Managerial Accounting 13th Edition By Carl Warren James M Reeve Jonathan Duchac – Test Bank

1. Product costing consists of only direct materials and direct labor.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-01 – 26-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

2. Managers depend on accurate factory overhead allocation to make decisions regarding product mix and product price.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-01 – 26-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

3. The selection of the factory overhead allocation method is important because the method selected determines the accuracy of the product cost.
a. True
b. False

ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-01 – 26-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

4. Managers depend on product costing to make decisions regarding continuing operations and product mix.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-01 – 26-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

5. A plantwide factory overhead rate is computed by dividing total budgeted factory overhead costs by the plantwide allocation base.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-02 – 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

6. Zorn Co. budgeted $600,000 of factory overhead cost for the coming year. Its plantwide allocation base, machine hours, is budgeted at 100,000 hours. Budgeted units to be produced are 200,000 units. Zorn’s plantwide factory overhead rate is $6.00 per unit.
a. True
b. False

ANSWER: False
RATIONALE: Single Plantwide Factory Overhead Rate = Total Budgeted Factory Overhead ÷
Total Budgeted Plantwide Allocation Base
Single Plantwide Factory Overhead Rate = $600,000 ÷ 100,000 machine hours =
$6 per machine hour
Plantwide factory overhead rate = $6 per machine hour × (100,000 / 200,000)
direct machine hours = $3 per unit

DIFFICULTY: Moderate
Bloom’s: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.26-02 – 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

7. Bob’s Biscuit Corporation budgeted $1,200,000 of factory overhead cost for the coming year. Its plantwide allocation base, machine hours, is budgeted at 100,000 hours. Budgeted units to be produced are 200,000 units. Bob’s plantwide factory overhead rate is $12.00 per machine hour.
a. True
b. False

ANSWER: True
RATIONALE: Single Plantwide Factory Overhead Rate = Total Budgeted Factory Overhead ÷
Total Budgeted Plantwide Allocation Base
Single Plantwide Factory Overhead Rate = $1,200,000 ÷ 100,000 machine hours
= $12 per machine hour

DIFFICULTY: Moderate
Bloom’s: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.26-02 – 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

8. When a plantwide factory overhead rate is used, the total overhead costs allocated to all products are the same.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-02 – 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

9. When a plantwide factory overhead rate is used, overhead costs are applied to all products by a single rate.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-02 – 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

10. Use of a plantwide factory overhead rate assumes that the activities causing overhead costs are the same across all departments and products.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-02 – 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

11. Use of a plantwide factory overhead rate assumes that the activities causing overhead costs are different across different departments and products.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.26-02 – 26-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs
ACCT.IMA.07 – Cost Management
BUSPROG: Analytic

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