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Managerial Accounting Exam Answers 1

When allocating manufacturing overhead using a predetermined manufacturing overhead rate, ______ can be used as a basis for allocation.
When allocating manufacturing overhead using a predetermined manufacturing overhead rate, only ______ can be used as a basis for allocation.
A. direct labor hours
B. direct labor costs
C. machine hours
D. all of the above can be used

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all of the above can be used

When allocating manufacturing overhead using a predetermined manufacturing overhead rate, only direct labor hours, direct labor costs and machine hours can be used as a basis for allocation.

Under-allocated/undercosted overhead occurs when
allocated overhead all year long is less than the actual manufacturing overhead at year end.

What is the difference between a service firm and a manufacturer?
A. the cost of a job for a service firm consists of direct labor and indirect costs and a cost of a job for a manufacturer consists of direct​ materials, direct labor and manufacturing overhead
B. a service firms largest cost of a job is labor where as a typical manufacturer direct labor is not the largest component but only part of the total cost of a job.
C. service firms allocate indirect period costs and a manufacturer allocates manufacturing overhead
D. All of the above are differences between a service firm and a manufacturer

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Service firms allocate indirect period costs and a manufacturer allocates manufacturing overhead.

A service firms largest cost of a job is labor where as a typical manufacturer direct labor is not the largest component but only part of the total cost of a job. The cost of a job for a service firm consists of direct labor and indirect costs of a job for a manufacturer consists of direct materials, direct labor and manufacturing overhead. Overallocated/overcosted overhead occurs when allocated all year long is greater than the actual manufacturing overhead at year end. For service firms, how are indirect period costs allocated?
Allocated to each job based on the indirect cost allocated rate.

Cost distortion is more likely to occur when departments incur different types of overhead and the products or job use the departments to a different extent ABM refers to using activity-based cost information to make decisions
True

Which of the following is not one of the costs of quality categories?
A. Prevention costs
B. Transportation costs
C. Appraisal costs
D. External failure costs

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Transportation costs

What are some of the costs of quality categories?
A. External failure costs
B. Prevention costs
C. Appraisal costs
D. All of the above

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D. All of the above

Why do companies refine its cost allocation systems and switch from a plant wide overhead rate to either departmental overhead rates or to the use of Activity Based Costing?
To prevent cost distortion, To prevent mismatching of resources, To get a clearer picture of the true cost of making a product.

What is activity based costing?
A system that focuses on activities as the fundamental cost object and uses the cost for these activities to compile indirect costs of goods and services.

Activity Based Management (ABM) refers to using activity-based cost information to make decisions that increase profits while satisfying customers' needs. ABM will help companies with?
Pricing and product mix decisions, Identify costs that may need to be cut, Planning and control (creating costs of activity budget goals and comparing them to actual results).

Lean operations means?
Reduced set up times.

What is an example of a prevention cost?
Buying higher grade materials to avoid production problems.

There are four cost hierarchies when implementing activity based costing. Which level else with a patent on a product?
Product.

Utilizing Activity Based Costing requires a cost benefit test. Which situation below would a company consider using Activity Based Costing?
When it has many different products that use different types and amounts of resources (indirect costs).

Lean operations means?
Pull system; the customer drives the production of the product.

What is an example of an internal failure cost?
Production loss caused by downtime.

________ gathers, summarizes, and reports on the financial impact of changes to business operations.
A) Managerial accounting
B) Planning
C) Directing
D) Controlling

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Managerial accounting

Creating budgets are part of which primary management responsibility?
A) Controlling
B) Planning
C) Managerial accounting
D) Directing

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