Cost Allocation Techniques MCQs

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Wilcox Industrial has two support departments, the Information Systems Department and the Personnel Department, and two manufacturing departments, th...






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A corporation allocates indirect corporate overhead costs to its operating divisions. The company uses a cause-and-effect criterion in the selection ...






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Cotton Company has two service departments and three operating departments. In allocating service department costs to the operating departments, whic...






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Boston Furniture Company manufactures several steel products. It has three production departments: Fabricating, Assembly, and Finishing. The service ...






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The management of ROX Company wishes to encourage all other departments to use the legal department, as circumstances warrant. To accomplish this, le...






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When allocating costs from one department to another, a dual-rate cost-allocation method may be used. The dual-rate cost-allocation method is most us...






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Allocation of service department costs to the production departments is necessary to






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When allocating service and administrative costs, the least useful criterion as a basis for allocation is






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Wilcox Industrial has two support departments, the Information Systems Department and the Personnel Department, and two manufacturing departments, th...






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Render, Inc., has four support departments (maintenance, power, human resources, and legal) and three operating departments. The support departments ...






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Wilcox Industrial has two support departments, the Information Systems Department and the Personnel Department, and two manufacturing departments, th...






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A large company is in the process of allocating service department costs to revenuegenerating departments. Under which one of the following allocatio...






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Which of the following statements is true for a firm that uses variable costing?






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When a firm prepares financial reports by using absorption costing,






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Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs, both variable and fixed, as inventoriable costs?






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The contribution margin is the excess of revenues over






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Which one of the following statements is true regarding absorption costing and variable costing?






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Jansen, Inc., pays bonuses to its managers based on operating income. The company uses absorption costing, and overhead is applied on the basis of di...






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The costing method that is properly classified for both external and internal reporting purposes is External Reporting ... Internal Reporting






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Absorption costing and variable costing are two different methods of assigning costs to units produced. Of the four cost items listed below, identify...






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Which one of the following is an advantage of using variable costing?






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Huntington Corporation pays bonuses to its managers based on operating income, as calculated under variable costing. It is now 2 months before year en...






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When comparing absorption costing with variable costing, which of the following statements is not true?






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Which one of the following is the best reason for using variable costing?






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If a manufacturing company uses variable costing to cost inventories, which of the following costs are considered inventoriable costs?






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Manchester Airlines is in the process of preparing a contribution margin income statement that will allow a detailed look at its variable costs and p...






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Xylon Company uses direct (variable) costing for internal reporting and absorption costing for the external financial statements. A review of the fir...






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When comparing absorption costing with variable costing, the difference in operating income can be explained by the difference between the






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Dawn Company has significant fixed overhead costs in the manufacturing of its sole product, auto mufflers. For internal reporting purposes, in which ...






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The primary difference between absorption and variable costing is that variable costing treats






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Isaac Toy Companys management would like to determine profitability of its Alpha Doll product line. To eliminate the possibility of profit distortion...






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Osawa, Inc., planned and actually manufactured 200,000 units of its single product during its first year of operations. Variable manufacturing costs ...






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The following is taken from Fortech Companys records for the fiscal year just ended: Direct materials used $300,000 Dire...






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The following is taken from Fortech Companys records for the fiscal year just ended: Direct materials used $300,000 Dire...






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"Estimated unit costs for Cole Lab using full absorption costing and operating at a production level of 12,000 units per month:" ...






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"Estimated unit costs for Cole Lab using full absorption costing and operating at a production level of 12,000 units per month:" ...






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Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the ...






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Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the ...






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Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the ...






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The marketing manager of Ames Company has learned the following about a new product that is being introduced by Ames: Sales of this product are plann...






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Bethany Company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred varia...






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Using absorption costing, Langdon Companys income for October was $250,000. Langdon began the month with 10,000 units in finished goods inventory th...






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"Last year a company had sales of 75,000 units and production of 100,000 units. Other information for the year is shown below." ...






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"Last year a company had sales of 75,000 units and production of 100,000 units. Other information for the year is shown below." ...






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Joint costs are useful for






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In joint-product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold to maxi...






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The principal disadvantage of using the physical quantity method of allocating joint costs is that






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A company produces three main joint products and one by-product. The by-products relative sales value is quite low compared with that of the main pr...






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The primary purpose for allocating common costs to joint products is to determine






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The distinction between joint products and by-products is largely dependent on






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In a production process where joint products are produced, the primary factor that will distinguish a joint product from a by-product is the






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All of the following are methods of allocating joint costs to joint products except






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Fitzpatrick Corporation uses a joint manufacturing process in the production of two products, Gummo and Xylo. Each batch in the joint manufacturing p...






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A company manufactures several products that originate in a joint process and are separated at a split-off point. Which one of the following methods ...






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Indirect and common costs often make up a significant portion of the cost of a product. All of the following are reasons for indirect cost allocation...






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If all of the joint products are sold at the split-off point and an overall profit is made on all of the products, which one of the following joint c...






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Stone Company manufactures two products that incur joint costs of $60,000. It costs an additional $10,000 to produce 5,000 units of Product 1 and an ...






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Units of production is an appropriate overhead allocation base when






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When the amount of overapplied factory overhead is significant, the entry to close overapplied factory overhead will most likely require






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The appropriate method for the disposition of underapplied or overapplied overhead of a manufacturer






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Which method of measuring the costs to be assigned to products or services uses budgeted rates for direct costs but applies those rates to the actual...






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When Nash Glassworks Company allocates fixed costs, management will select a capacity level to use as the denominator volume. All of the following ar...






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In determining next years overhead application rates, a company desires to focus on manufacturing capacity rather than output demand for its product...






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Generally, individual departmental rates rather than a plantwide rate for applying manufacturing overhead are used if






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The numerator of the overhead application rate equals






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In a labor intensive industry in which more overhead (service, support, more expensive equipment, etc.) is incurred by the more highly skilled and pa...






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The denominator of the overhead application rate can be based on one of several production capacities. Which would minimize expected over- or underap...






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Which concept of capacity applies the least amount of overhead to units of production?






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Annual overhead application rates are used to






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Departmental overhead rates are usually preferred to plant-wide overhead rates when






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Normal costing systems are said to offer a user several distinct benefits when compared with actual costing systems. Which one of the following is not...






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Henry Manufacturing, which uses direct labor hours to apply overhead to its product line, undertook an extensive renovation and modernization program ...






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The most important criterion in accurate cost allocations is






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A capital-intensive manufacturer of large construction equipment has a manufacturing process that relies heavily on specialized machinery. This machin...






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A company has budgeted overhead costs at its normal capacity based on machine hours. Variable factory overhead is $180,000, and fixed factory overhead...






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A manufacturing process normally produces defective units equal to 1% of production. Defective units are subsequently reworked and sold. The cost of r...






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During the current accounting period, a manufacturing company purchased $70,000 of raw materials, of which $50,000 of direct materials and $5,000 of ...






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Wagner Corporation applies factory overhead based upon machine hours. At the beginning of the year, Wagner budgeted factory overhead at $250,000 and ...






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"From the following budgeted data, calculate the budgeted indirect cost rate that would be used in a normal costing system." ...






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"Baldwin Printing Company uses a job order costing system and applies overhead based on machine hours. A total of 150,000 machine h...






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Patterson Corporation expects to incur $70,000 of factory overhead and $60,000 of general and administrative costs next year. Direct labor costs at $...






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In allocating factory service department costs to producing departments, which one of the following items would most likely be used as an activity ba...






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The two most appropriate factors for budgeting manufacturing overhead expenses would be






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When allocating service department costs to production departments, the method that does not consider different cost behavior patterns is the






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There are several methods for allocating service department costs to the production departments. The method that recognizes service provided by one s...






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A large manufacturing company has two service departments and two production departments. Each of the service departments renders services to each ot...






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Under variable costing, fixed manufacturing overhead is:






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Which of the following costs at a manufacturing company would be treated as a product cost under both absorption costing and variable costing? Vari...






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Which of the following are included in product costs under variable costing? I. Variable manufacturing overhead. II. Fixed manufacturing overhead....






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Under variable costing:






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In an income statement prepared using the variable costing method, fixed selling and administrative expenses would:






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In an income statement prepared using the variable costing method, fixed manufacturing overhead would:






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In an income statement prepared as an internal report using variable costing, variable selling and administrative expenses would:






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When sales exceed production, the net operating income reported under variable costing generally will be:






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A single-product company prepares income statements using both absorption and variable costing methods. Manufacturing overhead cost applied per unit p...






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The type of costing that provides the best information for breakeven analysis is:






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Advocates of variable costing argue that:






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An example of a production overhead would be:






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Which of the following would not be classed as a service department?






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Which of the following entries would record correctly the monthly salaries earned by the top management of a manufacturing company?