Chapter 3: Predetermined Overhead Rates, Flexible Budgets, and Absorption/Variable Costing

ACCOUNTING BUS314 Chapter 3: Predetermined Overhead Rates, Flexible Budgets, and Absorption/Variable Costing 1. Absorption costing is commonly used for external reporting. True False 2. Absorption costing is commonly used for internal reporting. True False 3. Variable costing is commonly used for internal reporting. True False 4. Variable costing is commonly used for external reporting. True False 5. In an actual cost system, factory overhead is assigned directly to products and services. True False 6. In a normal cost system, factory overhead is assigned directly to products and services. True False 7. In a normal cost system, factory overhead is assigned to an overhead control account and then allocated to products and services. True False 8. In an actual cost system, factory overhead is assigned to an overhead control account and then allocated to products and services. True False 9. A debit to the Factory Overhead account represents actual overhead costs. True False 10. A debit to the Factory Overhead account represents applied overhead costs. True False 11. A credit to the Factory Overhead account represents actual overhead costs. True False 12. A credit to the Factory Overhead account represents applied overhead costs. True False 13. If actual overhead exceeds applied overhead, factory overhead is said to be overapplied. True False 14. If actual overhead exceeds applied overhead, factory overhead is said to be underapplied. True False 15. If overapplied factory overhead is immaterial, the account is closed by a credit to Cost of Goods Sold. True False 16. If overapplied factory overhead is material, the account is closed by a credit to Cost of Goods Sold. True False 17. If overapplied factory overhead is immaterial, the account is closed by a debit to Cost of Goods Sold. 18. If underapplied factory overhead is immaterial, the account is closed by a debit to Cost of Goods Sold. True False 19. If underapplied factory overhead is immaterial, the account is closed by a credit to Cost of Goods Sold. True False 20. If underapplied factory overhead is material, it is prorated among Work in Process Inventory, Finished Goods Inventory, and Cost of Goods Sold. True False 21. The estimated maximum potential activity for a specified time is known as theoretical capacity. True False 22. Practical capacity does not adjust for routine downtime in a production process. True False 23. Normal capacity considers present and future production levels and cyclical fluctuations. True False 24. Expected capacity is a long-run measure of activity. True False 25. Practical capacity is the capacity that can be achieved during normal working hours. True False 26. The regression equation y = a+ bX assumes that the function is curvilinear in nature. True False 27. The regression equation y = a+ bX assumes that the function is linear in nature. True False 28. The slope of a regression line is determined by dividing the change in activity level by the change in total cost. True False 29. The slope of a regression line is determined by dividing the change in total cost by the change in activity level. True False 30. The high-low method excludes outliers from the calculation of the slope of a regression line. True False 31. When using the high-low method, fixed costs are computed before the variable component is computed. True False 32. When using the high-low method, the variable component is computed before computing the fixed component.