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web.groovymark@gmail.com
- December 8, 2024
Question 21
What is a characteristic of fixed costs?
a) They change in total as production increases or decreases
b) They remain constant in total regardless of production levels
c) They increase on a per-unit basis as production decreases
d) They decrease on a per-unit basis as production decreases
Answer: b) They remain constant in total regardless of production levels
Explanation: Fixed costs, such as rent, remain the same in total regardless of how much production increases or decreases.
Question 22
What is the formula for calculating the contribution margin?
a) Sales revenue – fixed costs
b) Sales revenue – total costs
c) Sales revenue – variable costs
d) Fixed costs – variable costs
Answer: c) Sales revenue - variable costs
Explanation: The contribution margin is the amount remaining from sales revenue after variable costs have been subtracted, and it contributes to covering fixed costs and generating profit.
Question 23
How are direct materials recorded in job order costing?
a) As debits to the manufacturing overhead account
b) As credits to the finished goods account
c) As debits to the work-in-process account
d) As debits to the cost of goods sold
Answer: c) As debits to the work-in-process account
Explanation: When direct materials are used in production, they are debited to the work-in-process account, as they are part of the cost of producing the job.
Question 24
What is the break-even point in units?
a) Total fixed costs divided by the contribution margin per unit
b) Total variable costs divided by the selling price per unit
c) Total sales divided by the contribution margin per unit
d) Total profit divided by the contribution margin per unit
Answer: a) Total fixed costs divided by the 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 need to be sold to cover all fixed costs.
Question 25
What does the cost of goods manufactured represent?
a) The total cost of all jobs completed during the period
b) The total cost of goods available for sale
c) The total cost of raw materials used in production
d) The total cost of goods transferred from work-in-process to finished goods
Answer: d) The total cost of goods transferred from work-in-process to finished goods
Explanation: The cost of goods manufactured represents the total cost of goods that have been completed and transferred from work-in-process to finished goods during the period.
Question 26
How are indirect materials treated in job order costing?
a) They are directly traced to jobs
b) They are included in manufacturing overhead
c) They are expensed immediately
d) They are recorded as direct materials
Answer: b) They are included in manufacturing overhead
Explanation: Indirect materials, like indirect labor, cannot be directly traced to specific jobs, so they are included in manufacturing overhead and then allocated to jobs.
Question 27
Which of the following is NOT a part of the manufacturing overhead?
a) Factory utilities
b) Depreciation on factory equipment
c) Direct labor
d) Factory insurance
Answer: c) Direct labor
Explanation: Direct labor is a direct cost of production, whereas manufacturing overhead includes indirect costs like factory utilities, insurance, and depreciation.
Question 28
What is the purpose of a production budget?
a) To estimate the number of units to be produced
b) To allocate labor costs to each job
c) To track the costs of raw materials
d) To determine the cost of goods sold
Answer: a) To estimate the number of units to be produced
Explanation: The production budget estimates how many units need to be produced to meet sales demands and maintain the desired level of finished goods inventory.
Question 29
What is the primary focus of activity-based costing (ABC)?
a) Allocating overhead costs based on a single activity base
b) Allocating overhead based on several cost drivers
c) Simplifying the allocation of overhead costs
d) Directly tracing labor costs to products
Answer: b) Allocating overhead based on several cost drivers
Explanation: Activity-based costing allocates overhead costs based on multiple cost drivers that more accurately reflect the activities that generate overhead.
Question 30
Which formula is used to calculate contribution margin per unit?
a) Sales price per unit – variable cost per unit
b) Fixed costs – variable costs
c) Total sales – total fixed costs
d) Sales price per unit + total costs
Answer: a) Sales price per unit - variable cost per unit
Explanation: The contribution margin per unit is the amount remaining after variable costs are deducted from the sales price, which contributes to covering fixed costs.
Question 31
What happens to the cost of goods sold when overhead is underapplied?
a) It increases
b) It decreases
c) It remains the same
d) It is credited
Answer: a) It increases
Explanation: When overhead is underapplied, the actual overhead incurred is greater than what was applied, leading to an increase in the cost of goods sold to account for the difference.
Question 32
In a job order costing system, what triggers the recording of direct labor costs?
a) The hiring of new workers
b) The completion of a job
c) The payment of wages
d) The use of time tickets
Answer: d) The use of time tickets
Explanation: Direct labor costs are recorded in a job order costing system when employees fill out time tickets showing the amount of time they worked on a particular job.
Question 33
What is the formula for the break-even point in sales dollars?
a) Total fixed costs / sales price per unit
b) Total variable costs / contribution margin ratio
c) Total fixed costs / contribution margin ratio
d) Total fixed costs + variable costs
Answer: c) Total fixed costs / contribution margin ratio
Explanation: The break-even point in sales dollars is calculated by dividing total fixed costs by the contribution margin ratio, which shows the proportion of each sales dollar available to cover fixed costs.
Question 34
In activity-based costing, what is a cost pool?
a) A group of similar overhead costs that are allocated together
b) A measure of direct labor used in production
c) A method of tracing direct materials to jobs
d) A method of calculating direct labor costs
Answer: a) A group of similar overhead costs that are allocated together
Explanation: In activity-based costing, cost pools are groups of similar overhead costs that are accumulated and then allocated to products based on appropriate cost drivers.
Question 35
Which of the following is true about process costing?
a) It is used when each product is unique
b) It tracks costs by individual job
c) It accumulates costs for each process or department
d) It only applies to service-based industries
Answer: c) It accumulates costs for each process or department
Explanation: Process costing is used for mass production of similar products and accumulates costs by process or department rather than by individual job.
Question 36
How are manufacturing overhead costs applied to jobs?
a) By direct tracing
b) By using a predetermined overhead rate
c) By allocating based on direct labor hours worked
d) By adding the cost directly to the materials
Answer: b) By using a predetermined overhead rate
Explanation: Manufacturing overhead costs are applied to jobs using a predetermined overhead rate, which is based on estimated overhead and an activity base like direct labor hours or machine hours.
Question 37
What is the formula for calculating total manufacturing costs?
a) Direct materials + direct labor + manufacturing overhead
b) Direct materials + direct labor + selling expenses
c) Direct materials + finished goods + indirect labor
d) Direct materials + work-in-process inventory
Answer: a) Direct materials + direct labor + manufacturing overhead
Explanation: Total manufacturing costs are the sum of direct materials, direct labor, and manufacturing overhead incurred in producing goods.
Question 38
What is the result of overapplied overhead?
a) Cost of goods sold is increased
b) Cost of goods sold is decreased
c) There is no effect on cost of goods sold
d) Finished goods inventory is reduced
Answer: b) Cost of goods sold is decreased
Explanation: When overhead is overapplied, more overhead has been allocated than was actually incurred, leading to a decrease in the cost of goods sold to correct the difference.
Question 39
What is the purpose of a job cost sheet?
a) To track the total cost of goods sold
b) To assign overhead costs to jobs
c) To record the costs of materials, labor, and overhead for a specific job
d) To track sales revenue from completed jobs
Answer: c) To record the costs of materials, labor, and overhead for a specific job
Explanation: A job cost sheet tracks the costs of materials, labor, and overhead associated with a particular job in a job order costing system.
Question 40
In process costing, what is the main focus of cost accumulation?
a) Individual products
b) Individual jobs
c) Departments or processes
d) Sales revenue
Answer: c) Departments or processes
Explanation: In process costing, costs are accumulated by department or process, as the focus is on mass production of similar products.
