Management Accounting Information for Decisionn Making And Strategy Execution Atkinson 6th Edition by Anthony A. Atkinson – Test Bank
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Sample Questions
Management Accounting, 6e (Atkinson
et al.)
Chapter 4 Accumulating and Assigning Costs to
Products
Objective 1
1) Overhead costs such as factory rent and supervisory salaries
are allocated to cost objects in a multi-product facility.
Answer: TRUE
Diff: 1
Terms: overhead cost
Objective: 1
AACSB: Reflective thinking
2) In job order costing, only direct costs are used to determine
the cost of a job.
Answer: FALSE
Explanation: In job order costing, direct costs and
indirect costs are used to determine the cost of a job.
Diff: 1
Terms: direct cost, indirect cost
Objective: 1
AACSB: Reflective thinking
3) Job order costing:
1. A)
can only be used in manufacturing.
2. B)
records the flow of costs for each customer.
3. C)
allocates an equal amount of cost to each unit made during a time period.
4. D) is
commonly used when each unit of output is identical.
Answer: B
Diff: 1
Terms: job order costing
Objective: 1
AACSB: Reflective thinking
4) All of the following create problems with accurate product or
job costing except:
1. A)
incorrect job numbers are recorded on source documents.
2. B)
bar coding is used to record materials used on the job.
3. C)
using budgeted overhead costs to determine overhead cost allocation rates.
4. D) a
computer screen requests an employee number before that employee is able to
work on information related to a specific job.
Answer: B
Diff: 1
Terms: job order costing
Objective: 1
AACSB: Reflective thinking
5) A job that shows low profitability may be the result of all
of the following except:
1. A)
inefficient use of direct materials.
2. B)
inefficient direct manufacturing labor.
3. C)
overpricing the job.
4. D)
over-allocating overhead costs.
Answer: C
Diff: 2
Terms: overhead
Objective: 1
AACSB: Reflective thinking
Objective 2
1) The raw material used in a product that can be easily traced
to the product is generally classified as an indirect cost.
Answer: FALSE
Explanation: The raw material used in a product that can
be easily traced to the product is generally classified as a direct cost.
Diff: 1
Terms: direct cost
Objective: 2
AACSB: Reflective thinking
2) An indirect cost will be traced to the cost object.
Answer: FALSE
Explanation: A direct cost will be traced to the cost
object.
Diff: 1
Terms: direct cost
Objective: 2
AACSB: Reflective thinking
3) An example of a direct cost for a service provided by an
accounting firm, such as a tax return, would be:
1. A)
depreciation on computer system.
2. B)
labor of staff accountant who prepared the return.
3. C)
labor of file clerk who filed copies of return.
4. D)
rent on the office.
Answer: B
Diff: 1
Terms: direct cost
Objective: 2
AACSB: Reflective thinking
4) An example of a direct cost in a car repair shop would
include:
1. A)
parts used in repair.
2. B)
supervisory labor.
3. C) depreciation
on tools.
4. D)
property taxes on car repair shop.
Answer: A
Diff: 1
Terms: direct cost
Objective: 2
AACSB: Reflective thinking
5) In a manufacturing environment, an indirect cost such as
________ would usually be allocated to a cost object.
1. A)
utilities
2. B)
raw materials
3. C)
labor of employees who operate manufacturing equipment
4. D)
labor of administrative secretaries
Answer: D
Diff: 1
Terms: indirect costs
Objective: 2
AACSB: Reflective thinking
6) In the manufacture of cans of beans, all of the following
would likely be allocated to a cost object except:
1. A)
utilities.
2. B)
supervisory labor.
3. C)
depreciation on equipment used to can multiple products.
4. D)
beans.
Answer: D
Diff: 1
Terms: indirect costs
Objective: 2
AACSB: Reflective thinking
7) A cost that depends on the amount of resource that is used is
referred to as a
1. A)
fixed cost.
2. B)
variable cost.
3. C)
direct cost.
4. D)
indirect cost.
Answer: B
Diff: 1
Terms: variable cost
Objective: 2
AACSB: Reflective thinking
8) A cost that is uniquely and unequivocally attributable to a
single cost object is a:
1. A)
capacity related resource.
2. B)
consumable resource.
3. C)
indirect cost.
4. D)
direct cost.
Answer: A
Diff: 2
Terms: direct cost
Objective: 2
AACSB: Reflective thinking
9) Depreciation on factory equipment is best characterized as
1. A)
direct costs.
2. B)
fixed manufacturing overhead.
3. C)
variable overhead.
4. D)
period costs.
Answer: D
Diff: 1
Terms: period cost
Objective: 2
AACSB: Reflective thinking
10) Depreciation on computers at the corporate headquarters is
best characterized as
1. A)
direct costs.
2. B)
fixed manufacturing overhead.
3. C)
variable overhead.
4. D)
period costs.
Answer: D
Diff: 1
Terms: period cost
Objective: 2
AACSB: Reflective thinking
11) Distinguish between direct and indirect costs. Give
examples of each with regard to a specific product.
Answer: Direct costs are those costs that can be easily
traced to the product and include direct materials and direct labor. In
the manufacture of a baseball bat, the wood would be the direct material and
the labor of the employees who cut and shape the wood would be direct
labor. Indirect costs are costs that cannot easily be traced to the
product because it is not possible or economically feasible to figure out what
quantity of the resource was consumed by the manufacture of the product.
Indirect costs must be allocated to products. Indirect costs for the
manufacture of a baseball bat would include the depreciation on the machines
used in the manufacturing process and the utilities for the manufacturing
facility.
Diff: 2
Terms: cost driver rate
Objective: 2
AACSB: Reflective thinking
MAL: This question is not available in MyAccountingLab.
Objective 3
1) The practical capacity of a cost driver is the short-term
capacity made available by the amount of resources committed to an overhead
activity.
Answer: FALSE
Explanation: The practical capacity of a cost driver is
the long-term capacity made available by the amount of resources committed to
an overhead activity.
Diff: 2
Terms: practical capacity
Objective: 3
AACSB: Reflective thinking
2) Determining cost pools and realistic cost driver rates is a
relatively complex process.
Answer: TRUE
Diff: 1
Terms: cost pools
Objective: 3
AACSB: Reflective thinking
3) The costs grouped in a cost pool should be driven by the same
activity.
Answer: TRUE
Diff: 1
Terms: cost pools
Objective: 3
AACSB: Reflective thinking
4) In a job order costing system, a cost driver rate is used to
apply direct manufacturing costs to a specific product.
Answer: FALSE
Explanation: In a job order costing system, a cost driver
rate is used to apply indirect manufacturing costs to a specific product
Diff: 1
Terms: job order cost system
Objective: 3
AACSB: Reflective thinking
5) In a normal job order costing system even though the cost
driver rate is based on estimates, overhead costs are applied to products based
on actual levels of activity.
Answer: TRUE
Diff: 2
Terms: job order cost system
Objective: 3
AACSB: Reflective thinking
6) When demand for a product is low, a higher markup should be
used since a larger share of the fixed costs needs to be allocated to each
product.
Answer: FALSE
Explanation: When demand for a product is low, a lower
markup should be used since a larger share of the fixed costs needs to be
allocated to each product.
Diff: 1
Terms: fixed cost
Objective: 3
AACSB: Reflective thinking
7) Labor hours are always an appropriate cost driver in a
manufacturing environment.
Answer: FALSE
Explanation: Machine hours is always an appropriate cost
driver in a manufacturing environment.
Diff: 1
Terms: cost driver
Objective: 3
AACSB: Reflective thinking
8) The over-allocation of overhead to a product distorts the
product’s cost and therefore the evaluation of the product’s profitability.
Answer: TRUE
Diff: 2
Terms: overhead
Objective: 3
AACSB: Reflective thinking
9) In job order costing, individual jobs and products will be
allocated different amounts of overhead costs depending on whether a single
cost pool or multiple cost pools is used.
Answer: TRUE
Diff: 2
Terms: cost pools
Objective: 3
AACSB: Reflective thinking
10) In a job order costing system, a manufacturing firm
typically uses a cost driver rate to estimate the ________ used for a job.
1. A)
direct materials
2. B)
direct labor
3. C)
variable overhead
4. D)
total costs
Answer: C
Diff: 1
Terms: variable overhead
Objective: 3
AACSB: Reflective thinking
11) The normal cost of overhead activities includes:
1. A)
costs of resources committed to the particular activity.
2. B)
amounts for additional overtime payments.
3. C)
allowances for idle time.
4. D)
All of the above are correct.
Answer: A
Diff: 2
Terms: overhead
Objective: 3
AACSB: Reflective thinking
12) For each cost pool, a(n) ________ is identified that is the
primary factor causing overhead costs to increase during the accounting period.
1. A)
activity
2. B)
job
3. C)
level
4. D)
process
Answer: A
Diff: 1
Terms: cost pools
Objective: 3
AACSB: Reflective thinking
13) For the activity cost driver rate, overhead costs ________
should be used in the calculation.
1. A)
actually consumed
2. B)
made available
3. C)
based on a seasonal average
4. D)
None of the above is correct.
Answer: D
Diff: 2
Terms: cost driver rate
Objective: 3
AACSB: Reflective thinking
14) The predetermined overhead cost driver rate is calculated
using ________ overhead costs.
1. A)
actual
2. B)
allocated
3. C)
direct
4. D)
estimated
Answer: D
Diff: 2
Terms: cost driver rate
Objective: 3
AACSB: Reflective thinking
Rupe Company has two departments: Machining and Assembly. The
following estimates are for the coming year:
|
|
Machining |
Assembly |
|
Direct labor hours |
30,000 |
40,000 |
|
Machine hours |
150,000 |
200,000 |
|
Manufacturing overhead
costs |
$600,000 |
$800,000 |
15) A single predetermined manufacturing cost driver rate based
on total plant direct labor hours is:
1. A) $
4 per direct labor hour.
2. B)
$10 per direct labor hour.
3. C)
$20 per direct labor hour.
4. D) $40
per direct labor hour..
Answer: C
Diff: 2
Terms: cost driver rate
Objective: 3
AACSB: Analytical skills
16) A predetermined manufacturing cost driver rate for the
Machining Department based on the number of machine hours in that department
is:
1. A) $
4 per machine hour.
2. B)
$10 per machine hour.
3. C)
$20 per machine hour.
4. D)
$40 per direct labor hour.
Answer: A
Explanation: A) $4 per machine hour = $600,000/150,000 mh
Diff: 2
Terms: cost driver rate
Objective: 3
AACSB: Analytical skills
For 2011, Steve’s Plastics Manufacturing uses a normal job order
costing system. The accounting records contain the following information:
|
Estimated manufacturing
overhead (overhead) costs |
$100,000 |
|
Actual manufacturing
overhead costs |
$120,000 |
|
Estimated machine hours |
20,000 |
|
Actual machine hours |
25,000 |
The only cost driver is machine hours.
17) Using normal job order costing, the 2011 predetermined
manufacturing overhead cost driver rate is:
4. A)
$4.00 per machine hour.
5. B)
$4.80 per machine hour.
6. C)
$5.00 per machine hour.
7. D)
$6.00 per machine hour.
Answer: C
Explanation: C) $5.00 per machine hour = $100,000 / 20,000
estimated mh
Diff: 2
Terms: cost driver rate
Objective: 3
AACSB: Analytical skills
18) Using normal job order costing, the amount of manufacturing
overhead costs allocated to jobs during 2011 is:
1. A)
$150,000.
2. B)
$125,000.
3. C)
$120,000.
4. D)
$100,000.
Answer: B
Explanation: B) $125,000 = $5.00 per machine hour × 25,000
actual mh
Diff: 2
Terms: cost driver rate, job order costing
Objective: 3
AACSB: Analytical skills
Ocean Technical Services applies manufacturing overhead costs to
products at a predetermined rate of $70 per direct labor hour. One customer has
requested a bid on a special order of a product. Estimates for this order
include: direct materials $50,000; direct labor 900 direct labor hours @
$30 per hour; and a markup rate of 25%.
19) Manufacturing overhead cost estimates for this special order
total:
1. A)
$7,000.
2. B)
$36,000.
3. C)
$45,990.
4. D)
$63,000.
Answer: D
Explanation: D) $63,000 = 900 dlh × $70 predetermined rate
Diff: 2
Terms: cost driver rate, job order costing
Objective: 3
AACSB: Analytical skills
20) Estimated total product costs for this special order equal:
1. A)
$77,000.
2. B)
$97,000.
3. C)
$140,000.
4. D)
$175,000.
Answer: C
Explanation: C) $140,000 = DM $50,000 + DL $27,000 + MOH
$63,000
Diff: 2
Terms: cost driver rate, job order costing
Objective: 3
AACSB: Analytical skills
21) The bid price for this special order is:
1. A) $77,000.
2. B)
$97,000.
3. C)
$121,250.
4. D)
$175,000.
Answer: D
Explanation: D) $175,000 = $140,000 × 1.25
Diff: 3
Terms: cost driver rate, job order costing
Objective: 3
AACSB: Analytical skills
LCR Company manufactures paint and applies manufacturing overhead
costs to production at a predetermined rate of $20 per direct labor hour. The
following data are obtained from the accounting records for October 2011:
|
Direct materials |
$1,320,000 |
|
Direct labor (20,000 hours
@ $31/hour) |
$620,000 |
|
Plant facility rent |
$ 140,000 |
|
Plant facility insurance |
$ 80,000 |
|
Other miscellaneous plant
costs |
$ 20,000 |
|
Depreciation on machinery
and equipment |
$ 180,000 |
|
Sales commissions |
$ 60,000 |
|
Administrative expenses |
$ 100,000 |
22) The actual amount of manufacturing overhead costs incurred
in October 2011 total:
1. A)
$2,180,000
2. B) $
480,000
3. C) $
420,000
4. D) $
160,000
Answer: C
Explanation: C) $420,000 = $140,000 + $80,000 + $20,000 +
$180,000
Diff: 2
Terms: cost driver rate, job order costing
Objective: 3
AACSB: Analytical skills
23) The amount of manufacturing overhead costs applied to all
jobs during October 2011 total:
1. A) $
102,000.
2. B)
$400,000.
3. C)
$620,000.
4. D)
$1,240,000.
Answer: B
Explanation: B) $400,000 = 20,000 dlh × $20 predetermined
overhead rate
Diff: 3
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
Wisconsin Electronics has received an order for 1,000 specially
designed TV/VCR combinations. The following standards were compiled for
this order:
|
Direct materials: |
|
|
Part #123 |
$25 per TV/VCR |
|
Part #456 |
$50 per TV/VCR |
|
|
|
|
Direct labor: |
2.0 hours per TV/VCR at $15
per hour |
|
Manufacturing overhead: |
$40 per direct labor hour |
24) The estimated direct labor cost for this order is:
1. A)
$30,000.
2. B)
$40,000.
3. C)
$80,000.
4. D)
$115,000.
Answer: A
Explanation: A) $30,000 = 1,000 unit order × 2.0 dlh × $15
per hour
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
25) The estimated manufacturing overhead cost assigned to this
order totals:
1. A)
$30,000.
2. B)
$40,000.
3. C)
$80,000.
4. D)
$115,000.
Answer: C
Explanation: C) $80,000 = 1,000 unit order × 2.0 dlh × $40
per hour
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
26) Assume the company adds a 10% markup to arrive at a selling
price. The bid price for this order totals:
500.
A) $203,500.
501.
B) $185,000.
502.
C) $115,500.
503.
D) $80,000.
Answer: A
Explanation: A) $203,500 = (DM $75,000 + DL $30,000 + MOH
$80,000) × 1.10
Diff: 3
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
Wood Manufacturing is a small textile manufacturer using
machine-hours as the single, plant-wide predetermined cost driver 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 |
900 |
27) For Wood Manufacturing, what is the annual manufacturing
overhead cost driver rate?
1. A) $0.50
per machine hour
2. B)
$0.80 per machine hour
3. C)
$0.30 per machine hour
4. D)
$33.33 per machine hour
Answer: C
Explanation: C) $0.30 per mh = $30,000 / 100,000mh
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
28) What amount of manufacturing overhead costs will be
allocated to the Winfield job?
1. A)
$270
2. B)
$720
3. C)
$450
4. D)
$30,000
Answer: C
Explanation: C) $270 = 900 mh × $0.30 per mh
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
29) What are the total manufacturing costs of this job?
1. A)
$1,200
2. B)
$1,470
3. C)
$1,650
4. D)
$1,920
Answer: B
Explanation: B) $1,470 = DM $1,000 + DL $200 + MOH $270
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
30) What is the bid price for the Winfield High School Job if
the company uses a 40% markup of total manufacturing costs?
1. A)
$2,310
2. B)
$588
3. C)
$1,680
4. D)
$2,058
Answer: D
Explanation: D) $2,058 = $1,470 × 1.40
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
Apple Valley Corporation uses a job order cost system and has
two production departments, A and B. Budgeted manufacturing costs for the year
are:
|
|
Department A |
Department B |
|
Direct materials |
$700,000 |
$100,000 |
|
Direct labor |
$200,000 |
$800,000 |
|
Manufacturing overhead |
$600,000 |
$400,000 |
The actual material and labor costs charged to Job #432 are as
follows:
|
|
|
|
Job #432 |
|
Direct materials: |
|
|
$25,000 |
|
Direct labor: |
|
|
|
|
Department A |
|
$ 8,000 |
|
|
Department B |
|
$12,000 |
|
|
|
|
$20,000 |
|
Apple Valley applies manufacturing overhead costs to jobs on the
basis of direct labor cost using departmental rates determined at the beginning
of the year.
31) For Department A, the manufacturing overhead cost driver
rate is:
1. A)
33% of direct labor costs.
2. B)
66% of direct labor costs.
3. C)
300% of direct labor costs.
4. D)
None of the above is correct.
Answer: C
Explanation: C) 300% = $600,000 / $200,000
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
32) For Department B, the manufacturing overhead cost driver
rate is:
1. A)
50% of direct labor costs.
2. B)
80% of direct labor costs.
3. C)
100% of direct labor costs.
4. D)
200% of direct labor costs.
Answer: A
Explanation: A) 50% = $400,000 / $800,000
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
33) Manufacturing overhead costs applied to Job #432 total:
1. A)
$12,000.
2. B)
$24,000.
3. C)
$36,000.
4. D)
None of the above is correct.
Answer: D
Explanation: D) $30,000 = ($8,000 × 300%) + ($12,000 ×
50%)
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
34) Total manufacturing costs associated with Job #432 equal:
1. A)
$55,000.
2. B)
$65,000.
3. C)
$70,000.
4. D)
$75,000.
Answer: D
Explanation: D) $75,000 = DM $25,000 + DL $20,000 + MOH
$30,000
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
Sheppard Manufacturing uses departmental cost driver rates to
allocate manufacturing overhead costs to products. Manufacturing overhead costs
are allocated on the basis of machine hours in the Machining Department and on
the basis of direct labor hours in the Assembly Department. At the beginning of
2011, the following estimates were provided for the coming year:
|
|
Machining |
Assembly |
|
Direct labor cost |
$500,000 |
$900,000 |
|
Manufacturing overhead
costs |
$420,000 |
$240,000 |
|
Direct labor-hours |
30,000 |
60,000 |
|
Machine-hours |
80,000 |
20,000 |
The accounting records of the company show the following data
for Job #316:
|
|
Machining |
Assembly |
|
Direct labor-hours |
120 |
70 |
|
Machine-hours |
60 |
5 |
|
Direct material cost |
$300 |
$200 |
|
Direct labor cost |
$100 |
$400 |
35) For the Machining Department, what is the annual
manufacturing overhead cost driver rate?
4. A)
$4.00 per machine hour
5. B)
$4.20 per machine hour
6. C)
$4.67 per machine hour
7. D)
$5.25 per machine hour
Answer: D
Explanation: D) $5.25 per mh = $420,000 / 80,000mh
Diff: 2
Terms: cost driver rate, job order costing, overhead
Objective: 3
AACSB: Analytical skills
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