Cost Measurement General 2

Question 1

Recording factory insurance cost twice will cause an error that results in

Answer 1

Overstating Finished goods inventory

Overstating Cost of Goods Manufactured

Understating Net Operating Income due to additional insurance expense

Question 2

Theoretical capacity

Answer 2

assumes output is produced 100% of the time

Question 3

Practical capacity

Answer 3

adjusts theoretical capacity for non-production time such as holidays and maintenance shutdowns

Question 4

Normal volume

Answer 4

adjusts theoretical capacity for long run product demand over a multiple year period

Question 5

Expected annual capacity

Answer 5

adjusts theoretical capacity for the expected output for the current year only

Question 6

Most common approach to application of overhead is

Answer 6

Expected Annual Capacity

Question 7

Using the Expected annual capacity with regards to overapplied overhead what would cause this result

Answer 7

Estimated overhead / Estimated activity level

either the estimated overhead is higher than the actual overhead

or the estimated activity level is lower than the actual activity level

Question 8

cost management system is a planning and control system that

Answer 8

measures the cost of significant activities

identifies non value-added cost

and identifies activities

Question 9

Why are Methods such as variable and throughput costing are often used for managerial accounting purposes

Answer 9

because they are more representative of actual performance during the period when inventories are high

Question 10

Variable costing

Answer 10

considers all fixed costs of manufacturing to be period costs