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Since overhead costs are indirect costs

Since overhead costs are indirect costs
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Solution Guide / Answer Key:



1. Since overhead costs are indirect costs, _______. (Points : 1)

2. An actual cost system differs from a normal cost system in that an actual cost system ______. (Points : 1)

3. One reason annual overhead application rates are used is ______. (Points : 1)

4. When a manufacturing company has a highly automated manufacturing plant producing many different products, which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process? (Points : 1)

5. In the formula y = a + bX, y represents _______. (Points : 1)

6. If the level of activity increases, _______. (Points : 1)

7. An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a _______. (Points : 1)

8. Reno 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)

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)

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)

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)

12. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in _______. (Points : 1)

13. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the _______. (Points : 1)

14. The FASB requires which of the following to be used in preparation of external financial statements? (Points : 1)

15. An ending inventory valuation on an absorption costing balance sheet would _______. (Points : 1)

16. Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated? (Points : 1)

17. The costing system that classifies costs by functional group only is _______. (Points : 1)

18. The costing system that classifies costs by both functional group and behavior is _______. (Points : 1)

19. Another name for variable costing is _______. (Points : 1)

20. If a firm uses variable costing, fixed manufacturing overhead will be included _______. (Points : 1)



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