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Chapter 4 Pre-Test
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Questions in this quiz (86)
1Job costing information is used:
- Ato develop strategies
- Bto make pricing decisions
- Cfor external financial reporting
- DAll of these answers are correct.
2Product costing information is used by managers:
- Ato make decisions and strategy
- Bfor planning and control
- Cfor cost management
- DAll of these answers are correct.
3A ________ is a grouping of individual indirect cost items.
- Acost allocation base
- Bcost assignment
- Ccost pool
- Djob-costing system
4Each indirect-cost pool of a manufacturing firm:
- Autilizes a separate cost-allocation rate
- Bis a subset of total indirect costs
- Crelates to one cost object
- DAll of these answers are correct.
5Direct costs
- Aare anything for which a measurement of costs is desired.
- Bare costs related to a particular cost object that can be traced to that cost object in an economically
feasible (cost-effective) way - Cfocus specifically on the costing needs of the CFO
- Dprovide all information for management decision needs
6In a costing system:
- Acost tracing allocates indirect costs
- Bcost allocation assigns direct costs
- Ca cost-allocation base can be either financial or nonfinancial
- Da cost object should be a product and not a department or a geographic territory
7Assigning direct costs to a cost object is called:
- Acost allocation
- Bcost assignment
- Ccost pooling
- Dcost tracing
8________ is the process of distributing indirect costs to products.
- ACost allocation
- BJob cost recording
- CCost pooling
- DCost tracing
9A ________ links an indirect cost to a cost object.
- Acost-allocation base
- Bcost pool
- Ccost assignment
- Dcost tracing
10Which of the following includes both traced direct costs and allocated indirect costs?
- Acost tracing
- Bcost pools
- Ccost assignments
- Dcost allocations
11The cost allocation base
- Ais a grouping of individual indirect cost items.
- Bare costs related to a particular cost object that cannot be traced to that cost object in an economically
feasible way. - Cis anything for which a measurement of costs is desired.
- Dis a systematic way to link an indirect cost or group of indirect costs to cost objects.
12Direct costs are allocated to the cost object using a cost-allocation method.
- ATrue
- BFalse
13A cost object is anything for which a measurement of costs is desired.
- ATrue
- BFalse
14Direct costs of a cost object are costs related to a particular cost object that can be allocated to that
cost object in an economically feasible (cost-effective) way.- ATrue
- BFalse
15The cost-allocation base is a systematic way to link an indirect cost or group of indirect costs to cost
objects.- ATrue
- BFalse
16Cost objects may be jobs, products, or customers.
- ATrue
- BFalse
17The cost driver of an indirect cost is often used as the cost-allocation base.
- ATrue
- BFalse
18________ costing is used by a business to price homogeneous products.
- AActual
- BJob
- CProcess
- DTraditional
19Process costing:
- Aallocates all product costs, including materials and labor
- Bresults in different costs for different units produced
- Cis commonly used by general contractors who construct custom-built homes
- Dis used exclusively in manufacturing
20________ costing is used by a business to price unique products for different jobs.
- AActual
- BJob
- CProcess
- DTraditional
21Job costing:
- Acan only be used in manufacturing
- Brecords the flow of costs for each customer
- Callocates an equal amount of cost to each unit made during a time period
- Dis commonly used when each unit of output is identical
22Job-costing may only be used by:
- Aservice companies
- Bmerchandising companies
- Cmanufacturing companies
- DAll of these may use job-costing.
23Many large companies which have multiple production methods and processes have hybrid costing
systems that are:- Ajob-costing
- Bactual costing
- Cprocess costing
- Da mix of job-costing and process costing
24Which of the following companies is most likely to use a process costing system.
- Aa manufacturer of breakfast cereal
- Ba manufacturer of large commercial aircraft
- Ca custom jewelry manufacturer
- Da law firm
25A company may use job costing to assign costs to different product lines and then use process costing
to calculate unit costs within each product line.- ATrue
- BFalse
26In each period, job costing divides the total cost of producing an identical or similar product by the
total number of units produced to obtain a per-unit cost.- ATrue
- BFalse
27Job costing is commonly used to estimate costs in beverage production.
- ATrue
- BFalse
28In a job-costing system the cost object is an individual unit, batch, or lot of a distinct product or
service.- ATrue
- BFalse
29Normal costing is a method of job costing that allocates an indirect cost based on the actual indirect-cost
rate times the actual quantity of the cost-allocation base.- ATrue
- BFalse
30Process costing is used to assign manufacturing costs to unique batches of a product.
- ATrue
- BFalse
31Job costing and process costing systems share the same objective of estimating product costs.
- ATrue
- BFalse
32While costs are measured for individual jobs in a job cost system, they are measured for individual
process stages in a process costing system.- ATrue
- BFalse
33Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost
rates.- ANumerator reason
- BDenominator reason
- CBoth A and B
- DNeither A nor B
34The actual indirect-cost rate is calculated by
- Adividing actual total indirect costs by the actual total quantity of the cost-allocation base.
- Bmultiplying actual total indirect costs by the actual total quantity of the cost-allocation base.
- Cdividing the actual total quantity of the cost allocation base by actual total indirect costs.
- Dmultiplying the actual total quantity of the cost allocation base by actual total indirect costs.
35Actual costing is a costing system that traces direct costs to a cost object by
- Ausing the budgeted direct cost rates times the budgeted quantities of direct-cost inputs.
- Busing the actual direct costs rates times the budgeted quantities of the direct-cost inputs.
- Cusing the actual direct cost rates times the actual quantities of the direct-cost inputs.
- Dusing the budgeted direct cost rates times the actual quantities of the direct cost inputs.
36An example of a denominator reason for calculating annual indirect-cost rates includes:
- Ahigher heating bills in the winter
- Bsemi-annual insurance payments in March and September
- Chigher levels of output demanded during the fall months
- DAll of these answers are correct.
37When calculating indirect cost rates, the longer the time period, the greater the
influence of seasonal patterns on the amount of costs.- ATrue
- BFalse
38Actual costing systems are NOT commonly found in practice because actual costs CANNOT be
computed in a timely manner.- ATrue
- BFalse
39The actual indirect-cost rate is calculated by dividing actual total indirect costs by
the actual total quantity of the cost-allocation base.- ATrue
- BFalse
40A job that shows low profitability may be the result of:
- Awasting direct materials
- Binefficient direct manufacturing labor
- Cunderpricing the job
- DAll of these answers are correct.
41For a given job the direct costs associated with the job are:
- Aactual overhead
- Bdirect material
- Cdirect manufacturing labor
- DBoth b and c are correct.
42Place the following steps in the order suggested by the seven steps used to assign costs to individual
jobs:
A. Identify indirect costs
B. Compute the total cost of the job
C. Select cost-allocation bases
D. Compute the indirect cost rate- AACDB
- BCADB
- CBACD
- DDCAB
43The basic source document for direct manufacturing labor is the:
- Ajob-cost record
- Bmaterials-requisition record
- Clabor-time record
- DAll of these answers are correct.
44Problems with accurate costing occur when:
- Aincorrect job numbers are recorded on source documents
- Bbar coding is used to record materials used on the job
- Ca computer screen requests an employee number before that employee is able to work on information related to a specific job
- DAll of these answers are correct.
45The budgeted indirect-cost rate for each cost pool is computed as
- Abudgeted annual indirect costs divided by budgeted annual quantity of cost allocation base.
- Bbudgeted annual quantity of cost allocation base divided by budgeted annual indirect costs.
- Cactual annual indirect costs divided by budgeted annual quantity of cost allocation base.
- Dbudgeted annual indirect costs divided by budgeted actual quantity of cost allocation base.
46If indirect-cost rates are calculated monthly, distortions might occur because of:
- Arental costs paid monthly
- Bproperty tax payments made in July and December
- Croutine monthly preventive-maintenance costs that benefit future months
- DBoth B and C are correct.
47Stewart Company's actual manufacturing overhead is $2,800,000. Overhead is allocated on the basis
of direct labor hours. The direct labor hours were 50,000 for the period. What is the manufacturing
overhead rate?- A$47.00
- B$56.00
- C$75.00
- DNone of the above are correct.
48O'Reilly Enterprises manufactures digital video equipment. For each unit $2,950 of direct material is
used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is
applied at $35 per direct manufacturing labor hour. Calculate the cost of each unit.- A$4,950
- B$9,950
- C$8,450
- D$11,950
49An example of a numerator reason for calculating annual indirect-cost rates includes:
- Afewer production workdays in a month
- Bpayment of estimated taxes four times a year
- Chigher snow-removal costs during the winter
- DBoth B and C are correct.
50In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the
________ allocated to a job.- Adirect materials
- Bdirect labor
- Cmanufacturing overhead costs
- Dtotal costs
51A job-cost sheet details the:
- Adirect materials purchased and paid
- Bdirect labor costs incurred
- Cindirect labor costs incurred
- Dactual indirect overhead costs incurred
52A job-cost record uses information from:
- Aa materials requisition record to record raw material purchases from suppliers
- Ba receiving report that indicates the type and quantity of each item received in an order from a
supplier - Ca labor-time card to record an employee's wage rate and hours spent on a particular job
- DAll of these answers are correct.
53Costs that are subject to short-run fluctuations for given jobs are:
- Aactual costs
- Bbudgeted direct costs
- Cbudgeted indirect costs
- Dnormal costs
54Annual cost rates are preferred over actual cost rates for all of the following reasons EXCEPT:
- Abudgeted costs allow managers to have cost information on a timely basis
- Bbudgeted costs may be subject to short-run fluctuations
- Cbudgeted indirect-cost rates are known prior to the inception of a new job
- Dbudgeted-cost rates can be used to allocate direct or indirect costs
55Fixed costs remain constant at $400,000 per month. During high-output months variable costs are
$320,000, and during low-output months variable costs are $80,000. What are the respective high and
low indirect-cost rates if budgeted professional labor-hours are 16,000 for high-output months and 4,000
for low-output months?- A$45.00 per hour; $120.00 per hour
- B$45.00 per hour; $45.00 per hour
- C$25.00 per hour; $20.00 per hour
- D$56.20 per hour; $120.00 per hour
56Managers and accountants collect most of the cost information that goes into their systems through:
- Aan information databank
- Bcomputer programs
- Csource documents
- Dtime surveys
57Answer the following questions using the information below:
For 2010, Jake's Dog Supply Manufacturing uses machine-hours as the only overhead cost-allocation
base. The accounting records contain the following information:
Estimated Actual
Manufacturing overhead costs $200,000 $240,000
Machine-hours 40,000 50,000
Using job costing, the 2010 actual indirect-cost rate is:- A$4.00 per machine-hour
- B$4.80 per machine-hour
- C$5.00 per machine-hour
- D$6.00 per machine-hour
58Answer the following questions using the information below:
For 2010, Jake's Dog Supply Manufacturing uses machine-hours as the only overhead cost-allocation
base. The accounting records contain the following information:
Estimated Actual
Manufacturing overhead costs $200,000 $240,000
Machine-hours 40,000 50,000
Using actual costing, the amount of manufacturing overhead costs allocated to jobs during 2010 is:- A$300,000
- B$250,000
- C$240,000
- D$200,000
59Answer the following questions using the information below:
Philadelphia Company manufactures pipes and applies manufacturing overhead costs to production at a
budgeted indirect-cost rate of $15 per direct labor-hour. The following data are obtained from the
accounting records for June 2010:
Direct materials $140,000
Direct labor (3,500 hours @ $11/hour) $ 38,500
Indirect labor $ 10,000
Plant facility rent $ 30,000
Depreciation on plant machinery and equipment $ 15,000
Sales commissions $ 20,000
Administrative expenses $ 25,000
The actual amount of manufacturing overhead costs incurred in June 2010 totals:- A$278,500
- B$100,000
- C$55,000
- D$40,000
60Answer the following questions using the information below:
Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and
indirect costs are applied on a professional labor-hour basis that includes both attorney and
paraprofessional hours. Following is information for 20X3:
Budget Actual
Indirect costs $270,000 $300,000
Annual salary of each attorney $100,000 $110,000
Annual salary of each paraprofessional $ 29,000 $ 30,000
Total professional labor-hours 50,000 dlh 60,000 dlh
What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional
labor-hour?- A$27.00; $4.17
- B$29.80; $5.40
- C$32.40; $5.00
- D$27.00; $5.00
61Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and
indirect costs are applied on a professional labor-hour basis that includes both attorney and
paraprofessional hours. Following is information for 20X3:
Budget Actual
Indirect costs $270,000 $300,000
Annual salary of each attorney $100,000 $110,000
Annual salary of each paraprofessional $ 29,000 $ 30,000
Total professional labor-hours 50,000 dlh 60,000 dlh
How much should the client be billed in an actual costing system if 200 professional labor-hours are
used?- A$5,000
- B$6,960
- C$7,480
- D$6,400
62If indirect-cost rates were based on actual short-term usage, periods of lower demand would result in
lower costs per unit.- ATrue
- BFalse
63In job costing, only direct costs are used to determine the cost of a job.
- ATrue
- BFalse
64Indirect manufacturing costs should be allocated equally to each job.
- ATrue
- BFalse
65Each cost pool may have multiple cost allocation bases.
- ATrue
- BFalse
66Normal costing is a costing system that traces direct costs to a cost object by using
the actual direct-cost rates times the actual quantities of the direct-cost inputs.- ATrue
- BFalse
67A job-cost record is a source document, but individual items of the job-cost record may also have
source documents.- ATrue
- BFalse
68A materials-requisition record is an example of a source document.
- ATrue
- BFalse
69The reliability of the job-cost records depends on the reliability of the inputs.
- ATrue
- BFalse
70To smooth fluctuating levels of output, separate indirect-cost rates should be calculated for each
month.- ATrue
- BFalse
71Grounds-maintenance costs incurred during the summer months will distort indirect-cost rates that
are computed monthly.- ATrue
- BFalse
72One reason for using longer time periods to calculate indirect-cost rates is seasonal cost fluctuations.
- ATrue
- BFalse
73The budgeted indirect-cost rate is calculated:
- Aat the beginning of the year
- Bduring the year
- Cat the end of each quarter
- Dat the end of the year
74The difference between actual costing and normal costing is:
- Anormal costing uses actual quantities of direct-costs
- Bactual costing uses actual quantities of direct-costs
- Cnormal costing uses budgeted indirect-costs
- Dactual costing uses actual quantities of cost-allocation bases
75Which of the following statements about normal costing is true?
- ADirect costs and indirect costs are traced using an actual rate.
- BDirect costs and indirect costs are traced using budgeted rates.
- CDirect costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate.
- DDirect costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.
76When using a normal costing system, manufacturing overhead is allocated using the ________
manufacturing overhead rate and the ________ quantity of the allocation base.- Abudgeted; actual
- Bbudgeted; budgeted
- Cactual; budgeted
- Dactual; actual
77Which of the following statements about actual costing and normal costing is true?
- AManufacturing costs of a job are available earlier under actual costing.
- BCorrective actions can be implemented sooner under normal costing.
- CManufacturing costs are available earlier under normal costing.
- DBoth B and C are correct.
78Answer the following questions using the information below:
For 2010, Jake's Dog Supply Manufacturing uses machine-hours as the only overhead cost-allocation
base. The accounting records contain the following information:
Estimated Actual
Manufacturing overhead costs $200,000 $240,000
Machine-hours 40,000 50,000
Using job costing, the 2010 budgeted manufacturing overhead rate is:- A$4.00 per machine-hour
- B$4.80 per machine-hour
- C$5.00 per machine-hour
- D$6.00 per machine-hour
79Answer the following questions using the information below:
For 2010, Jake's Dog Supply Manufacturing uses machine-hours as the only overhead cost-allocation
base. The accounting records contain the following information:
Estimated Actual
Manufacturing overhead costs $200,000 $240,000
Machine-hours 40,000 50,000
Using normal costing, the amount of manufacturing overhead costs allocated to jobs during 2010 is:- A$300,000
- B$250,000
- C$240,000
- D$200,000
80Answer the following questions using the information below:
Rhett Company has two departments, Machining and Assembly. The following estimates are for the
coming year:
Machining Assembly
Direct manufacturing labor-hours 10,000 50,000
Machine-hours 40,000 20,000
A single indirect-cost rate based on direct manufacturing labor-hours for the entire plant is:
Manufacturing overhead $200,000 $400,000- A$ 8 per direct labor-hour
- B$10 per direct labor-hour
- C$20 per direct labor-hour
- DNone of these answers is correct.
81Answer the following questions using the information below:
Rhett Company has two departments, Machining and Assembly. The following estimates are for the
coming year:
Machining Assembly
Direct manufacturing labor-hours 10,000 50,000
Machine-hours 40,000 20,000
Manufacturing overhead $200,000 $400,000
The budgeted indirect-cost driver rate for the Machining Department based on the number of
machine-hours in that department is:- A$5 per machine-hour
- B$10 per machine-hour
- C$20 per machine-hour
- DNone of these answers is correct.
82Answer the following questions using the information below:
Joni's Kitty Supplies applies manufacturing overhead costs to products at a budgeted indirect-cost rate of
$60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy
Mouse product. Estimates for this order include: Direct materials $40,000; 500 direct manufacturing
labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs.
Manufacturing overhead cost estimates for this special order total:- A$10,000
- B$30,000
- C$36,000
- DNone of these answers is correct.
83Answer the following questions using the information below:
Gibson Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost
rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The
following estimates are provided for the coming year for the company and for the Winfield High School
band jacket job.
Company Winfield High School Job
Direct materials $40,000 $1,000
Direct labor $10,000 $200
Manufacturing overhead costs $30,000
Machine-hours 100,000 mh 900 mh
For Gibson Manufacturing, what is the annual manufacturing overhead cost-allocation rate?- A$0.50
- B$0.80
- C$0.30
- D$33.33
84Answer the following questions using the information below:
Gibson Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost
rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The
following estimates are provided for the coming year for the company and for the Winfield High School
band jacket job.
Company Winfield High School Job
Direct materials $40,000 $1,000
Direct labor $10,000 $200
Manufacturing overhead costs $30,000
Machine-hours 100,000 mh 900 mh
What amount of manufacturing overhead costs will be allocated to this job?- A$270
- B$720
- C$450
- D$30,000
85Answer the following questions using the information below:
Gibson Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost
rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The
following estimates are provided for the coming year for the company and for the Winfield High School
band jacket job.
Company Winfield High School Job
Direct materials $40,000 $1,000
Direct labor $10,000 $200
Manufacturing overhead costs $30,000
Machine-hours 100,000 mh 900 mh
What are the total manufacturing costs of this job?- A$1,200
- B$1,470
- C$1,650
- D$1,920
86Answer the following questions using the information below:
Gibson Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost
rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The
following estimates are provided for the coming year for the company and for the Winfield High School
band jacket job.
Company Winfield High School Job
Direct materials $40,000 $1,000
Direct labor $10,000 $200
Manufacturing overhead costs $30,000
Machine-hours 100,000 mh 900 mh
What is the bid price for the Winfield High School job if the company uses a 40% markup of total
manufacturing costs?- A$2,310
- B$588
- C$1,680
- D$2,058
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- Exam 1 Cost Accounting Quiz on Chapter 4 Pre-Test, created by Isabel Robles on 06/03/2016.
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- Isabel Robles
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