ACC 312 EXAM 2 QUESTIONS AND CORRECT
ANSWERS
Implementing activity-based costing may be preferable for a business that: - Answers - -
Produces a variety of diverse products
-Activity-based costing is useful to allocate costs more accurately over multiple of
diverseproducts
What is the effect of disposing any over-applied overhead to the appropriate account, if
the amount is immaterial? - Answers - -It will decrease COGS, increase net income, and
have no effect on inventory
-Over-applied OH is booked to COGS and is a credit to the account, decreasing its
balance. AsCOGS decreases and everything else is held constant, net income
increases. Inventory is notrelated to this scenario, since the amount is immaterial.
The production budget is based upon which primary driver? - Answers - the number of
finished goods the company plans to sell for the period
In an activity-based costing system, the manufacturing plant security guard's wages
would be categorized as which of the following types of costs? - Answers - -Facility-level
cost
Security costs support the entire operation and cannot be traced to any individual
segmentof production
Which of the following budgets is based upon many more other master-
budgetcomponents? - Answers - Cash budget.
job-order costing - Answers - A product-costing system in which costs are assigned to
batches or job orders of production. Used by firms that produce relatively small numbers
of dissimilar products.
process-costing system - Answers - A product-costing system in which production costs
are averaged over a large number of product units. Used by firms that produce large
numbers of nearly identical products.
predetermined overhead rate - Answers - The rate used to apply manufacturing
overhead to Work-in-Process Inventory, calculated as: estimated manufacturing
overhead cost ÷ estimated amount of cost driver (or activity base).
normal costing - Answers - A product-costing system in which actual direct-materials,
actual direct-labor, and applied manufacturing-overhead costs are added to Work-in-
Process Inventory.
ANSWERS
Implementing activity-based costing may be preferable for a business that: - Answers - -
Produces a variety of diverse products
-Activity-based costing is useful to allocate costs more accurately over multiple of
diverseproducts
What is the effect of disposing any over-applied overhead to the appropriate account, if
the amount is immaterial? - Answers - -It will decrease COGS, increase net income, and
have no effect on inventory
-Over-applied OH is booked to COGS and is a credit to the account, decreasing its
balance. AsCOGS decreases and everything else is held constant, net income
increases. Inventory is notrelated to this scenario, since the amount is immaterial.
The production budget is based upon which primary driver? - Answers - the number of
finished goods the company plans to sell for the period
In an activity-based costing system, the manufacturing plant security guard's wages
would be categorized as which of the following types of costs? - Answers - -Facility-level
cost
Security costs support the entire operation and cannot be traced to any individual
segmentof production
Which of the following budgets is based upon many more other master-
budgetcomponents? - Answers - Cash budget.
job-order costing - Answers - A product-costing system in which costs are assigned to
batches or job orders of production. Used by firms that produce relatively small numbers
of dissimilar products.
process-costing system - Answers - A product-costing system in which production costs
are averaged over a large number of product units. Used by firms that produce large
numbers of nearly identical products.
predetermined overhead rate - Answers - The rate used to apply manufacturing
overhead to Work-in-Process Inventory, calculated as: estimated manufacturing
overhead cost ÷ estimated amount of cost driver (or activity base).
normal costing - Answers - A product-costing system in which actual direct-materials,
actual direct-labor, and applied manufacturing-overhead costs are added to Work-in-
Process Inventory.
