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web.groovymark@gmail.com
- December 8, 2024
Question 41
What is the impact of overapplied overhead at the end of a period?
a) It increases the cost of goods sold
b) It reduces the cost of goods sold
c) It has no effect on the financial statements
d) It increases the work-in-process inventory
Answer: b) It reduces the cost of goods sold
Explanation: When overhead is overapplied, it reduces the cost of goods sold, as more overhead was applied to production than was actually incurred.
Question 42
Which of the following would be classified as direct labor?
a) The wages of a janitor in the factory
b) The wages of a factory manager
c) The wages of an assembly line worker
d) The salary of the company CEO
Answer: c) The wages of an assembly line worker
Explanation: Direct labor refers to the labor costs of workers directly involved in manufacturing the product, such as assembly line workers.
Question 43
In a job order costing system, what does the completion of a job trigger?
a) The transfer of costs from finished goods to cost of goods sold
b) The application of direct materials to the job
c) The transfer of costs from work-in-process to finished goods
d) The application of manufacturing overhead to the job
Answer: c) The transfer of costs from work-in-process to finished goods
Explanation: When a job is completed, the costs associated with it are transferred from the work-in-process account to the finished goods inventory account.
Question 44
What is the role of cost pools in activity-based costing?
a) To allocate direct labor costs
b) To assign overhead costs to different activities
c) To reduce total manufacturing costs
d) To calculate direct materials costs
Answer: b) To assign overhead costs to different activities
Explanation: Cost pools are used in activity-based costing to group related overhead costs, which are then assigned to products or services based on the activities that generate those costs.
Question 45
What is the purpose of calculating the margin of safety?
a) To determine the total fixed costs of a product
b) To assess how much sales can drop before a company incurs a loss
c) To measure the company’s profitability
d) To calculate the break-even point in units
Answer: b) To assess how much sales can drop before a company incurs a loss
Explanation: The margin of safety shows how much sales can decline before the company reaches its break-even point, indicating its cushion against financial losses.
Question 46
How are period costs treated in a company’s financial statements?
a) They are included in the cost of goods sold
b) They are capitalized as inventory
c) They are expensed in the period they are incurred
d) They are allocated to manufacturing overhead
Answer: c) They are expensed in the period they are incurred
Explanation: Period costs, such as selling and administrative expenses, are expensed in the period they are incurred, rather than being included in the cost of goods sold.
Question 47
What happens when manufacturing overhead is underapplied at the end of the period?
a) The cost of goods sold is increased
b) The cost of goods sold is reduced
c) The work-in-process account is credited
d) The finished goods inventory is debited
Answer: a) The cost of goods sold is increased
Explanation: When manufacturing overhead is underapplied, the cost of goods sold is increased to reflect the additional overhead costs that were not applied during production.
Question 48
In activity-based costing, what is a cost driver?
a) The total overhead costs assigned to a product
b) A factor that causes changes in the cost of an activity
c) A measure of direct labor used in production
d) The total direct materials used in production
Answer: b) A factor that causes changes in the cost of an activity
Explanation: In activity-based costing, cost drivers are the factors that cause changes in the costs of various activities, such as the number of machine hours or labor hours used.
Question 49
How does job order costing differ from process costing?
a) Job order costing averages costs, while process costing assigns costs to jobs
b) Job order costing assigns costs to individual jobs, while process costing averages costs across units
c) Process costing is used for custom jobs, while job order costing is used for mass production
d) Job order costing is based on estimated costs, while process costing uses actual costs
Answer: b) Job order costing assigns costs to individual jobs, while process costing averages costs across units
Explanation: Job order costing tracks costs for individual jobs, while process costing averages costs across large batches of identical products.
Question 50
What is the breakeven point?
a) The point where total variable costs equal total fixed costs
b) The level of sales where total revenue equals total costs
c) The point where total fixed costs equal total direct labor costs
d) The level of sales where net income equals total revenue
Answer: b) The level of sales where total revenue equals total costs
Explanation: The breakeven point is the level of sales at which a company’s total revenue equals its total costs, meaning no profit or loss is generated.
