Question

23) Job costing A) records the flow of costs for each product or service B) cannot be used by the service industry C) allocates an equal amount of cost to each wit made during a time period D) is used when each unit of output is identical Explanation: A) 24) Which of the following are reasons for t r ods such as a year, to calculate indirect cost rates? A) shorter the period, the greater is the influence of seasonal patterns on the amount of costs B) shorter the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs C) longer the period, the greater is the influence of seasonal patterns on the amount of costs D) longer the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs Explanation: A) 25) X-Industries manufactures 3-D printers. For each unit, $3,400 of direct material is used and there is $2,600 of direct manufacturing labor at $16 per hour. Manufacturing overhead is applied at $20 per direct manufacturing labor hour. Calculate the profit earned on 46 units if each unit sells for $9,500. A) $3,250 B) $11,500 C) $35,880 D) $65,320 Explanation: A) B) $3,400 + $2,600 + (($2,600 / $16) $20) - $9,250 Profit earned on 46 units = ($9,500 - 59,250) 46 units - $11,500 C) D ) manufacturing 26) When using a normal costing system, manufacturing overhead is allocated using the overhead rate and the quantity of the allocation base. A) budgeted; budgeted B) actual; budgeted C) actual; actual D) budgeted; actual Explanation: A)

Answer 1

23) Job costing a) Records the flow of costs for each product or service. The other options are incorrect because 1) Job costing can be used by product and service industry because in Product industry, job costing traces direct materials ,direct labour hours etc., whereas in service industry, job costing traces direct labour and other costs. 2) allocates indirect costs i.e., overheads as a fraction of direct costs and not as an equal amount of costs 3) Job costing is the efficient method to use when the industry creates products specific to the needs of the users like auditing, construction services etc., 24) which of the following are reasons for using longer periods such as an year to calculate indirect cost rates? a) shorter the period of indirect cost pool, the greater is the influence of seasonal patterns on the amount of costs - i.e., costs incurred in a specific month benefits future months The other options are incorrect because 1) Opportunity costs is not taken into account while calculating indirect cost rate and hence the option of b) shorter the period, the smaller is the influence of seasonal patterns on the amount of costs and d) longer the period, the smaller is the influence of seasonal patterns on the amount of costs. 2) Longer the period, the greater is the influence of seasonal patterns on the amount of costs is incorrect since with the duration of period, the influnce gets reduced.

25) Answer is B 11500 Given information Direct Material Direct manufacturing labour at $ 16 per hour Manufacturing overhead per direct manufacturing labour hour Sale units Selling price $3400 $2600 $20 46 $9500 Particulars Amount ($) 437000 Sales value ($9500* 46 units) 156400 119600 Less: Costs Direct material costs ($3400*46 units) Direct labour costs (162.5 hours *16 per hour *46 units) Total manufacturing labour hours = $2600/16 per hour= 162.5 hours Manufacturing overhead (162.5 hours * $ 20 per hour *46 units) Total costs Profit earned 149500 425500 11,500 26) when using a normal costing system , Manufacturing overhead is allocated using the budgeted overhead rate and the actual quantity of the allocation base (Option D)