D196 Unit 6 & 7 Study Guide Exam And
Actual Answers.
Job order costing - Correct! Job order costing is useful when products or services are provided in discrete
units based on specific customer orders. - Answer Smartistry produces custom photo albums,
calendars, and stationery for customers. Which overhead allocation system should the company use?
Product line costing
Unit-based costing
Job order costing
Process costing
Overhead
Correct. In a job order costing system, while a job or product or project is in the production process, the
accountant assigns the actual direct materials and direct labor costs and also allocates a specific amount
of overhead costs. - Answer In a job order costing system, some actual production costs are directly
associated with a job or product or project. Which production cost is allocated rather than being directly
associated with a job, product, or project?
Sales discounts
Interest
Overhead
Income taxes
Wages of factory employees who work directly on the products manufactured
Correct! Direct labor includes the wages and other payroll-related expenses of factory employees who
work directly on products. The cost of wages and benefits for assembly-line workers would be included,
but not the wages and benefits of the factory supervisors because even though they work in the factory,
they do not work directly on making products. - Answer What is direct labor?
The collection of overhead costs associated with a specific overhead cost activity - Answer In an ABC
system, what is a cost pool?
, Activity-based costing
Correct! Activity-based costing is a more accurate product costing system that allocates overhead based
on multiple activities. - Answer Sara is frustrated with her company's costing system. She suspects that
too much overhead cost is being allocated to generic, simple products, and too little overhead cost is
being allocated to custom-designed, complex products. The existing overhead allocation system is very
traditional, with overhead being allocated strictly based on the number of direct labor hours.
Which type of costing system should Sara's company be using instead of its current system?
Unit-level, batch-level, and product-line - Answer There are three general types of overhead cost
activities in an ABC system. What are those three general types of activities?
Unit-level - Answer Overhead cost activities performed each time a unit is produced.
batch-level - Answer Overhead activities performed each time a new production batch is started or
ended
product-line - Answer Overhead activities associated with the capability to produce different types of
products.
Cost pool divided by number of cost driver events
The calculation of an activity rate in an ABC system involves dividing the amount of the estimated cost
pool by the estimated number of cost driver events. - Answer How is an activity rate computed in an
ABC system?
Process costing is appropriate when the units produced as a result of passing through the process
centers are basically the same.
Producing identical cans of paint - Answer For some production processes, job order costing is the
correct production costing system to use. With other production processes, process costing is more
appropriate. For which process is process costing more appropriate?
A manufacturer of custom-designed furniture
Actual Answers.
Job order costing - Correct! Job order costing is useful when products or services are provided in discrete
units based on specific customer orders. - Answer Smartistry produces custom photo albums,
calendars, and stationery for customers. Which overhead allocation system should the company use?
Product line costing
Unit-based costing
Job order costing
Process costing
Overhead
Correct. In a job order costing system, while a job or product or project is in the production process, the
accountant assigns the actual direct materials and direct labor costs and also allocates a specific amount
of overhead costs. - Answer In a job order costing system, some actual production costs are directly
associated with a job or product or project. Which production cost is allocated rather than being directly
associated with a job, product, or project?
Sales discounts
Interest
Overhead
Income taxes
Wages of factory employees who work directly on the products manufactured
Correct! Direct labor includes the wages and other payroll-related expenses of factory employees who
work directly on products. The cost of wages and benefits for assembly-line workers would be included,
but not the wages and benefits of the factory supervisors because even though they work in the factory,
they do not work directly on making products. - Answer What is direct labor?
The collection of overhead costs associated with a specific overhead cost activity - Answer In an ABC
system, what is a cost pool?
, Activity-based costing
Correct! Activity-based costing is a more accurate product costing system that allocates overhead based
on multiple activities. - Answer Sara is frustrated with her company's costing system. She suspects that
too much overhead cost is being allocated to generic, simple products, and too little overhead cost is
being allocated to custom-designed, complex products. The existing overhead allocation system is very
traditional, with overhead being allocated strictly based on the number of direct labor hours.
Which type of costing system should Sara's company be using instead of its current system?
Unit-level, batch-level, and product-line - Answer There are three general types of overhead cost
activities in an ABC system. What are those three general types of activities?
Unit-level - Answer Overhead cost activities performed each time a unit is produced.
batch-level - Answer Overhead activities performed each time a new production batch is started or
ended
product-line - Answer Overhead activities associated with the capability to produce different types of
products.
Cost pool divided by number of cost driver events
The calculation of an activity rate in an ABC system involves dividing the amount of the estimated cost
pool by the estimated number of cost driver events. - Answer How is an activity rate computed in an
ABC system?
Process costing is appropriate when the units produced as a result of passing through the process
centers are basically the same.
Producing identical cans of paint - Answer For some production processes, job order costing is the
correct production costing system to use. With other production processes, process costing is more
appropriate. For which process is process costing more appropriate?
A manufacturer of custom-designed furniture
