Test Bank for Managerial Accounting for Managers Question
and Answers Step by step Solutions
Which costing method assumes all products use overhead costs in the same proportions? -
answerPlantwide overhead rate method
Which of the following would usually not be used in computing plantwide overhead rates? -
answerNumber of quality inspections
With ABC, overhead costs should be traced to which cost object first? - answerActivities
Activity-based costing - answer-Uses more than one rate to allocate overhead costs to products.
-Typically uses the most overhead allocation rates.
-Focuses on the costs of carrying out activities.
Plantwide overhead rate method - answer-Uses only volume-based measures such as direct labor hours
to allocate overhead costs to products.
Departmental overhead rate method - answer-Uses more than one rate to allocate overhead costs to
products.
-Uses only volume-based measures such as direct labor hours to allocate overhead costs to products.
A manufacturer uses machine hours to assign overhead costs to products. Budgeted information for the
next year follows.
Budgeted factory overhead costs $544,000
Budgeted machine hours 6,400
,Compute the plantwide overhead rate for the next year based on machine hours. -
answer544,000/6400=85
Activity - answerA task that causes a cost to be incurred.
Activity driver – answer Measurement associated with an activity.
Cost object – answer Anything to which costs will be assigned.
Cost pool - answerA group of costs that have the same activity drivers.
If management wants the most accurate product cost, which of the following costing methods should be
used? - answerActivity-based costing.
Which costing method tends to overstate the cost of high-volume products - answerTraditional volume-
based costing.
Disadvantages of activity-based costing include - answer-It is not acceptable under GAAP for external
reporting.
-It can be costly to implement.
traditional income statement - answersales
-cost of sales
gross profit/margin
-operating expense
operating income
,-nonoperating expenses
-taxes
=net income
Contribution margin - answersales
-variable cost
cost margin
-fixed costs
operating income
=net income
contribution margin used – answer internally: managment
contribution margin focus - answercost behavior-fixed or variable cost
income statement used - answerexternally: creditors/ stockholders
income statement focus - answercost type/function-cost of sale, operating expense
contribution margin equation - answerselling price
-variable cost
=
a)direct materials - answera) variable cost
, b) factory rent - answerb) fixed cost
c) sales commissions expense - answerc) variable cost
d) direct labor - answerd) variable cost
e) depreciation on factory building - answere) fixed cost
c.as production increases, total fixed costs - answerc.stays the same
a.as production increases, fixed costs per unit - answera.decreases
b.as production decreases, variable costs per unit - answerb.stays the same
d.as production decreases, total variable costs - answerd.increases
Product level - answerActivities that relate to specific products that must be carried out regardless of
how many units are produced and sold or batches run.
- Redesigning a bicycle seat in response to customer feedback
Facility level - answerActivities that relate to overall production and cannot be traced to specific
products; costs associated with these activities pertain to a plant's general manufacturing process.
- Paying real estate taxes on the factory building.
-Cleaning the assembly department.
and Answers Step by step Solutions
Which costing method assumes all products use overhead costs in the same proportions? -
answerPlantwide overhead rate method
Which of the following would usually not be used in computing plantwide overhead rates? -
answerNumber of quality inspections
With ABC, overhead costs should be traced to which cost object first? - answerActivities
Activity-based costing - answer-Uses more than one rate to allocate overhead costs to products.
-Typically uses the most overhead allocation rates.
-Focuses on the costs of carrying out activities.
Plantwide overhead rate method - answer-Uses only volume-based measures such as direct labor hours
to allocate overhead costs to products.
Departmental overhead rate method - answer-Uses more than one rate to allocate overhead costs to
products.
-Uses only volume-based measures such as direct labor hours to allocate overhead costs to products.
A manufacturer uses machine hours to assign overhead costs to products. Budgeted information for the
next year follows.
Budgeted factory overhead costs $544,000
Budgeted machine hours 6,400
,Compute the plantwide overhead rate for the next year based on machine hours. -
answer544,000/6400=85
Activity - answerA task that causes a cost to be incurred.
Activity driver – answer Measurement associated with an activity.
Cost object – answer Anything to which costs will be assigned.
Cost pool - answerA group of costs that have the same activity drivers.
If management wants the most accurate product cost, which of the following costing methods should be
used? - answerActivity-based costing.
Which costing method tends to overstate the cost of high-volume products - answerTraditional volume-
based costing.
Disadvantages of activity-based costing include - answer-It is not acceptable under GAAP for external
reporting.
-It can be costly to implement.
traditional income statement - answersales
-cost of sales
gross profit/margin
-operating expense
operating income
,-nonoperating expenses
-taxes
=net income
Contribution margin - answersales
-variable cost
cost margin
-fixed costs
operating income
=net income
contribution margin used – answer internally: managment
contribution margin focus - answercost behavior-fixed or variable cost
income statement used - answerexternally: creditors/ stockholders
income statement focus - answercost type/function-cost of sale, operating expense
contribution margin equation - answerselling price
-variable cost
=
a)direct materials - answera) variable cost
, b) factory rent - answerb) fixed cost
c) sales commissions expense - answerc) variable cost
d) direct labor - answerd) variable cost
e) depreciation on factory building - answere) fixed cost
c.as production increases, total fixed costs - answerc.stays the same
a.as production increases, fixed costs per unit - answera.decreases
b.as production decreases, variable costs per unit - answerb.stays the same
d.as production decreases, total variable costs - answerd.increases
Product level - answerActivities that relate to specific products that must be carried out regardless of
how many units are produced and sold or batches run.
- Redesigning a bicycle seat in response to customer feedback
Facility level - answerActivities that relate to overall production and cannot be traced to specific
products; costs associated with these activities pertain to a plant's general manufacturing process.
- Paying real estate taxes on the factory building.
-Cleaning the assembly department.
