete lists of cost accounting systems, and choice D is incorrect as fixed and variable costs are types of cost behavior, not cost accounting systems.

Question 16

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.

Accepted Answer

Developing a predetermined overhead application rate facilitates assigning overhead costs to the ending inventory of work in process, allowing for a more accurate determination of unit costs. It does not eliminate long-run fluctuations in volume of output (A), nor does it require waiting until the end of the period to determine unit costs in a job order system (B). Additionally, actual overhead may be greater or less than applied overhead, so D is not correct.

Question 17

Activity-based costing tracks cost to the activities that consume resources.

Accepted Answer

Activity-based costing is a costing system that traces indirect costs to the activities that consume resources, rather than allocating costs based on arbitrary measures such as direct labor hours or machine hours.

Question 18

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.

Accepted Answer

Using a predetermined overhead application rate allows for a consistent amount of manufacturing overhead to be charged to units produced, regardless of the actual overhead costs incurred in a given period. This helps to provide a more accurate estimate of the true cost of production and can lead to more accurate pricing decisions. Additionally, it simplifies the accounting process by eliminating the need to record actual costs incurred for each unit produced.

Question 19

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.

Accepted Answer

The nature of the company's manufacturing operations plays a significant role in determining the most suitable cost accounting system. Different manufacturing operations may require different cost tracking methods, and the system that works best for a specific company may not be optimal for another. Factors such as the type of products or services offered, production processes, and the level of automation are all essential in choosing an appropriate cost accounting system.

Question 20

The two steps required in activity-based costing are identifying separate activity cost pools and allocating each cost pool to the product using an appropriate cost driver.

Accepted Answer

This is true. Activity-based costing involves identifying and analyzing separate activity cost pools, and then allocating the costs of each pool to the product using an appropriate cost driver.

Quiz 17: Job Order Cost Systems and Overhead Allocations

In activity-based costing,only one cost driver should be used in applying overhead.

The method used by managers when comparing unit costs with budgeted costs or other measures is broadly known as:

Activity-based costing systems always result in more accurate measurements of unit costs.

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 debit balance in the Manufacturing Overhead account at the end of the period indicates that overhead has been under-applied to jobs.

A job order cost system would be appropriate in the manufacturing of:

If actual overhead costs are less than the amount of overhead applied to production,this indicates that manufacturing overhead is over-applied.

Under a job order cost system,costs are accumulated for:

A job order cost system would be suitable for which of the following:

Which of the following is not a commonly used cost accounting system?

If the manufacturing overhead account at month end has a credit balance before adjustment,this indicates that overhead is under-applied.

Which of the following is a characteristic of manufacturing overhead in a job order cost system?

An increase in an activity base must cause an increase in actual overhead costs incurred for that base to be considered a cost driver.

Activity-based costing uses multiple activity bases to assign overhead costs to units of production.

The basic types of cost accounting systems are:

Which of the following is an advantage of developing a predetermined overhead application rate?

Activity-based costing tracks cost to the activities that consume resources.

The advantage of using a predetermined overhead application rate is that:

The type of cost accounting system best suited to a particular company depends on:

The two steps required in activity-based costing are identifying separate activity cost pools and allocating each cost pool to the product using an appropriate cost driver.