-
web.groovymark@gmail.com
- December 8, 2024
Question 01
Which of the following is a variable cost?
a) Factory rent
b) Depreciation
c) Direct materials
d) Property taxes
Answer: c) Direct materials
Explanation: Variable costs change with the level of production, and direct materials are an example of such costs because they vary depending on how many products are produced.
Question 02
What is the predetermined overhead rate based on?
a) Actual costs incurred
b) Estimated total manufacturing overhead and estimated activity level
c) Actual direct materials costs
d) Actual direct labor hours worked
Answer: b) Estimated total manufacturing overhead and estimated activity level
Explanation: The predetermined overhead rate is calculated before the period begins, using estimated manufacturing overhead and the estimated activity level (e.g., machine hours or labor hours).
Question 03
In job order costing, what triggers the movement of costs from work-in-process to finished goods?
a) The start of a new job
b) The completion of a job
c) The sale of finished goods
d) The allocation of overhead
Answer: b) The completion of a job
Explanation: When a job is completed, the accumulated costs in the work-in-process account are transferred to the finished goods account.
Question 04
What is the purpose of a materials requisition form?
a) To request new materials to be purchased
b) To document the use of direct materials in production
c) To track the total overhead costs for the period
d) To apply labor costs to production
Answer: b) To document the use of direct materials in production
Explanation: A materials requisition form is used to request and document the use of direct materials in the production process.
Question 05
Which type of business would use process costing?
a) A custom furniture manufacturer
b) A law firm
c) A candy manufacturer
d) A software development company
Answer: c) A candy manufacturer
Explanation: Process costing is used by companies that produce large quantities of similar or identical products, like a candy manufacturer.
Question 06
Which of the following would most likely be classified as manufacturing overhead?
a) Factory supervisor’s salary
b) Direct materials used in production
c) Sales commission
d) Depreciation on office equipment
Answer: a) Factory supervisor's salary
Explanation: Manufacturing overhead includes indirect costs associated with production, such as the factory supervisor's salary.
Question 07
In process costing, what is a department’s equivalent units of production?
a) The number of units started and completed during the period
b) The sum of the work done on both completed and partially completed units
c) The total number of physical units in the department
d) The total direct labor hours used
Answer: b) The sum of the work done on both completed and partially completed units
Explanation: Equivalent units of production account for both completed units and partially completed units, reflecting the amount of work done during the period.
Question 08
What happens when overhead is overapplied?
a) Total costs are understated
b) More overhead is allocated to jobs than was actually incurred
c) Overhead costs are allocated based on direct labor hours
d) Actual overhead costs were more than applied overhead
Answer: b) More overhead is allocated to jobs than was actually incurred
Explanation: Overapplied overhead occurs when the overhead allocated to jobs exceeds the actual overhead costs incurred.
Question 09
Which of the following costs is NOT included in manufacturing overhead?
a) Direct labor
b) Indirect labor
c) Factory rent
d) Factory utilities
Answer: a) Direct labor
Explanation: Direct labor is classified as a direct cost of production and is not included in manufacturing overhead, which consists of indirect costs.
Question 10
What is the break-even point in sales dollars?
a) The point where total revenue equals total variable costs
b) The point where total revenue equals total fixed costs
c) The point where total revenue equals total costs
d) The point where total revenue exceeds total fixed costs
Answer: c) The point where total revenue equals total costs
Explanation: The break-even point in sales dollars is the point at which total revenue equals total costs, meaning the company makes no profit or loss.
Question 11
How are indirect labor costs treated in job order costing?
a) They are directly traced to jobs
b) They are included in manufacturing overhead
c) They are expensed in the period incurred
d) They are recorded as direct labor costs
Answer: b) They are included in manufacturing overhead
Explanation: Indirect labor costs cannot be directly traced to specific jobs, so they are included in manufacturing overhead and allocated to jobs using a predetermined overhead rate.
Question 12
What is a cost driver in activity-based costing (ABC)?
a) A factor that causes changes in total fixed costs
b) A factor that drives direct labor costs
c) A factor that causes changes in activity costs
d) A factor that reduces direct materials costs
Answer: c) A factor that causes changes in activity costs
Explanation: In ABC, cost drivers are the factors that cause the cost of an activity to increase or decrease, such as the number of machine setups or production runs.
Question 13
In which situation is a company most likely to use job order costing?
a) When producing a high volume of identical products
b) When producing unique, customized products
c) When operating a continuous manufacturing process
d) When mass-producing goods for the consumer market
Answer: b) When producing unique, customized products
Explanation: Job order costing is used when each job or batch of products is unique and requires individual cost tracking.
Question 14
How are actual manufacturing overhead costs recorded in the accounting records?
a) As debits to the manufacturing overhead account
b) As credits to the cost of goods sold
c) As debits to work-in-process inventory
d) As credits to finished goods inventory
Answer: a) As debits to the manufacturing overhead account
Explanation: Actual manufacturing overhead costs are recorded as debits to the manufacturing overhead account throughout the period.
Question 15
What is the primary difference between variable and fixed costs?
a) Variable costs change with the level of production, while fixed costs remain constant
b) Fixed costs are always higher than variable costs
c) Variable costs are incurred only during production shutdowns
d) Fixed costs increase with production levels
Answer: a) Variable costs change with the level of production, while fixed costs remain constant
Explanation: Variable costs fluctuate with production levels, while fixed costs remain constant regardless of the number of units produced.
Question 16
What is the margin of safety?
a) The percentage of sales revenue exceeding variable costs
b) The difference between actual sales and break-even sales
c) The total profit earned by the company
d) The difference between fixed and variable costs
Answer: b) The difference between actual sales and break-even sales
Explanation: The margin of safety measures how much sales can drop before the company reaches its break-even point, providing a cushion against losses.
Question 17
In job order costing, what is the role of the predetermined overhead rate?
a) To allocate direct labor costs to jobs
b) To estimate the cost of direct materials
c) To allocate indirect costs to jobs
d) To calculate the total cost of goods sold
Answer: c) To allocate indirect costs to jobs
Explanation: The predetermined overhead rate is used to allocate indirect manufacturing costs (such as overhead) to individual jobs based on an activity base like direct labor hours or machine hours.
Question 18
What is included in conversion costs?
a) Direct materials and direct labor
b) Direct labor and manufacturing overhead
c) Direct materials and manufacturing overhead
d) Selling and administrative costs
Answer: b) Direct labor and manufacturing overhead
Explanation: Conversion costs are the costs incurred to convert raw materials into finished goods, and they include direct labor and manufacturing overhead.
Question 19
When is process costing used?
a) When production consists of unique, custom products
b) When products are made in large, continuous batches
c) When products are produced in small, specialized batches
d) When products are manufactured using job order costing
Answer: b) When products are made in large, continuous batches
Explanation: Process costing is used for mass production of identical or very similar products, where costs are averaged over large quantities.
Question 20
What is the effect of underapplied overhead?
a) It reduces the cost of goods sold
b) It increases work-in-process inventory
c) It increases the cost of goods sold
d) It decreases manufacturing overhead
Answer: c) It increases the cost of goods sold
Explanation: Underapplied overhead means that the amount of overhead applied to jobs is less than the actual overhead incurred, so the difference is added to the cost of goods sold at the end of the period.
