Chapter 3. Cost Accounting Rewiew Reno Corporation uses a predetermined overhead
ID: 2443358 • Letter: C
Question
Chapter 3. Cost Accounting RewiewReno Corporation uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied $363,000 of overhead during the year. How many direct labor hours did the company plan to incur? (Points: 1)
1,150,000
1,190,000
1,200,000
1,210,000
9. Gary Corporation has developed the following flexible budget formula for monthly overhead:
For output of less than 200,000 units:
$36,600 + $.80(units)
For output of 200,000 units or more:
$43,000 + $.80(units)
How much overhead should Gary expect if the firm plans to produce 200,000 units? (Points: 1)
$52,600
$59,000
$196,600
$203,000
10. Aztec Company is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1,000 plus 25 cents per mile, what is the expected cost to move 800 miles? (Points: 1)
$1,000
$1,200
$2,400
$3,600
11. Aquatic Motor Company is exploring different prediction models that can be used to forecast indirect labor costs. One independent variable under consideration is machine hours. Following are matching observations on indirect labor costs and machine hours for the past six months:
Month
Machine hours
Indirect labor costs
1
300
$20,000
2
400
$24,000
3
240
$17,000
4
370
$22,000
5
200
$13,000
6
225
$14,000
In a high-low model, which months' observations would be used to compute the model's parameters? (Points: 1)
2 and 5
1 and 6
2 and 6
4 and 5
12. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in _______. (Points: 1)
higher income and assets
higher income but lower assets
lower income but higher assets
lower income and assets
13. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the _______. (Points: 1)
work-in-process account
finished goods inventory account
cost of goods sold
period costs
14. The FASB requires which of the following to be used in preparation of external financial statements? (Points: 1)
variable costing
standard costing
activity-based costing
absorption costing
15. An ending inventory valuation on an absorption costing balance sheet would _______. (Points: 1)
sometimes be less than the ending inventory valuation under variable costing
always be less than the ending inventory valuation under variable costing
always be the same as the ending inventory valuation under variable costing
always be greater than or equal to the ending inventory valuation under variable costing
16. Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated? (Points: 1)
Change in the quantity of all units in inventory times the relevant fixed costs per unit.
Change in the quantity of all units produced times the relevant fixed costs per unit.
Change in the quantity of all units in inventory times the relevant variable cost per unit.
Change in the quantity of all units produced times the relevant variable cost per unit.
17. The costing system that classifies costs by functional group only is _______. (Points: 1)
standard costing
job order costing
variable costing
absorption costing
18. The costing system that classifies costs by both functional group and behavior is _______. (Points: 1)
process costing
job order costing
variable costing
absorption costing
19. Another name for variable costing is _______. (Points: 1)
full costing
direct costing
standard costing
adjustable costing
20. If a firm uses variable costing, fixed manufacturing overhead will be included _______. (Points: 1)
only on the balance sheet
only on the income statement
on both the balance sheet and income statement
on neither the balance sheet nor income statement
Explanation / Answer
How many direct labor hours did the company plan to incur? 1,200,000
$360,000 / 0.30
9 How much overhead should Gary expect if the firm plans to produce 200,000 units?
$43,000 + $.80(units)
= $43,000 + ($0.80 x 200,000) = $203,000
10 If the per truck rental charge is $1,000 plus 25 cents per mile, what is the expected cost to
move 800 miles? $1,000 + ($0.25 x 800) = $1,200
11 In a high-low model, which months' observations would be used to compute the model's parameters?
2 and 5
12 If a firm produces more units than it sells, absorption costing, relative to variable costing,
will result in higher income and assets
13. Under absorption costing, fixed manufacturing overhead could be found in all of the following except
the period costs
14. The FASB requires which of the following to be used in preparation of external financial statements?
absorption costing
15. An ending inventory valuation on an absorption costing balance sheet would always be greater than or equal to the ending inventory valuation under variable costing.
16. Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated?
Change in the quantity of all units in inventory times the relevant fixed costs per unit.
17. The costing system that classifies costs by functional group only is absorption costing.
18. The costing system that classifies costs by both functional group and behavior is Variable Costing.
19. Another name for variable costing is direct costing .
20. If a firm uses variable costing, fixed manufacturing overhead will be included only on the income statement.
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