Managerial accounting test 2 Verified Exam Questions and Answers
Latest update 2026/2027
Question:
when overhead is allocated to every product using the same manufacturing overhead rate, this rate is
called the departmental overhead rate
Answer:
false
Question:
with increased competition, managers need more accurate estimates of product costs in order to set
prices and to identify the most profitable products
Answer:
true
Question:
using departmental overhead rates is generally less accurate than using a single plantwide overhead
rate
Answer:
false
Question:
cost distortion occurs when some products are overcosted while other products are undercosted by the
cost allocation system
Answer:
true
Question:
companies often refine their cost allocation systems to minimize the amount of cost distortion caused
by the simpler cost allocation
Answer:
true
Question:
companies that use departmental overhead rates trace direct materials and direct labor to cost objects
just as they would in a traditional costing system
Answer:
true
,Question:
merchandising and service companies, as well as governmental agencies, can use refined cost
allocation systems to provide their managers with better cost information
Answer:
true
Question:
one condition that favors using a departmental overhead rate, rather than plantwide overhead rates, is
that different departments incur different amounts and types of manufacturing overhead
Answer:
true
Question:
the allocation base selected for each department should be the cost driver of the costs in the
departmental overhead pool
Answer:
true
Question:
direct labor hours would be the most appropriate cost allocation base for a machining department that
uses machine robotics extensively
Answer:
false
Question:
ABC generally causes the least amount of cost distortion among products because indirect costs are
allocated to the products based on
Answer:
the extent to which the activities are used. and types of activities used by the product
Question:
four basic steps are used in the ABC system. list the proper order
Answer:
identify the primary activities and estimate a total cost pool for each. select an allocation base for each
activity. calculate and activity cost allocation rate for each activity. allocate the costs to the cost object
using the activity cost allocation rates
, Question:
the use of which of the following costing systems is most likely to reduce distortion to a minimum
Answer:
activity - based costing
Question:
machine set - up would most likely be classified as a _ cost
Answer:
batch - level
Question:
research and development would most likely be classified as a _ cost
Answer:
product - level
Question:
using factory utilities would most likely be classified as a _ cost
Answer:
facility - level
Question:
molding and sanding each unit of product would most likely be classified as a _ cost
Answer:
unit - level
Question:
in ABC, how is the activity allocation rate computed
Answer:
the total estimated activity cost pool is divided by the total estimated activity allocation base
Question:
all of the following describe an ABC system except
Answer:
ABC systems may only be used by service companies
Latest update 2026/2027
Question:
when overhead is allocated to every product using the same manufacturing overhead rate, this rate is
called the departmental overhead rate
Answer:
false
Question:
with increased competition, managers need more accurate estimates of product costs in order to set
prices and to identify the most profitable products
Answer:
true
Question:
using departmental overhead rates is generally less accurate than using a single plantwide overhead
rate
Answer:
false
Question:
cost distortion occurs when some products are overcosted while other products are undercosted by the
cost allocation system
Answer:
true
Question:
companies often refine their cost allocation systems to minimize the amount of cost distortion caused
by the simpler cost allocation
Answer:
true
Question:
companies that use departmental overhead rates trace direct materials and direct labor to cost objects
just as they would in a traditional costing system
Answer:
true
,Question:
merchandising and service companies, as well as governmental agencies, can use refined cost
allocation systems to provide their managers with better cost information
Answer:
true
Question:
one condition that favors using a departmental overhead rate, rather than plantwide overhead rates, is
that different departments incur different amounts and types of manufacturing overhead
Answer:
true
Question:
the allocation base selected for each department should be the cost driver of the costs in the
departmental overhead pool
Answer:
true
Question:
direct labor hours would be the most appropriate cost allocation base for a machining department that
uses machine robotics extensively
Answer:
false
Question:
ABC generally causes the least amount of cost distortion among products because indirect costs are
allocated to the products based on
Answer:
the extent to which the activities are used. and types of activities used by the product
Question:
four basic steps are used in the ABC system. list the proper order
Answer:
identify the primary activities and estimate a total cost pool for each. select an allocation base for each
activity. calculate and activity cost allocation rate for each activity. allocate the costs to the cost object
using the activity cost allocation rates
, Question:
the use of which of the following costing systems is most likely to reduce distortion to a minimum
Answer:
activity - based costing
Question:
machine set - up would most likely be classified as a _ cost
Answer:
batch - level
Question:
research and development would most likely be classified as a _ cost
Answer:
product - level
Question:
using factory utilities would most likely be classified as a _ cost
Answer:
facility - level
Question:
molding and sanding each unit of product would most likely be classified as a _ cost
Answer:
unit - level
Question:
in ABC, how is the activity allocation rate computed
Answer:
the total estimated activity cost pool is divided by the total estimated activity allocation base
Question:
all of the following describe an ABC system except
Answer:
ABC systems may only be used by service companies
