Final Exam Cost Accounting Multiple Choice – Flashcards
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1. For a manufacturing company, product costs include all of the following except: A. Iindirect material costs. B. Warehousing costs. C. Direct labor costs. D. All of these are product costs
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B. Warehousing costs
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1. For a manufacturing company, product costs include all of the following except: A. Iindirect material costs. B. Warehousing costs. C. Direct labor costs. D. All of these are product costs
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D. All of these are product costs
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3. Which of the following statements is true with regard to product costs versus general, selling, and administrative costs? A. Product costs associated with unsold units appear on the income statement as general expenses. B. General, selling, and administrative costs appear on the balance sheet. C. Product costs associated with units sold appear on the income statement as cost of goods sold. D. None of these is true.
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C. Product costs associated with units sold appear on the income statement as cost of goods sold.
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4. Which of the following is not classified as manufacturing overhead? A. Product delivery costs B. Supervisory labor C. Factory insurance D. Production supplies
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A. Product delivery costs
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5. Based on the following cost data, what conclusions can you make about Product A and Product B? A. Product A is a fixed cost and Product B is a variable cost. B. Product A is a variable cost and Product B is a fixed cost. C. Product A and Product B are both variable costs. D. Product A and Product B are both mixed costs.
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B. Product A is a variable cost and Product B is a fixed cost.
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6. Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If Wu's volume doubles, the company's total cost will: A. Stay the same. B. Double as well. C. Increase but will not double. D. Decrease
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C. Increase but will not double
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7. Select the incorrect statement regarding the contribution margin income statement. A. The contribution margin approach for the income statement is unacceptable for external reporting. B. Contribution margin represents the amount available to cover product costs and thereafter to provide profit. C. The contribution margin approach requires that all costs be classified as fixed or variable. D. Assuming no change in fixed costs, a $1 increase in contribution margin will result in a $1 increase in profit.
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B. Contribution margin represents the amount available to cover product costs and thereafter to provide profit.
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8. Craft, Inc. normally produces between 120,000 and 150,000 units each year. Producing more than 150,000 units alters the company's cost structure. For example, fixed costs increase because more space must be rented, and additional supervisors must be hired. The production range between 120,000 and 150,000 is called the: A. Differential range. B. Median range. C. Relevant range. D. Leverage range
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C. Relevant range.
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9. Southern Food Service operates six restaurants in the Atlanta area. The company pays rent of $20,000 per year for each shop. The managers of each shop are paid a salary of $4,200 per month and all other employees are paid on an hourly basis. Relative to the number of hours worked, total compensation cost for a particular shop is which kind of cost? A. Mixed cost B. Fixed cost C. Variable cost D. None of these
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A. Mixed cost
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10. Martin Company currently produces and sells 40,000 units of product at a selling price of $12. The product has variable costs of $6 per unit and fixed costs of $150,000. The company currently earns a total contribution margin of: A. $280,000 B. $200,000 C. $240,000 D. $90,000
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C. $240,000
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11. Once sales reach the break-even point, each additional unit sold will: A. Increase fixed cost by a proportionate amount. B. Reduce the margin of safety. C. Increase the company's operating leverage. D. Increase profit by an amount equal to the per unit contribution margin
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D. Increase profit by an amount equal to the per unit contribution margin
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12. If total fixed costs increase while variable costs and sales price are unchanged, what happens to the break-even point? A. The break-even point increases, and therefore more units must be sold to break-even. B. The break-even point decreases, and therefore fewer units must be sold to break-even. C. The break-even point remains the same. D. The break-even point decreases and therefore more units must be sold to break-even.
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A. The break-even point increases, and therefore more units must be sold to break-even.
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13. What is the formula for calculating contribution margin ratio? A. Contribution margin/net income B. Contribution margin/fixed costs C. Contribution margin/desired profit D. Contribution margin/sales
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D. Contribution margin/sales
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14. At the break-even point: A. Sales would be equal to total costs. B. Contribution margin would be equal to total fixed costs. C. Sales would be equal to fixed costs. D. Both Sales would be equal to total costs and Contribution margin would be equal to total fixed costs are correct.
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D. Both Sales would be equal to total costs and Contribution margin would be equal to total fixed costs are correct.
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15. Select the incorrect statement regarding cost-volume-profit relationships for multiple products. A. For a company that sells many different products, the level of the break-even point is affected by the company's sales mix. B. An increase in sales volume accompanied by a change in sales mix could cause a company's profits to decrease. C. For a multi-product company, cost-volume-profit analysis can be done using the contribution margin ratio of the most profitable product. D. None of these answers is correct
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C. For a multi-product company, cost-volume-profit analysis can be done using the contribution margin ratio of the most profitable product.
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16. A chair manufacturer makes custom chairs using hand tools, wood, glue, and varnish. Which of the following statements is true? A. The costs of wood and glue would be treated as direct costs. B. Wood, glue, and varnish would all be direct materials. C. Wood would be accounted for as a direct cost, and glue and varnish as indirect costs. D. The concepts of direct and indirect costs are not applicable here.
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C. Wood would be accounted for as a direct cost, and glue and varnish as indirect costs
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17. Financial reporting standards require that joint costs: A. Be treated as a period cost and expensed immediately. B. Be assigned to the product produced in the largest quantity. C. Be assigned to the product with the highest sales value. D. Be allocated to the two or more joint products.
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D. Be allocated to the two or more joint products.
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18. Which of the following regarding direct costs is a correct statement? A. Direct costs are always fixed costs. B. Direct costs are always variable costs. C. Direct costs are easily traced to cost objects. D. Direct costs are never selling and administrative expenses
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C. Direct costs are easily traced to cost objects
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19. Joint products are: A. Easily traced to products. B. Similar products that result from a common process. C. Direct costs are easily traced to cost objects D. Different products that are combined to create a single product
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C. Direct costs are easily traced to cost objects
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20. The split off point: A. Is the point at which production of joint products begins. B. Is the point at which joint products become unidentifiable. C. Refers to the point where title to goods sold passes from the seller to the buyer. D. Is the point at which joint products separated from each other
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D. Is the point at which joint products separated from each other
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21. Select the correct statement regarding activity-based costing (ABC). A. ABC does not use cost drivers. B. ABC uses a single activity center but multiple cost drivers. C. ABC uses multiple activity cost centers and multiple cost drivers. D. ABC uses multiple activity cost centers but a single cost driver.
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C. ABC uses multiple activity cost centers and multiple cost drivers
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22. Which of the following is not a cost resulting from a unit-level activity? A. The cost of electricity to power manufacturing equipment B. The cost of sending monthly statements to customers C. The indirect cost of glue used on each product D. The per unit cost of packaging goods
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B. The cost of sending monthly statements to customers
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23. Which of the following activity costs would not likely be included in a unit-level activity cost pool? A. Indirect material B. Packaging costs C. Machine setup costs D. Machine-related utilities
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C. Machine setup costs
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24. Which of the following activity costs should usually be ignored when making a decision regarding whether to eliminate a product? A. Product-level costs B. Batch-level costs C. Unit-level costs D. Facility-level costs
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D. Facility-level costs
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25. Which of the following statement(s) regarding activity-based costing is(are) true? I. Use of activity based costing improves cost tracing by using more cause-and-effect relationship to assign indirect costs to activity centers. II. An activity based system is characterized by multiple cost pools and multiple volume and activity cost drivers. III. Activity-based costing can cause distortion of cost, assigning too much cost to some products and too little to others. A. I and III B. I and II C. II and III D. III only
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B. I and II
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26. Which of the following statements regarding unit-level activities is(are) true? I. Unit-level activities occur each time a batch of units is produced. II. Unit-level costs follow a variable cost behavior pattern. III. Unit-level activities benefit the production as a whole and are not related to any specific product. A. I only B. I and II C. II and III D. II only
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D. II only
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27. Hough Company manufactures a wide variety of products. A high proportion of its indirect costs are batch-level costs, such as acquiring materials, moving materials within the factory, and setting up machines. Hough uses direct labor hours to assign indirect costs to all of its products. How is this use of a traditional product costing system likely to affect the costs of Hough's high-volume and low-volume products? A. All of its products are undercosted. B. Its low-volume products are overcosted. C. All of its products are overcosted. D. Its high-volume products are overcosted.
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D. Its high-volume products are overcosted.
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28. For purposes of decision making, avoidable costs are costs that: A. Were incurred in the past. B. Will not be incurred in the future, regardless of the alternative chosen. C. Differ between alternatives. D. None of these.
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C. Differ between alternatives.
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29. Which of the following statements is true? A. Fixed costs are sometimes relevant for decision making. B. Opportunity costs are never relevant to decision making. C. Information must be exactly accurate to be relevant to decision making. D. A cost that is relevant in one decision context is relevant in other decision contexts
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A. Fixed costs are sometimes relevant for decision making
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30. Select the incorrect statement regarding relevant costs and revenues. A. To be relevant, a cost or revenue must be future-oriented and must differ between the alternatives. B. Sunk costs are never relevant for decision-making purposes. C. Differential revenues are expected future revenues that differ from past revenues. D. Avoidable costs are also known as differential costs.
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A. To be relevant, a cost or revenue must be future-oriented and must differ between the alternatives.
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31. Engineering design costs are generally referred to as: A. Batch-level costs. B. Facility-level costs. C. Unit-level costs. D. Product-level costs
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D. Product-level costs
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32. Which of the following is a way to relax a constraint or bottleneck? A. Have employees work overtime. B. Install faster machinery. C. Train workers to improve productivity. D. All of these.
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D. All of these.
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33. Select the correct statement about the master budget. A. The master budget is a group of detailed budgets and schedules representing the company's operating and financial plans for the past accounting period. B. The master budget usually includes operating budgets and capital budgets, and pro forma financial statements. C. The budgeting process usually begins with preparing the strategic budgets. D. Preparing the master budget begins with the cash budget.
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B. The master budget usually includes operating budgets and capital budgets, and pro forma financial statements.
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34. Which of the following is not a benefit of budgeting? A. Provides assurance that accounting records are in accordance with generally accepted accounting principles B. Coordinates the activities of the company by integrating the plans of all departments C. Requires managers to plan ahead and to formalize their objectives D. Sets realistic standards that serve as benchmarks for evaluating performance
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A. Provides assurance that accounting records are in accordance with generally accepted accounting principles
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35. Which of the following would represent the order in which most master budgets are prepared? A. Sales, Income Statement, Cash, Purchases B. Purchases, Cash, Sales, Income Statement C. Purchases, Sales, Cash, Income Statement D. Sales, Purchases, Cash, Income Statement
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D. Sales, Purchases, Cash, Income Statement
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36. Select the correct equation format for the purchases budget. A. Beginning inventory + expected sales = required purchases. B. Cost of sales + beginning inventory - desired ending inventory = required purchases. C. Beginning inventory + expected sales - desired ending inventory = required purchases. D. Cost of sales + desired ending inventory - beginning inventory = required purchases
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D. Cost of sales + desired ending inventory - beginning inventory = required purchases
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37. Which of the following would appear on a selling and administrative expense budget, but would not appear on a schedule of cash payments for selling and administrative expenses? A. Cost of goods sold B. Depreciation expense C. Salary expense D. Sales expense
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B. Depreciation expense
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38. Which of the following is generally included in a sales budget? A. Schedule of cash receipts for the projected sales B. Desired ending inventory C. Budgeted cost of goods sold D. Schedule of cash payments for inventory purchases
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A. Schedule of cash receipts for the projected sales
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39. The cash budget is based on which budget? A. Sales budget B. Inventory purchases budget C. Selling and administrative expense budget D. All of these answers are correct.
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D. All of these answers are correct.
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40. Which of the following would not be included in a selling and administrative expenses budget? A. Budgeted salary expenses B. Budgeted rent expense C. Cash payments for selling and administrative expenses D. Budgeted interest expense
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D. Budgeted interest expense
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41. Select the incorrect statement regarding the cash budget. A. The cash budget helps managers to anticipate cash shortages and excess cash balances. B. Cash inflows and outflows indicated on the cash budget are reported on a company's pro forma statement of cash flows. C. Cash payments may include outflows for inventory, selling and administrative expenses, and equipment purchases. D. The total cash available is calculated by adding cash receipts and the ending cash balance
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D. The total cash available is calculated by adding cash receipts and the ending cash balance
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42. A budget prepared at a single volume of activity is referred to as a: A. Strategic budget. B. Standard budget. C. Static budget. D. Flexible budget
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C. Static budget
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43. Spark Company's static budget is based on a planned activity level of 45,000 units. At the same time the static budget was prepared, the management accountant prepared two additional budgets, one based on 40,000 units and one based on 50,000. The company actually produced and sold 49,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets? A. A budget based on 40,000 units B. A budget based on 45,000 units C. A budget based on 49,000 units D. A budget based on 50,000 units
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C. A budget based on 49,000 units
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44. Static and flexible budgets are similar in that: A. They both are based on the same per unit variable amounts and the same fixed costs. B. They both concentrate solely on costs. C. They both are prepared for multiple activity levels. D. None of these answers is correct
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A. They both are based on the same per unit variable amounts and the same fixed costs.
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45. When would a variance be labeled as favorable? A. When actual costs are less than standard costs B. When standard costs are equal to actual costs C. When standard costs are less than actual costs D. When estimated costs are greater than actual costs
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A. When actual costs are less than standard costs
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46. Standard cost systems facilitate the management practice known as: A. Management by the numbers. B. Management development. C. Managing by exception. D. Just-in-time management
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C. Managing by exception
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47. All of the following factors should influence the decision to investigate a variance except: A. Frequency of occurrence. B. Materiality of the variance amount. C. The direction of the variance (favorable or unfavorable). D. Capacity for management to control.
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C. The direction of the variance (favorable or unfavorable).
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48. Abbot Company spent less than expected for materials and more than expected for labor. Select the incorrect statement from the following. A. Labor variances will always be unfavorable if material variances are favorable. B. In order to facilitate cost control, it will be necessary to analyze the price and quantity of each resource used in production. C. It cannot be determined from the information provided whether employees were paid higher wages or if they worked more hours. D. It cannot be determined from the information provided whether the company paid a lower purchase price for materials or if workers used less materials.
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A. Labor variances will always be unfavorable if material variances are favorable
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49. Select the correct statement regarding flexible budgets. A. A flexible budget can only be prepared for a single level of activity. B. A flexible budget is not used for planning. C. A flexible budget shows expected revenues and costs at a variety of activity levels. D. A flexible budget is also known as the master budget.
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C. A flexible budget shows expected revenues and costs at a variety of activity levels.
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50. Which of the following is a difference between a static and a flexible budget? A. Static budgets use the same fixed cost amounts, whereas flexible budgets change the amount of fixed costs at different levels of activity. B. Static budgets are based on the same per unit variable amount, whereas flexible budgets are based on multiple per unit variable amounts. C. Static budgets are based on single estimate of volume, whereas flexible budgets show estimated costs and revenues at a variety of activity levels. D. None of these answers is correct.
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C. Static budgets are based on single estimate of volume, whereas flexible budgets show estimated costs and revenues at a variety of activity levels.
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51. When would a cost variance be listed as unfavorable? A. When actual costs are less than budgeted costs B. When actual costs exceed budgeted costs C. When actual costs are equal to budgeted costs D. When actual sales are less than budgeted sales
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B. When actual costs exceed budgeted costs
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54. The research and development department of Apple would likely be organized as: A. A profit center. B. A cost center. C. A revenue center. D. An investment center.
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B. A cost center
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67. Product costs are expensed as cost of goods sold: A. When production is complete. B. At the start of production. C. When the related products are sold. D. When the related revenue is collected
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C. When the related products are sold
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70. Product costs are expensed as cost of goods sold: A. When production is complete. B. At the start of production. C. When the related products are sold. D. When the related revenue is collected.
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D. When the related revenue is collected.
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71. All of the following costs are accumulated in the work in process account except: A. Transportation-out costs. B. Direct labor costs. C. Manufacturing overhead costs. D. Direct material costs
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A. Transportation-out costs
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72. Which of the following correctly computes cost of goods manufactured? A. Beginning work in process + Direct materials used + Direct labor + Overhead - Ending work in process B. Beginning work in process + Cost of goods sold - Ending finished goods C. Beginning work in process + Direct materials used + Direct labor + Overhead D. None of these.
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A. Beginning work in process + Direct materials used + Direct labor + Overhead - Ending work in process
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73. Which of the following is a valid reason for using variable costing? A. Fixed production cost should be ignored when costing units of inventory since it is not essential to the production process. B. Absorption costing recognizes fixed costs as expense regardless of volume of production. C. Absorption costing may motivate managers to overproduce in order to increase profits. D. Under variable costing managers can increase profitability by increasing the volume of production
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C. Absorption costing may motivate managers to overproduce in order to increase profits.
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74. Which of the following statements is true for a company that uses variable costing? A. The manufacturing cost per unit decreases when the volume of production increases. B. Net income is not affected by fluctuations in production. C. Fixed manufacturing overhead is treated like a product cost. D. Fixed manufacturing overhead costs incurred in the current period may be recognized as expense in a later period
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B. Net income is not affected by fluctuations in production.
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75. Which of the following statement(s) is/are correct? I. A predetermined overhead rate is used to assign estimated overhead costs to work in process inventory. II. The predetermined overhead rate is calculated by dividing estimated overhead cost by the estimated volume or level of activity. III. The most common means of allocating overhead costs is to calculate a predetermined overhead rate at the end of the period. A. I B. I and III C. II D. I and II
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D. I and II
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76. In which account is the actual amount of costs such as factory utilities and maintenance initially recorded? A. Work in process inventory B. Manufacturing overhead C. Raw materials inventory D. Supplies inventory
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B. Manufacturing overhead
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77. For 2014, Kelly Company's manufacturing overhead costs totaled $2,871,400. At the end of the period, manufacturing overhead had been underapplied by $5,310. As a result: A. Cost of goods sold increases. B. Manufacturing overhead increases. C. Cost of goods sold decreases. D. None of these.
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A. Cost of goods sold increases
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78. The reporting method that includes in the cost of inventory (and cost of goods sold) all product costs, including both fixed and variable costs is known as: A. Variable costing. B. Total costing. C. Direct costing. D. Absorption costing.
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D. Absorption costing.
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79. Cost of goods sold is equal to: A. Cost of goods manufactured - ending finished goods. B. Cost of goods available for sale - beginning finished goods. C. Cost of goods available for sale - ending finished goods. D. Cost of goods manufactured - beginning finished.
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C. Cost of goods available for sale - ending finished goods.
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80. A process cost system is used when: A. Homogenous items are produced in a continuous flow production process. B. Batches of identical inventory items are produced. C. A company produces unique, one-of-a-kind inventory items. D. All of these.
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A. Homogenous items are produced in a continuous flow production process.
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81. In a job-order cost system, as goods are produced, product costs are accumulated in the: A. Work in process account. B. Materials account. C. Finished goods account. D. Cost of goods sold account
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A. Work in process account
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82. Select the incorrect statement regarding cost flows through a process cost system. A. Process cost systems parallel the physical flow of products in the production process. B. The three inventory accounts used are maintained on a perpetual basis. C. Product costs are accumulated separately by job. D. A separate work in process account is maintained for each department or process.
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C. Product costs are accumulated separately by job
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83. The entry to record cost of goods sold in a job-order costing system would include a: A. Debit to finished goods inventory and a credit to cost of goods sold. B. Debit to cost of goods sold and a credit to finished goods inventory. C. Debit to cost of goods sold and a credit to work in process Inventory. D. Credit to work in process and a debit to finished goods Inventory.
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B. Debit to cost of goods sold and a credit to finished goods inventory.
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84. When manufacturing overhead is applied to production in a job order cost system, the accounting records would reflect an increase in which of the following? A. Work in process B. Cost of goods sold C. Finished goods inventory D. Raw materials inventor
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A. Work in process
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85. Equivalent units of production would best be defined as: A. The number of whole units that could have been completed with direct material, direct labor and overhead used during the period. B. Completed units that are produced through the same process. C. Number of units transferred out during the period, regardless of when the units were started into production. D. Units of production that are the same kind of product.
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A. The number of whole units that could have been completed with direct material, direct labor and overhead used during the period.
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86. A laundry detergent manufacturer would most likely use: A. Process costing. B. Job order costing. C. Hybrid order costing. D. Batch order costing.
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A. Process costing.
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87. Which of the following statement(s) is/are correct? I. It is easy to distinguish the balance sheet of a company that uses a process costing system from that of a company that uses job-order costing II. A process cost system requires a work in process account for each processing department, while a job order system uses a single work in process account III. Process cost systems use multiple finished goods inventory accounts A. I only B. II only C. II and III D. I, II, and III
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B. II only
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88. An activity cost driver is A. A measure of the underlying activity that occurs in each activity cost pool. B. A measure of the volume of units produced or customers sold. C. A number of activities combined into one cost pool. D. The cost assigned to an activity.
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A. A measure of the underlying activity that occurs in each activity cost pool.
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89. Volume-based cost systems tend to A. Under-cost low-volume products and under-cost high-volume products. B. Under-cost low-volume products and over-cost high-volume products. C. Over-cost low-volume products and under-cost high-volume products. D. Over-cost low-volume products and over-cost high-volume products.
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B. Under-cost low-volume products and over-cost high-volume products.
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90. Which of the following is the best example of a facility-level activity? A. Human resources B. Research and development C. Painting a final product D. Product testing
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A. Human resources
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91. Which of the following statements is true? A. A process costing system will have a single Work in Process Inventory account. B. A process costing system will have a separate Work in Process Inventory account for each of the major processes. C. A job costing system will have a separate Work in Process Inventory account for each of the major processes. D. A process costing system will have a separate Raw Materials Inventory account for each of the major processes.
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B. A process costing system will have a separate Work in Process Inventory account for each of the major processes.
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92. Which of the following relationships is correct? A. Beginning units in process + units started = units completed + ending units in process B. Units started = beginning units in process + units completed + ending units in process C. Units started - beginning units in process = units completed + ending units in process D. Ending units in process + beginning units in process = units started - units completed
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A. Beginning units in process + units started = units completed + ending units in process
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93. Physical units multiplied by their percentage of completion yields A. Units completed and transferred out. B. Beginning units in process. C. Equivalent units. D. Ending units in process.
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C. Equivalent units.
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94. Cost per equivalent unit is kept separate for direct materials and conversion costs because A. The physical units were different for the two categories. B. The total manufacturing costs were different for the two categories. C. The equivalent units were different for the two categories. D. The ending inventories were different for the two categories
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C. The equivalent units were different for the two categories
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95. For a firm that uses process costing, calculating equivalent units makes it possible to fulfill which of the following requirements of GAAP? A. Assigning an appropriate value to assets. B. Assigning an appropriate value to liabilities. C. Expensing period costs as they are incurred. D. Recognizing revenue when it is realized or realizable.
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A. Assigning an appropriate value to assets
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96. Which of the following would be included in net income but not in annual cash flows? A. Sales revenue B. Depreciation C. Initial investment D. Direct labor
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B. Depreciation
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97. If cash flows are not equal each year, the payback period A. Cannot be calculated. B. Is calculated by dividing the initial investment by the average cash flows. C. Is calculated by subtracting each year's cash flows from the initial investment until zero is reached. D. Is calculated by dividing the total years in the project by two.
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C. Is calculated by subtracting each year's cash flows from the initial investment until zero is reached.
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98. The responsibility center in which the manager has responsibility and authority over revenues, costs and assets is A. A cost center. B. An investment center. C. A profit center. D. A revenue center.
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B. An investment center.
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100.The purpose of the cash budget is to A. Be used as a basis for the operating budgets. B. Provide external users with an estimate of future cash flows. C. Help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs. D. Summarize the cash flowing into and out of the business during the past period
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C. Help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs
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101.The break-even point is A. The point where zero contribution margin is earned. B. The point where zero profit is earned. C. The point where selling price just equals variable cost. D. Equal to sales revenue less fixed costs.
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B. The point where zero profit is earned.
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102.The margin of safety tells managers A. How much sales would have to increase to hit the target profit. B. How much profit would drop if sales decreased. C. How much sales could drop before the firm no longer earns profits. D. How much profit would have to increase to hit target sales
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C. How much sales could drop before the firm no longer earns profits
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103.Cost structure refers to A. A company's break-even point. B. Whether fixed costs are covered by contribution margin. C. How a company uses variable versus fixed costs. D. Where funds are stored.
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C. How a company uses variable versus fixed costs
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104.Profit will be the same under variable costing as under full absorption costing whenever A. Production is greater than sales. B. Production is the same as sales. C. Production is less than sales. D. Variable costing is chosen for external reporting purposes.
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B. Production is the same as sales.
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105.What is the difference between full absorption costing and variable costing? A. In full absorption costing, all of the non-manufacturing costs are expensed. In variable costing, all of the non-manufacturing expenses are included in the cost of the product. B. In full absorption costing, fixed manufacturing overhead is expensed. In variable costing, fixed manufacturing overhead is included in the cost of the product. C. In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed. D. Variable costing must be used for external financial reports while full absorption costing can only be used for internal reporting
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C. In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed.
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106.Which of the following responsibility centers will use a segmented income statement as an evaluation tool? A. Cost center B. Revenue center C. Profit center D. Balanced center
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C. Profit center
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107.The difference between variable costing and full absorption costing is due to differences in the treatment of A. Direct costs. B. Variable manufacturing overhead. C. Fixed manufacturing overhead. D. Period costs
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C. Fixed manufacturing overhead
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108.If a cost is a common cost of the segments on a segmented income statement, the cost should: A. Be allocated to the segments on the basis of segment sales. B. Not be allocated to the segments. C. Excluded from the income statement. D. Treated as a product cost rather than as a period cost
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B. Not be allocated to the segments
