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Product Costing

The document discusses product costing and manufacturing overhead. It covers topics like the components of manufacturing cost, using predetermined overhead rates, absorption costing, normal costing vs actual costing, volume variances, using multiple overhead rates, and activity-based costing.

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Yixing Xing
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61 views2 pages

Product Costing

The document discusses product costing and manufacturing overhead. It covers topics like the components of manufacturing cost, using predetermined overhead rates, absorption costing, normal costing vs actual costing, volume variances, using multiple overhead rates, and activity-based costing.

Uploaded by

Yixing Xing
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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PRODUCT COSTING

b 1. The three major components of manufacturing cost are


a. materials, work in process, and finished goods.
b. materials, labor, and manufacturing overhead.
c. materials, labor, and finished goods.
d. materials, labor, and production costs.

a 2. A predetermined overhead rate CANNOT be used


a. if a company does not budget its overhead costs.
b. by a company that uses job-order costing.
c. in a multiple-product company.
d. by a highly automated company where labor is a minor part of product cost.

a 3. Assigning overhead to jobs using a predetermined overhead rate is called


a. applying.
b. budgeting.
c. product costing.
d. job-order costing.

d 4. Predetermined overhead rates are based on activity measured by


a. number of jobs.
b. units of sales.
c. units of production.
d. units of an input factor.

b 5. Absorption costing is required


a. for financial accounting purposes only.
b. for financial accounting and tax purposes.
c. for financial and managerial accounting purposes.
d. for managerial accounting purposes only.

a 6. Both actual and normal costing


a. include material, labor, and overhead in product cost.
b. require predetermined overhead rates.
c. are likely to result in over- or underabsorption of overhead.
d. will show a favorable volume variance if production is greater than budgeted.

b 7. An advantage of normal costing over actual costing is that


a. the company can compute the exact cost of a unit of product.
b. unit costs are not affected by monthly fluctuations in production activity.
c. control over fixed costs is improved.
d. the company need not forecast the level of productive activity for the year.

d 8. An unfavorable volume variance signifies that


a. cost control was poor.
b. sales were less than budgeted.
c. production was less than sales.
d. production was less than the level used to set the fixed overhead application rate.

b 9. The principal reason for using more than one rate to apply overhead is
a. to keep the individual rates low.
b. that overhead costs are driven by more than one activity.
c. that such rates recognize the seasonal nature of some costs.
d. to simplify recordkeeping.

a 10. Activity-based overhead rates are more useful than a single plant-wide rate if
a. overhead costs are driven by several activities.
b. direct labor cost varies significantly from department to department.
c. all products require about the same amounts of all activities.
d. manufacturing overhead costs are nearly all fixed.

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