Cost Accounting Systems: Master Cost Allocation and Overhead Rates

Question 1

Which of the following is the primary objective of cost accounting systems?

Accepted Answer

To provide managers with information for decision-making

Answer

To ensure compliance with tax regulations

Answer

To prepare financial statements in accordance with GAAP

Answer

To calculate employee bonuses and incentives

Question 2

Which of the following is NOT a component of overhead in a process costing system?

Accepted Answer

Direct labour

Answer

Indirect materials

Answer

Utilities

Answer

Equipment depreciation

Question 3

Activity-based costing (ABC) is particularly useful when:

Accepted Answer

Overhead costs are complex and diverse

Answer

Products are produced in large batches

Answer

Production processes are highly automated

Answer

Costs are easy to trace directly to products

Question 4

Which of the following is NOT a method for calculating overhead rates?

Accepted Answer

Variable costing

Answer

Actual costing

Answer

Normal costing

Answer

Standard costing

Question 5

What is the primary purpose of a cost reconciliation statement?

Accepted Answer

To verify the accuracy of cost calculations

Answer

To allocate costs to different departments

Answer

To calculate overhead rates

Answer

To prepare financial statements

Question 6

What is the key difference between a job order and a process order in cost accounting?

Accepted Answer

Job orders are used for unique or customized products, while process orders are used for standardized or mass-produced products.

Answer

Process orders are used for unique or customized products, while job orders are used for standardized or mass-produced products.

Answer

Job orders are used for short-term projects, while process orders are used for long-term projects.

Answer

There is no difference between job orders and process orders.

Question 7

In cost accounting, which method is employed when costs are accumulated for specific production units or batches?

Accepted Answer

Job Costing

Answer

Process Costing

Answer

Activity-Based Costing

Question 8

What is a drawback of using activity-based costing (ABC)?

Accepted Answer

Cost accounting systems become more complex

Answer

More precise cost allocation

Answer

Better decisions from understanding cost drivers

Answer

Less control over indirect costs

Question 9

The main advantage of using a job costing system is that it:

Accepted Answer

Provides cost information for each specific job

Answer

Simplifies cost allocation

Answer

Eliminates the need for overhead rates

Answer

Is more accurate than process costing

Question 10

Which of the following is **not** a step in a cost accounting system?

Accepted Answer

Revenue recognition

Answer

Cost accumulation

Answer

Cost allocation

Answer

Cost assignment

Question 11

The purpose of a cost-benefit analysis is to:

Accepted Answer

Evaluate the potential costs and benefits of a decision

Answer

Determine the optimal level of costs

Answer

Control costs within a budget

Answer

Allocate costs to products or services

Question 12

The difference between actual costs and standard costs is known as a:

Accepted Answer

Cost variance

Answer

Overhead variance

Answer

Price variance

Answer

Material variance

Question 13

What is a key benefit of using an activity-based costing (ABC) system?

Accepted Answer

More precise allocation of costs to products or services

Answer

Simplified budget preparation

Answer

Lower administrative costs

Question 14

Which aspect is NOT a crucial feature of a cost accounting system?

Accepted Answer

Product pricing

Answer

Cost allocation

Answer

Overhead rate calculation

Answer

Cost-volume-profit analysis

Question 15

Which of the following is not a recognized type of costing system used in accounting?

Accepted Answer

Budgeting

Answer

Job costing

Answer

Activity-based costing

Question 16

Which of the following is a fundamental concept of cost accounting systems?

Accepted Answer

Job costing

Answer

Budgeting

Answer

Auditing

Answer

Financial reporting

Question 17

In job costing, costs are allocated to:

Accepted Answer

Specific jobs or batches

Answer

Processes

Answer

Overheads

Answer

Departments

Question 18

Which method of overhead allocation considers the activities performed in a production process?

Accepted Answer

Activity-based costing

Answer

Traditional costing

Answer

Standard costing

Answer

Variable costing

Question 19

What is the primary purpose of calculating an overhead rate?

Accepted Answer

To allocate overhead costs to products or services

Answer

To compare actual costs to budgeted costs

Answer

To reduce the impact of overhead costs on profitability

Answer

To determine the total cost of production

Question 20

What is the key difference between actual costs and standard costs?

Accepted Answer

Actual costs are incurred costs, while standard costs are estimated costs.

Answer

Standard costs are incurred costs, while actual costs are estimated costs.

Answer

Both statements are true.

Answer

Neither statement is true.

Question 21

What is the main purpose of a reconciliation between cost accounting and financial accounting?

Accepted Answer

To ensure accuracy of financial reporting

Answer

To adjust for different accounting principles

Answer

To simplify the audit process

Answer

To identify errors in cost accounting

Question 22

Which type of cost accounting system allocates costs to units of production based on their physical characteristics or processes?

Accepted Answer

Process costing

Answer

Job costing

Answer

Activity-based costing

Answer

Standard costing

Question 23

The primary purpose of calculating an overhead rate in job costing is to:

Accepted Answer

Distribute overhead costs equitably to each job.

Answer

Determine the total overhead costs incurred.

Answer

Control and reduce overhead costs.

Answer

Identify inefficiencies in the production process.

Question 24

In activity-based costing, overhead costs are assigned to products or services based on:

Accepted Answer

The activities performed to produce them.

Answer

The department in which they are incurred.

Answer

The volume of production.

Answer

The direct labor costs.

Question 25

Which of the following is NOT typically considered an overhead cost?

Accepted Answer

Direct materials

Answer

Factory rent

Answer

Utilities

Answer

Depreciation on equipment

Question 26

Which of the following is NOT a potential advantage of implementing a cost accounting system?

Accepted Answer

Increased customer satisfaction

Answer

Enhanced cost control

Answer

Improved decision-making

Answer

Reduced production costs

Question 27

What is the primary objective of cost accounting systems in organizations?

Accepted Answer

Support internal decision-making and performance evaluation

Answer

Provide information for external financial reporting

Answer

Ensure compliance with tax regulations

Answer

Calculate employee salaries and wages

Question 28

Which of the following is an unethical practice in designing a cost accounting system?

Accepted Answer

Manipulating data to achieve desired outcomes

Answer

Ensuring data accuracy

Answer

Promoting transparency

Answer

Using reliable methods for cost allocation

Question 29

Which of the following is NOT a characteristic of a job costing system?

Accepted Answer

Continuous production process

Answer

Use of job cost sheets

Answer

Production for specific customer orders

Answer

Accumulation of costs by job

Question 30

Which of the following is a benefit of using activity-based costing (ABC)?

Accepted Answer

Improved cost allocation accuracy

Answer

Simplified cost calculations

Answer

Eliminated need for overhead rates

Answer

Reduced data collection

Question 31

Which of the following is a limitation of using standard costs?

Accepted Answer

May not reflect actual costs

Answer

Provides timely feedback on performance

Answer

Simplifies cost accounting

Answer

Eliminates the need for variance analysis

Question 32

Which of the following is a characteristic of a hybrid costing system?

Accepted Answer

Combines elements of job and process costing

Answer

Eliminates the need for overhead allocation

Answer

Uses only actual costs

Answer

Suitable only for small businesses

Question 33

Which of the following is a benefit of using a predetermined overhead rate?

Accepted Answer

Reduces the need for frequent cost calculations

Answer

Eliminates the possibility of errors

Answer

Simplifies financial reporting

Answer

Provides more accurate cost information

Question 34

Which of the following is a key characteristic of job costing?

Accepted Answer

Costs are accumulated by individual jobs or projects.

Answer

It is most suitable for industries producing standardized goods.

Answer

Costs are assigned to products based on their usage of activities.

Question 35

In a manufacturing company, which of the following would be classified as direct labor?

Accepted Answer

Wages of assembly line workers

Answer

Depreciation on factory equipment

Answer

Salary of the production manager

Answer

Rent of the factory building

Question 36

Process costing is most appropriate for which of the following industries?

Accepted Answer

Chemical manufacturing

Answer

Construction

Answer

Furniture making

Answer

Shipbuilding

Question 37

Which of the following is NOT a step in activity-based costing?

Accepted Answer

Allocate direct materials to cost objects

Answer

Assign costs to activity cost pools

Answer

Identify the activities performed in the organization

Question 38

Overapplied overhead occurs when:

Accepted Answer

Applied overhead exceeds actual overhead

Answer

Direct labor costs exceed manufacturing overhead costs

Answer

Actual overhead exceeds applied overhead

Answer

Applied overhead equals actual overhead

Question 39

Which of the following is a benefit of using activity-based costing?

Accepted Answer

More accurate product costing

Answer

Reduced need for cost information

Answer

Simpler to implement than traditional costing

Question 40

In a job costing system, the cost of raw materials requisitioned for a specific job would be recorded as a debit to:

Accepted Answer

Work in Process Inventory

Answer

Finished Goods Inventory

Answer

Cost of Goods Sold

Answer

Raw Materials Inventory

Question 41

Which of the following is an example of a cost driver for the purchasing activity in a manufacturing company?

Accepted Answer

Number of purchase orders

Answer

Number of inspections

Answer

Number of machine setups

Answer

Direct labor hours

Question 42

The main difference between variable costing and absorption costing is the treatment of:

Accepted Answer

Fixed manufacturing overhead

Answer

Direct materials

Answer

Variable manufacturing overhead

Answer

Direct labor