Accounting Exam 2 MCQ

Which of the following reasons would indicate that a company should consider using departmental overhead rates rather than using a single plantwide overhead​ rate?

A. Each product is in each department for a different length of time.

B. Each department spends different amounts on manufacturing overhead.

C. Each department incurs different types of manufacturing overhead.

D. All of the above statements are reasons that a company would choose departmental overhead rates rather than using a single plantwide overhead rate.

D. All of the above statements are reasons that a company would choose departmental overhead rates rather than using a single plantwide overhead rate.

Cost distortion is likely to​ cause:

A. overcosting of all products

B. undercosting of all products

C. overcosting some products and undercosting other products

D. accurate costing of all products

C. overcosting some products and undercosting other products

Insurance on a​ company's buildings would most likely be classified as a​ ______________ cost.

A. facility-level

B. unit-level

C. product-level

D. batch-level

A. facility-level

Which costing system is most likely to produce the least cost​ distortion?

A. ​Activity-based costing

B. Traditional costing system

C. Departmental overhead allocation rates

D. Plantwide overhead rate

A. ​Activity-based costing

Which of the following statements is​ false?

A. A system that uses​ activity-based costing is more refined than one that uses departmental overhead rates.

B. Activity-based costing can only be used by manufacturing firms.

C. Activity-based costing focuses on allocating indirect costs.

D. An​ activity-based costing system requires more information than a system that uses a single plantwide overhead rate.

B. Activity-based costing can only be used by manufacturing firms.

The information provided by an​ activity-based costing system can help with what type of decisions by an automobile​ manufacturer?

A. Evaluating manager performance

B. Cost cutting

C. Pricing       

D. All of the listed choices are correct.

D. All of the listed choices are correct.

Which of the following is not a good reason for a paint manufacturer to use​ activity-based costing?

A. The paint manufacturer produces a variety of paint​ types, with some types much more difficult to produce than other types.

B. The paint industry is highly competitive.

C. Most costs are​ direct; indirect costs are a small proportion of total costs.

D. The paint manufacturer has the technology in place to capture the required information to implement​ activity-based costing.

C. Most costs are​ direct; indirect costs are a small proportion of total costs.

A window manufacturer has a commitment to lean production. What is not a benefit from adopting a lean production​ philosophy?

A. Lower inventory carrying costs

B. Ability to continue production despite disruptions in deliveries of raw materials

C. More space available for production

D. Ability to respond more quickly to changes in customer demand

B. Ability to continue production despite disruptions in deliveries of raw materials

The cost of reworking defective products before shipping to customers would be classified as which type of quality​ costs?

A. Appraisal cost

B. Internal failure cost

C. External failure cost

D. Prevention cost

B. Internal failure cost

A computer​ manufacturer's spending on testing its computers before shipping them to customers helps reduce which of the following​ costs?

A. External failure costs

B. Appraisal costs

C. Internal failure costs

D. Prevention costs

A. External failure costs