Accounting Test 2 Ch 17-19

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A method of assigning overhead costs to a product using a single overhead rate is:

Plantwide overhead rate method.

Which types of overhead allocation methods result in the use of more than one overhead rate during the same
time period?

Departmental overhead rate method and activity based costing.

Which of the following would
not be considered a product cost?

A.Direct labor costs. B.Factory supervisor’s salary. C.Factory line worker’s salary. {D.Cost accountant’s salary.} E.Manufacturing overhead costs

Overhead costs:

Cannot be traced to units of product in the same way that direct labor can.

The cost object of the plantwide overhead rate method is:

The unit of product.

The cost object of the departmental overhead rate method is:

The production departments in the first stage and the unit of product in the second stage

The cost object(s) of the activity-based costing method is(are)

The production activities in the first stage and the unit of product in the second stage.

From an ABC perspective, what causes costs to be incurred?


What is the reason for pooling costs?

Determining a pool rate for all costs incurred by the same activity reduces the number of cost assignments required.

Which of the following are advantages of using the plantwide overhead rate method?

The necessary information is readily available.

Which of the following is a disadvantage of the departmental overhead rate method?

The departmental overhead rate method assigns overhead on the basis of volume-related measures

What are three advantages of activity
-based costing over traditional volume-based allocation methods?

More accurate product costing, more effective cost control, and better focus on the relevant factors for decision making.

A cost that remains the same in total even when volume of activity varies is a:

Fixed cost.

A cost that changes in total proportionately to changes in volume of activity is a(n):

Variable cost.

A cost that changes with volume, but not at a constant rate, is called a:

Curvilinear cost.

A cost that remains constant over a limited range of volume, but increases by a lump sum when volume increases beyond a maximum amount, is a(n):

Step-wise cost.

A cost that can be separated into fixed and variable components is called a:

Mixed cost.

An important tool in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received is

Cost-volume-profit analysis.

The margin of safety is the excess of:

Expected sales over breakeven sales.

The excess of expected sales over the sales level at the break-even point is known as the:

Margin of safety.

A graph used to analyze past cost behaviors by displaying costs and volume levels for each period as points on the diagram is called a:

Scatter diagram.

A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume levels on a scatter diagram with a straight line is called the:

High-low method.

The sales level at which a company neither earns a profit nor incurs a loss is the:

Break-even point.

The difference between sales price per unit and variable cost per unit is the:

Contribution margin per unit.

The contribution margin per unit expressed as a percentage of the product’s selling price is the:

Contribution margin ratio.

Which of the following is not a product cost?

A.Direct labor. B.Indirect manufacturing costs. C.Direct materials. D.Manufacturing overhead. {E.Advertising costs.}

Using a traditional costing approach, which of the following manufacturing costs are assigned to products?

Variable manufacturing overhead, direct materials, direct labor and fixed manufacturing overhead.

When evaluating a special order, management should:

Only accept the order if the incremental revenue exceeds total variable product costs.

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