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web.groovymark@gmail.com
- December 8, 2024
Question 21
Which company would likely use job order costing?
a) A chemical processing plant
b) A law firm
c) A fast-food restaurant
d) An oil refinery
Answer: b) A law firm
Explanation: Job order costing is commonly used by companies that offer specialized, individualized services or products, like a law firm where each client case is unique.
Question 22
What is the primary goal of cost allocation in activity-based costing (ABC)?
a) To reduce the total manufacturing costs
b) To allocate costs based on actual usage of resources
c) To evenly distribute costs across all products
d) To track direct materials more effectively
Answer: b) To allocate costs based on actual usage of resources
Explanation: ABC allocates costs to products or services based on the specific activities that are responsible for incurring those costs, making cost allocation more accurate.
Question 23
In process costing, how are costs accumulated?
a) By individual job orders
b) By department or process
c) By cost center
d) By direct labor hours
Answer: b) By department or process
Explanation: In process costing, costs are accumulated for each department or process over a set period of time, as it’s used for continuous, mass production systems.
Question 24
When manufacturing overhead is underapplied, which of the following is true?
a) Actual overhead costs were less than applied overhead costs
b) Actual overhead costs were more than applied overhead costs
c) Overhead is overestimated at the start of the period
d) More overhead was applied than actually incurred
Answer: b) Actual overhead costs were more than applied overhead costs
Explanation: Underapplied overhead means the amount of overhead allocated to jobs is less than the actual overhead costs incurred.
Question 25
What does a high contribution margin indicate?
a) A product is not profitable
b) The product’s variable costs are higher than fixed costs
c) The company has high fixed costs
d) The product generates significant revenue to cover fixed costs
Answer: d) The product generates significant revenue to cover fixed costs
Explanation: A high contribution margin means that after covering variable costs, there is more revenue left to cover fixed costs and contribute to profit.
Question 26
What is the primary purpose of calculating equivalent units in process costing?
a) To track the number of units transferred between departments
b) To calculate the cost per unit produced
c) To adjust for inflation
d) To assign costs to individual jobs
Answer: b) To calculate the cost per unit produced
Explanation: Equivalent units allow companies to account for partially completed units, helping determine the cost per unit for products still in process.
Question 27
In which costing method are costs averaged over all units produced?
a) Job order costing
b) Standard costing
c) Process costing
d) Activity-based costing
Answer: c) Process costing
Explanation: Process costing averages costs across all units produced during a period, making it suitable for mass production environments.
Question 28
Which of the following would be an example of a fixed cost?
a) Raw materials used in production
b) Wages paid to production workers
c) Depreciation on factory equipment
d) Utilities based on production levels
Answer: c) Depreciation on factory equipment
Explanation: Fixed costs, like depreciation, remain constant regardless of the number of units produced, unlike variable costs such as raw materials.
Question 29
In job order costing, how are indirect labor costs assigned?
a) They are assigned to individual jobs
b) They are included in direct labor costs
c) They are accumulated in manufacturing overhead
d) They are charged to cost of goods sold
Answer: c) They are accumulated in manufacturing overhead
Explanation: Indirect labor costs are not directly traceable to specific jobs and are included in manufacturing overhead, which is then allocated to jobs using a predetermined rate.
Question 30
When using a job order costing system, what happens when goods are sold?
a) Costs are transferred from work-in-process to finished goods
b) Costs are transferred from finished goods to cost of goods sold
c) Costs are transferred from raw materials to manufacturing overhead
d) Costs are transferred from direct labor to manufacturing overhead
Answer: b) Costs are transferred from finished goods to cost of goods sold
Explanation: When goods are sold, the costs associated with those goods move from the finished goods inventory to cost of goods sold, reflecting the expense of the sale.
Question 31
What is the purpose of using equivalent units in process costing?
a) To reduce material costs
b) To allocate costs evenly across jobs
c) To assign costs to partially completed units
d) To increase labor efficiency
Answer: c) To assign costs to partially completed units
Explanation: Equivalent units allow for the allocation of costs to units that are partially completed, ensuring that costs are accurately reflected at various stages of production.
Question 32
Which statement best describes direct labor?
a) Labor costs that are incurred for workers not directly involved in production
b) Labor costs for workers directly involved in converting materials into finished goods
c) Labor costs that are classified under administrative expenses
d) Labor costs that cannot be traced to specific jobs
Answer: b) Labor costs for workers directly involved in converting materials into finished goods
Explanation: Direct labor costs are associated with employees who work directly on the production of goods or services, such as assembly line workers.
Question 33
What is the cost of goods manufactured?
a) The cost of goods transferred to finished goods inventory
b) The total cost of goods sold during a period
c) The total manufacturing costs added to beginning work-in-process
d) The total overhead costs applied to jobs
Answer: a) The cost of goods transferred to finished goods inventory
Explanation: The cost of goods manufactured refers to the total costs incurred to complete products and move them from work-in-process to finished goods.
Question 34
In which scenario is activity-based costing most useful?
a) When a company produces a single product
b) When overhead costs are minimal
c) When a company produces diverse products with different resource requirements
d) When direct materials costs are higher than overhead
Answer: c) When a company produces diverse products with different resource requirements
Explanation: ABC is most useful in environments where products consume resources differently, allowing for more accurate cost allocation.
Question 35
What is the formula for calculating the break-even point in units?
a) Total fixed costs / contribution margin per unit
b) Total variable costs / contribution margin per unit
c) Total fixed costs / sales price per unit
d) Total fixed costs / direct labor cost per unit
Answer: a) Total fixed costs / contribution margin per unit
Explanation: The break-even point in units is calculated by dividing total fixed costs by the contribution margin per unit, which shows how many units must be sold to cover fixed costs.
Question 36
How are actual overhead costs recorded during production?
a) As credits to the finished goods account
b) As debits to the work-in-process account
c) As debits to the manufacturing overhead account
d) As credits to the manufacturing overhead account
Answer: c) As debits to the manufacturing overhead account
Explanation: Actual overhead costs incurred are recorded as debits to the manufacturing overhead account throughout the production process.
Question 37
In job order costing, what happens when a job is started?
a) Costs are transferred from raw materials to finished goods
b) Costs are accumulated in the work-in-process account
c) Costs are applied to the cost of goods sold
d) Costs are debited to manufacturing overhead
Answer: b) Costs are accumulated in the work-in-process account
Explanation: When a job is started, direct materials, direct labor, and overhead costs are accumulated in the work-in-process account until the job is completed.
Question 38
Which of the following is a product cost?
a) Office rent
b) Advertising expenses
c) Factory utilities
d) Sales commissions
Answer: c) Factory utilities
Explanation: Product costs are directly related to the production of goods, including costs like factory utilities, which are incurred in the production process.
Question 39
What is the purpose of calculating the predetermined overhead rate?
a) To determine actual overhead costs for the period
b) To assign indirect costs to jobs based on a consistent method
c) To reduce the overall overhead costs
d) To allocate direct materials costs accurately
Answer: b) To assign indirect costs to jobs based on a consistent method
Explanation: The predetermined overhead rate allows companies to apply overhead to jobs in a consistent manner throughout the period, based on estimates.
Question 40
What does overapplied overhead mean?
a) Actual overhead costs are higher than applied overhead
b) More overhead was allocated to jobs than was actually incurred
c) Actual overhead costs are lower than expected
d) All direct labor costs have been assigned to jobs
Answer: b) More overhead was allocated to jobs than was actually incurred
Explanation: Overapplied overhead occurs when the amount of overhead assigned to jobs is more than the actual overhead costs incurred.
