Question

Question 1 of 1010.0 Points

If the variable costing concept is followed, which of the following costs would be included as part of the cost of product manufactured? (1) Depreciation on plant; (2) Direct labor; (3) Direct materials; (4) Property taxes on plant; (5) Insurance on plant; (6) Electricity purchased to operate machinery.

A. 1, 2, 3 would be included.

B. 2, 3, 5, and 6 would be included.

C. Only 2, 3, and 6 would be included.

                                                                                        

Question 2 of 1010.0 Points

A predetermined manufacturing overhead rate is calculated in the same manner as an actual manufacturing overhead rate except that estimated rather than actual costs and activity levels are used in computing predetermined overhead rates.

A. True

B. False

Question 3 of 1010.0 Points

In the income statement under variable costing, income is more directly related to the volume of units sold than under absorption costing.

A. True

B. False

Question 4 of 1010.0 Points

Rorry Company uses a job cost system. Labor costs for the period were $21,000, of which $3,000 were indirect. The journal entry is:

A. Dr. Work in Process Inventory for $18,000 and Manufacturing Overhead for $3,000 and Cr. Payroll Summary for $21,000

B. Dr. Work in Process for $3,000 and Manufacturing Overhead for $18,000 and Cr. Payroll Summary for $21,000

C. Dr. Finished Goods for $21,000 and Indirect Labor for $600 and Cr. Accrued Payroll for $21,600

D. Dr. Direct Labor for $18,000 and Indirect Labor for $3,000 and Cr. Payroll Summary for $21,000

Question 5 of 1010.0 Points

Depreciation, Indirect Materials, Indirect Labor, and Factory Rent are typical overhead items.

A. True

B. False

Question 6 of 1010.0 Points

Under variable costing, finished goods are carried at their full manufacturing cost per unit.

A. True

B. False

Question 7 of 1010.0 Points

Which of the following would be classified as selling costs? (1) marketing research; (2) depreciation on president’s office facilities; (3) advertising; (4) factory taxes; (5) indirect materials; (6) machinery maintenance.

A. 1, 3 are selling costs.

B. 1, 2, 3 are selling costs.

C. 3, 5 are selling costs.

D. 3, 6 are selling costs.

E. 1, 2, 3, 4, 5, 6 are selling costs.

Question 8 of 1010.0 Points

Which of the following would be classified as administrative costs? (1) marketing research; (2) depreciation on president’s office facilities; (3) advertising; (4) factory taxes; (5) indirect materials; (6) machinery maintenance.

A. None, they are all manufacturing overhead costs.

B. 2, 4 are administrative costs.

C. 1, 2, 3 are administrative costs.

D. 2 is the only administrative cost.

E. 4, 5, 6 are administrative costs.

Question 9 of 1010.0 Points

Selling and administrative costs are treated differently under variable costing and absorption costing.

A. True

B. False

Question 10 of 1010.0 Points

A company sells for $50,000 cash finished goods costing $23,000. The entry is:

A. Dr. Cost of Goods Sold for $23,000 and Cr. Finished Goods Inventory for $23,000

B. Dr. Cash for $50,000 and Cr. Sales for $50,000

C. Dr. Cost of Goods Sold for $23,000 and Cr. Work in Process Inventory for $23,000

D. Both a and c are necessary

E. Both a and b are necessary

Answer 1

1. Answer is C

Variable cost varies according to the quantity produced. Direct Materials, Direct Labour and Electricity consumption is variable according to the quantity produced.

Option A is Wrong because depreciation & insurance are fixed costs.

Option B is also wrong because insurance cost is also fixed cost.

2. Answer is A and true. Predetermined is based on the previous experience at various capacity levels.

3. Answer is A and true. Under absorption costing, closing inventory carries fixed element of cost also.

4. Answer is A. Dr. Work in Process Inventory for $18,000 and Manufacturing Overhead for $3,000 and Cr. Payroll Summary for $21,000. Direct cost is debited to WIP and indirect costs are debited to overhead which will be absorbed to WIP later.

5. Answer is A and true.

6. Answer is B and False.

7. Answer is A and marketing research and advertising are selling costs.

8. Answer is D and Depreciation on president's bunglow is only administrative cost.

9. Answer is B and False.

10. Answer is E & both A and B are necessary to record sales and cost of sales.