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Chapter 1: The Role of Accounting Information in Management Decision Making
Learning Objective | True / False | Multiple Choice | Matching | Exercises | Short Answer | Problems |
Q1: What is the process of strategic management and decision making? | 1-4 | 1-12
S: 59, 67 W: 78, 83, 84 |
1 | 6 | ||
Q2: What types of control systems do managers use? | 5-8 | 13 – 14 | 7 | |||
Q3: What is the role of accounting information in strategic management? | 9-13 | 15-23
S: 60-62 W: 68-70, 80 |
3 | 3, 4 | ||
Q4: What information is relevant for decision making? | 14-17 | 24-30
S: 63-65 W: 74, 75, 77, 79, 81, 82 |
4 | 1 | 2 | 1, 2 |
Q5 How does business risk affect management decision making? | 18-21 | 31-32 | ||||
Q6: How do biases affect management decision making? | 22-24 | 33-40
W: 72, 73 |
2 | 1, 5 | 1 | |
Q7: How can managers make higher-quality decisions? | 25-29 | 41-53
S: 58 W: 71 |
2 | 4, 8 | ||
Q8: What is ethical decision making, and why is it important? | 30-32 | 54-59
S: 66 W: 76 |
5 |
S: Questions from the study guide
Level of Complexity* | True / False | Multiple Choice | Matching | Exercises | Short Answer | Problems |
Foundation: Repeat or paraphrase information; Reason to single correct solution; Perform computations; etc. | All | All | All | All | 6 | 2 |
Step 1: Identify the problem, relevant information, and uncertainties | 1, 2, 5, 6, 7 | 1, 2 | ||||
Step 2: Explore interpretations and connections | 3, 4 | 1 | ||||
Step 3: Prioritize alternatives and implement conclusions | ||||||
Step 4: Envision and direct strategic innovation |
*Based on level in Steps for Better Thinking (Exhibit 1.10, textbook p. 16):
Note: Step 1, 2, 3, and 4 questions in this test bank are intentionally open-ended and subjective, giving students the opportunity to demonstrate skills such as judgment, reasoning, identification of uncertainties, identification or analysis of pros and cons, and so on. Therefore, student answers may not exactly match those shown in the solutions.
True / False
- A vision statement is one way to clarify an organization’s basic purpose and ideology.
- Most managers follow a standard template and format when writing a vision statement.
- A vision statement helps employees understand how to deal with various stakeholder groups.
- Organizational core competencies are the tactics that managers use to take advantage of the vision.
- Belief systems encourage employees to be inspired by the vision of the company
- Boundary systems set budget goals to constrain behavior.
- Diagnostic systems set budget goals to constrain behavior.
- Interactive systems should be examined only when a problem exists.
- Accounting information is the only thing managers need to make financial decisions.
- Accounting information is used to monitor operations by comparing actual results to planned results.
- Accounting information cannot be used to motivate employee behavior.
- Cost accounting information is used for both external reporting and internal decision making.
- Cost accounting information, such as the valuation of ending inventory, is shown on external financial statements.
- Incremental cash flows are relevant for decision making.
- Incremental cash flows are the same as unavoidable cash flows.
- Relevant information for decisions can focus both on learning from the past and anticipating the future.
- The cost of your old automobile is relevant in the decision to purchase a new automobile.
- Business risk is the risk that business will be altered or interrupted in some way.
- Business risk should be monitored regularly
- Risk management can eliminate business risk
- Using prior year, historical information can eliminate business risk.
- Because accounting information is highly objective and quantitative in nature, it is not subject to management bias.
- Biases reduce decision quality.
- Biases do not affect external financial reports, because they are based on objective standards.
- Because we can never completely remove biases and business risk from decision making, higher quality decision processes are often ineffective.
- Higher quality decisions result from higher quality information, reports, and decision making processes.
- Few management decisions can be made with absolute certainty.
- Open-ended problems are not often seen in business.
- When learning cost accounting, it is sufficient to learn the mechanics of applying cost accounting methods.
- Ethical behavior is an individual obligation, but not an organizational obligation.
- Employees will always make ethical decisions if they act in the best interests of shareholders.
- Ethical behavior is required of every employee within an organization.
Multiple Choice
- Which of the following influences organizational strategies?
- Organizational vision
- Financial statement results
- Computer software
- Number of employees
- Which of the following statements regarding organizational vision is false?
- Organizational vision means the same as core competencies
- Organizational vision is one tool for expressing an organization’s main purpose
- Organizational vision should be communicated to all employees
- Managers sometimes divide the organizational vision into one or more written statements
- An organizational vision is sometimes broken down into
- Mission statement
- Core values statement
III. Code of conduct
- I only
- I and II only
- I, II, and III
- II and III only
- Organizational core competencies can include
- A mission statement
- Patents, copyrights and special legal protections
- A code of conduct
- An operating plan
- How are organizational strategies related to core competencies?
- Competencies are the tactics managers use to take advantage of strategies
- Competencies and strategies are an integral part of organizational vision
- Strategies help managers exploit competencies
- Strategies and competencies are actually two ways of expressing the same idea
- Organizational strategies
- Are reconsidered on a daily basis
- Should never be reconsidered once they are determined
- Are reconsidered quarterly
- Are reconsidered periodically in response to changes in the organization or environment
- Which of the following is an element of an operating plan?
- Developing an organizational mission
- Preparing financial statements
- Defining core values
- Budgeting employee costs
Use the following information for the next 5 questions:
Maude is considering opening her own business, now that she has retired from her regular job. Her business idea is a reminder and shopping service, in which clients submit lists of birthdays, anniversaries and other important dates. Maude sends her clients reminders for those dates, and shops for special gifts at the client’s request. She plans to do all of the work herself rather than hiring and managing additional employees.
- “Providing excellent, reliable customer service at reasonable prices” best describes which of the following for Maude’s business?
- Core competency
- Vision
- Operating plan
- Actual operations
- Maude’s core competencies are most likely to include
- An annual budget
- The ability to deduct business expenses on her tax return
- The first year’s actual results
- Her knowledge of potential gifts and the local shops
- Maude’s organizational strategy is most likely to include
- Her knowledge of local stores
- Operating her business from her home to keep costs low
- Leasing equipment
- Mailing flyers to potential clients
- Maude’s actual operations would probably include
- Establishing a sales strategy
- Purchasing advertisements in local media
- Identifying her core competencies
- Developing a budget
- Which of the following statements is true for Maude’s business regarding measuring and monitoring performance?
- Maude does not need a system to measure and monitor performance because her company is a sole proprietorship
- Maude needs audited financial statements every year
- Maude can track cash flows on a monthly basis
- Maude only needs to reconcile her accounts every few years
- Belief systems are an important part of what framework?
- Levers of information
- Levers of control
- Levers of belief
- Control systems
- The code of conduct of a firm would likely be considered
- Belief system
- Boundary system
- Diagnostic control system
- Interactive control system
- Accounting information
- Can be used to guide organizational vision
- Is a core competency for most companies
III. Can be used to motivate performance
- I only
- I and II only
- I, II, and III
- I and III only
- Cost accounting information is used for
- Financial reporting only
- Management reporting only
- Both financial and management reporting
- Neither financial nor management reporting
- Which of the following is a type of external report produced by an organization’s information system?
- Cash flow plan
- Analysis of potential acquisition
- News release
- Bonus computations
- Which of the following is least likely to be an external report?
- Credit report
- Supplier’s inventory report
- Tax return
- Analysis of supplier quality
- Which of the following is the best example of an internal report that might come from an organization’s information system?
- Environmental Protection Agency regulatory report
- Operating budget
- Income tax returns
- Medicare cost report
- Financial statements are
- External reports produced from an organization’s information system
- Never used for internal decision making
- Only true when they are audited
- Unimportant reports for most organizations
- Information gathered outside the organization includes
- Customer preferences
- Product design specifications
- Taxable income
- Number of employees hired
- Which of the following is not true about information in an organization’s databases?
- Information may be collected formally or informally
- Access to database information is often restricted to specific individuals
- Intellectual capital is usually captured in database information
- The benefits of generating information should exceed the costs
- How does the use of sophisticated information systems affect strategic management?
- Sophisticated information systems always improve strategic management
- Sophisticated information systems always provide better information
- Managers may overlook potential uncertainties and bias in their information
- The cost of sophisticated information systems may exceed their benefit
- Irrelevant information may be
- Useful in decision making
- Internally-generated
III. Accurate
- I only
- I and II only
- II and III only
- I, II, and III
- Whether a given type of information is relevant or irrelevant depends on
- Its accuracy
- Its objectivity
- Its relation to the decision to be made
- Whether it is cash-basis or accrual-basis
- Relevant cash flows are
- Past cash flows
- Future cash flows
- Incremental cash flows
- Unavoidable cash flows
- In a decision to lease or borrow money and build office space, which of the following is relevant?
- The current cost of office space
- The architect’s fee for drawing the building
- The number of employees currently working for the company
- The personal preferences of the decision maker
- Irrelevant cash flows are
- Avoidable
- Unavoidable
- Objective
- Subjective
- Relevant cash flows are
- Avoidable
- Incremental
- Both of the above
- None of the above
- Frank is considering transportation modes to a client’s office. He can drive his own car, at an incremental cost of $0.55 per mile, or take a company car. If he takes his own car, he can be reimbursed $0.45 per mile. If Frank makes his decision strictly from his personal economic point of view, what is the relevant net cost associated with driving his own car?
- $0.10
- $0.45
- $0.55
- Some other amount
- Business Risks
- Are issues about which managers have doubts
- Do not impact accounting information, which is highly objective and reliable
- Are preconceived notions developed without careful thought
- Are rarely a problem in business decision making
- Alaska Airlines flies several non-stop flights daily between Los Angeles and Vancouver. Which of the following is a business risk associated with this operation?
- The exact number of flights flown the previous day
- The average number of passengers on each flight the previous week
- The average number of empty seats for flights next month
- The number of ticket agents scheduled for each shift for the next day
- Business risk may hinder a manager’s ability to:
- Adequately define a problem
- Identify all potential solution options
III. Predict the outcome of various solution options
- I and III only
- II and III only
- I, II, and III
- II only
- Pet Snacks Company has 500 pounds of liver-flavored dog biscuits that are not selling well. The selling price of the biscuits could be reduced from $3.00 to $2.50 per pound. Or, they could be cheese-coated and sold for $4.00 per pound; the additional processing cost would be $0.50 per pound. Cheese-coated biscuits sell very well. Which alternative probably has less uncertainty concerning volume of sales?
- Reduce the price of liver-flavored biscuits
- Proceed with the cheese coating
- Both alternatives are equally uncertain
- Uncertainty does not affect this decision
- Marriott Corporation operates hotels all over the world. Which of the following is the best example of a potential bias associated with its operations?
- Managers assume that most travelers are interested in conducting business, rather than vacationing
- Managers learn that guests rarely stay longer than a week
- Managers find that last year’s profits were below the industry average
- Managers are concerned because employee turnover increased during the last year
- Biases can affect
- Organizational vision
- Core competencies
III. Operating plans
- I only
- II only
- I and III only
- I, II, and III
- Which of the following statement about biases is true?
- Biases can affect management accounting information, but not financial accounting information
- Managers cannot work toward eliminating their biases
- Biases reduce the quality of decisions
- Biased managers are more likely to explore alternatives before making a decision
- Biases may be
- Intentional
- Unintentional
- Both intentional and unintentional
- Beneficial to decision making
- Biases
- Inhibit anticipating all future conditions
- Assist in the identification of relevant information
- Do not affect the ability to identify irrelevant information
- Are not a problem in ethical decision making
- Biases
- Are issues about which managers have doubts.
- Do not impact accounting information, which is highly objective and reliable
- Are preconceived notions developed without careful thought
- Are rarely a problem in business decision making
- Managers can make higher-quality decisions by relying on all of the following except
- More complete information
- Better decision-making processes
- Irrelevant information
- Information having less uncertainty
- Which of the following adjectives describes higher quality information?
- Complete
- Costly to develop
III. Relevant
- I and II only
- II and III only
- I and III only
- I, II, and III
- Higher quality reports are more
- Relevant
- Understandable
III. Available
- I and II only
- I and III only
- II and III only
- I, II, and III
- Higher quality decision making processes are less
- Biased
- Certain
- Creative
- Focused
- The process of making higher quality business decisions requires each of the following except
- Distinguishing between relevant and irrelevant information
- Recognizing and evaluating assumptions
- Considering organizational values and core competencies
- Relying on preconceived notions to make decisions more quickly
- Which of the following statements about open-ended problems is true?
- Open-ended problems cannot be solved with absolute certainty
- It is not possible to find the best solution to an open-ended problem
- Only one possible solution is possible for an open-ended problem
- The best solution to an open-ended problem ensures the most favorable outcome
- Why is it necessary to identify whether a problem is open-ended?
- Open-ended problems require less decision making effort than other types of problems
- Decision maker biases are not important when addressing open-ended problems
- More than one potential solution must be explored for open-ended problems
- Few management decisions are open-ended
- Which of the following is least likely to be an open-ended problem?
- How to contribute as a team member
- Choice of career
- How to study for a course
- Identification of required courses for a college degree
- John is creating next year’s budget for PDC Corporation. He estimates that next year’s sales volume will be 5% higher than this year and that the selling price per unit will remain at $75 per unit. He estimates that cost of goods sold will be $40 per unit, based on a purchase agreement the company has signed with its supplier. The company has done business with the supplier for many years. In creating the budget, which of the following tasks is most likely to be open-ended?
- Calculating budgeted sales volume
- Determining that sales volume will grow by 5%
- Calculating budgeted cost of goods sold
- Determining that cost of goods sold per unit will be $75 per unit
- Analyzing the strengths and weaknesses of different alternatives includes all of the following except
- Recognizing and evaluating assumptions
- Drawing a conclusion about which alternative is best overall
- Gauging the quality of information
- Considering different viewpoints
Purchase For Continue….
Chapter 5: Job Costing
Learning Questions | True / False | Multiple Choice | Matching | Exercises | Short Answer | Problems |
1. How are costs assigned to customized goods and services? | 1-5 | 9-12, 22, 63-72, 77-84
W: 104, 105, 108, 110-112, 114, 117, 120-121 |
1, 3 | 2, 3, 10, 11 | 1, 11, 12 | |
2. How is overhead allocated to individual jobs? | 6-15 | 1,- 8, 13-16, 18-21, 23, 34,73,76,85,86
S: 97-99, 101-103 W: 119 |
1,2,3 | 1-4,9 | 2,6.7.8.13 | 1-3 |
3. | ||||||
3,How does job costing information affect managers’ incentives and decisions? | 16-20 | 35-42
W: 113 |
9, 10, 14, 15 | 1, 2, 3 | ||
4. How are spoilage, rework and scrap handled in job costing? | 21-25 | 43-46, 48-51, 54, 55, 58, 59
S: 88-93, 95 W: 107, 116 |
3 | 3, 4 | 4, 5, 6 | |
5. What are the quality and behavioral implications of spoilage? | 26-29 | 47, 52, 53, 56, 57, 60-62
S: 87, 94 |
3 | 5, 6 |
S: Questions from the study guide
W: Questions from web quizzes on the student web site
Level of Complexity* | True / False | Multiple Choice | Matching | Exercises | Short Answer | Problems |
Foundation: Repeat or paraphrase information; Reason to single correct solution; Perform computations; etc. | All | All | All | All | 2, 3, 6 | 1-6 |
Step 1: Identify the problem, relevant information, and uncertainties | 1, 4, 9-13 | 2 | ||||
Step 2: Explore interpretations and connections | 7, 8, 14, 15 | 1, 3, 5, 6 | ||||
Step 3: Prioritize alternatives and implement conclusions | ||||||
Step 4: Envision and direct strategic innovation |
*Based on level in Steps for Better Thinking (Exhibit 1.10, textbook p. 16):
Note: Step 1, 2, 3, and 4 questions in this test bank are intentionally open-ended and subjective, giving students the opportunity to demonstrate skills such as judgment, reasoning, identification of uncertainties, identification or analysis of pros and cons, and so on. Therefore, student answers may not exactly match those shown in the solutions.
True / False
- When goods are customized, all costs are easily traced to individual cost objects.
- Overhead allocation is the process of tracing costs to products or services.
- Job costing can be used in both manufacturing and service organizations.
- Direct material and direct labor costs are typically traced to individual jobs in a job costing system.
- In a job costing system, costs flow out of work in process into finished goods inventory.
- Overhead is typically allocated to jobs in a job costing system, rather than being traced directly.
- A “job” refers to a group of individual overhead costs that are accumulated for a particular purpose.
- The first step in overhead allocation is to identify the cost object.
- Identifying a cost driver is the first step in allocating overhead in a job costing system.
- A separate cost allocation base must be chosen for each job in a job costing system.
- Actual costing and normal costing are two different names for the same overhead allocation system.
- Both actual costing and normal costing systems use the actual quantity of the allocation base to assign overhead costs to jobs.
- In actual costing systems, overhead is allocated using the following formula: actual allocation base volume ¸ actual allocation rate.
- In normal costing systems, overhead is allocated using the following formula: normal allocation base volume ¸ normal allocation rate.
- One of the primary differences between actual and normal costing systems is their treatment of direct material and direct labor costs.
- In a job costing system, costs are very accurate because jobs are customized.
- Information from job costing systems is subject to uncertainties, and implementing a job costing system requires judgment.
- Because overhead costs are allocated in a job costing system, they can be considered “variable” for the purpose of decision making.
- Direct costs are subject to less uncertainty than indirect costs in a job costing system, but managers still exercise judgment regarding direct cost tracing.
- Allocated overhead generally does not accurately measure a job’s overhead resources.
- Spoilage, rework, and scrap are irrelevant in job costing systems.
- Spoilage is typically identified as part of the overhead allocation process.
- Only spoiled goods are reworked.
- Reworked units can always be sold at the regular market price.
- Scrap can be sold, discarded, or used in other creative ways.
- Potential loss of reputation and market share are opportunity costs of spoilage and rework.
- Although they may be significant in amount, quality costs are often measured imprecisely.
- Quality initiatives have both quantitative and qualitative benefits.
- Accounting processes influence manager behavior in many organizations.
Multiple Choice
Use the following information for the next 2 questions.
Direct Direct Direct
Materials Labor Cost Labor Hours
Job 200 $ 500 $800 40
Job 201 350 200 10
Job 202 1,000 600 30
Franks Fabricating uses job costing and applies overhead using a normal costing system and uses direct labor cost as the allocation base. This period’s estimated overhead cost is $100,000 and estimated direct labor cost of $50,000 and 2,500 direct labor hours.
- What is the overhead allocation rate?
- 200%
- 50%
- 30%
- 60%
- What is the total manufacturing cost of Job 201?
- $550
- $950
- $850
- $1,500
Use the following information for the next 2 questions.
Direct Direct Direct
Materials Labor Cost Labor Hours
Job 400 $200 $800 40
Job 401 250 200 10
Job 402 500 600 32
O’Hare Sisters Manufacturing uses job costing and applies overhead using a normal costing system using direct labor hours as the allocation base. This period’s estimated overhead cost is $400,000, estimated direct labor cost is $500,000 and estimated direct labor hours are 25,000. This period actual overhead cost was $420,000, actual direct labor cost was $390,000, and actual direct labor hours were 20,000.
- What is the overhead allocation rate?
- $21/hour
- $10/hour
- $16/hour
- $18/hour
- What is the total manufacturing cost of Job 400?
- $1,200
- $1,000
- $1,320
- $1,640
Use the following information for the next 2 questions.
Direct Direct Direct
Materials Labor Cost Labor Hours
Job 400 $200 $800 40
Job 401 250 200 10
Job 402 500 600 32
Sparkle Company uses job costing and applies overhead using an actual costing system using direct labor hours as the allocation base. This period’s estimated overhead cost is $400,000, estimated direct labor cost is $500,000 and estimated direct labor hours are 25,000. This period actual overhead cost was $420,000, actual direct labor cost was $390,000, and actual direct labor hours were 20,000.
- What is the overhead allocation rate?
- $21/hour
- $10/hour
- $16/hour
- $18/hour
- What is the total manufacturing cost of Job 402?
- $1,100
- $1,772
- $1,320
- $1,640
Use the following information for the next 2 questions.
Professional Other Direct Professional
Labor Cost Costs Labor Hours
Client 57 $2,000 $800 20
Client 58 1,000 200 10
Client 59 5,000 600 50
Allen’s Accounting Services uses job costing and applies overhead using a normal costing system using professional labor hours as the allocation base. This period’s estimated overhead cost is $400,000, estimated professional labor cost is $800,000 and estimated direct labor hours are 8,000. This period actual overhead cost was $426,400, actual direct labor cost was $820,000, and actual direct labor hours were 8,200.
- What is the overhead allocation rate?
- $60/hour
- $55/hour
- $52/hour
- $50/hour
- What is the total cost for Client 58?
- $1,300
- $1,200
- $1,720
- $1,700
Use the following information for the next 4 questions.
Kelita’s Kar Kare Kompany had the following cost and inventory data for the month.
Costs incurred for the month:
Direct labor $6,900
Indirect labor 1,500
Direct materials purchased 4,500
Factory utilities 2,200
Factory depreciation 3,000
Factory supervision 1,200
Inventories:
Ending Beginning
Direct materials $1,500 $1,800
Work-in-process 4,500 4,050
Finished goods 6,000 5,250
- What were the direct materials available for the month?
- $4,500
- $6,000
- $6,300
- $7,800
- What were the direct costs of production incurred during the month?
- $12,000
- $11,700
- $10,200
- $10,500
- Assume that the total production costs incurred for the month were $15,000. What was the cost of jobs completed?
- $14,550
- $19,050
- $15,000
- $15,450
- Assume that total production costs incurred for the month were $15,000. What was the cost of goods sold?
- $13,800
- $15,300
- $19,800
- $20,550
Use the following information for the next 3 questions.
Asadi Company uses a job costing system and allocates overhead using an estimated overhead allocation rate based on direct labor hours. Information for 20×5 is as follows:
Estimated Actual
Manufacturing overhead $166,500 $165,000
Direct labor hours 50,000 60,000
- The estimated overhead allocation rate for 20×5 was
- $2.75
- $3.30
- $3.33
- $2.76
- The overhead allocated to work-in-process during 20×5 before the year-end adjustment was
- $199,800
- $165,000
- $166,500
- $198,000
- The amount of over- or underapplied overhead for 20×5 was
- $1,500 underapplied
- $3,000 underapplied
- $1,500 overapplied
- $34,800 overapplied
- Following are the budgeted costs for a manufacturing plant producing custom products:
Materials (70% direct and 30% indirect) $15,000
Labor (60% direct and 40% indirect) 12,000
Supervision 5,000
Depreciation 10,000
Utilities 4,860
Total $46,860
The company uses a normal costing system, and overhead is allocated on the basis of direct labor cost. If actual direct labor cost was $7,500, the overhead allocated was
- $29,160
- $20,688
- $30,375
- $48,813
Use the following information for the next 2 questions.
Allen, Inc. has budgeted $120,000 in variable overhead and $72,000 in fixed overhead for the current month. 8,000 custom units were expected to be produced using 60,000 machine hours. During the month, Allen actually used 68,096 machine hours and produced 8,960 units. Actual overhead costs were: $132,000 variable and $73,600 fixed.
- Assume Allen uses an actual costing system. The amount of over- or underapplied overhead for the current month is
- $9,440 overapplied
- $12,307 overapplied
- $0
- $13,600 overapplied
- Assume Allen uses a normal costing system. The variable overhead allocated would be
- $136,192
- $132,000
- $134,400
- $120,000
- Kelita’s Kar Company projects the following costs:
Direct material $300,000
Direct labor 500,000
Indirect labor wages 50,000
Sales commissions 30,000
Production foremen salaries 75,000
Production equipment leases 125,000
Production depreciation 60,000
Property taxes-plant 25,000
If overhead is allocated on the basis of direct labor hours and 25,000 direct labor hours are budgeted for next year, the estimated overhead allocation rate will be
- $13.40 per direct labor hours
- $14.60 per direct labor hours
- $12.40 per direct labor hours
- $33.40 per direct labor hours
- A firm had the following balances at the end of the period
Work in process $ 400
Finished goods 600
Cost of goods sold 1,000
Overapplied overhead 400
It was determined that the overapplied overhead should be treated as immaterial. After any adjustments for overapplied overhead are made, the balance of work in process would be
- $320
- $400
- $480
- $534
- Assume there is $2,000 of overapplied fixed overhead, which is to be prorated. Current balances of selected accounts are:
Work in process $15,000
Finished goods 25,000
Cost of goods sold 60,000
The adjusting journal entry is
- Overapplied fixed overhead 2,000
Work in process 300
Finished goods 500
Cost of goods sold 1,200
- Work in process 300
Finished goods 500
Cost of goods sold 1,200
Overapplied fixed overhead 2,000
- Fixed overhead control 2,000
Work in process 300
Finished goods 500
Cost of goods sold 1,200
- Work in process 300
Finished goods 500
Cost of goods sold 1,200
Fixed overhead allocated 2,000
- For which of the following products would a job costing system be appropriate?
- Brewery, where each brand is a produced in a separate batch process
- Jewelry store that manufactures and sells handcrafted jewelry
- Cement kiln, where a single identical type of cement product is manufactured
- Chemical plant, where each polymer is produced in a separate continuous process
- Assume that variable overhead is overapplied by $200 and fixed overhead is underapplied by $100. If these variances are considered immaterial, the effect on cost of goods sold is
- $300 increase
- $100 increase
- $300 decrease
- $100 decrease
- When overhead is underapplied
- Cost of goods sold is understated
- Work in process inventory is overstated
- Gross profit is understated
- Finished goods inventory is overstated
- The denominator in an overhead allocation rate for normal costing is
- Actual overhead costs
- Estimated activity level
- Estimated overhead costs
- Actual activity level
Purchase For Continue….