Question : 55. Abby believes her company’s overhead costs driven (affected) by the : 1207981

 

 

55. Abby believes her company’s overhead costs are driven (affected) by the number of machine hours because the production process is heavily automated. During the period, the company produced 3,000 units of Product A requiring a total of 200 machine hours and 2,000 units of Product B requiring a total of 50 machine hours. What allocation rate should be used if the company incurs overhead costs of $10,000? 
A. $2 per unit
B. $2 per machine hour
C. $40 per unit
D. $40 per machine hour

 

 

56. The following information relates to Betty’s Baskets for 2012:
  
Based on this information, what is the company’s cost of goods sold for 2012? 
A. $43,000
B. $57,000
C. $60,000
D. $85,000

 

 

57. The following information relates to Mystic Manufacturing’s 2012 accounting period:
  
Based on this information, what is the company’s net income for 2012? 
A. $15,000
B. $35,000
C. $18,000
D. $21,000

 

 

58. Costs such as transportation-out, sales commissions, uncollectible accounts receivable, and packaging are sometimes called 
A. upstream costs.
B. indirect costs.
C. direct costs.
D. downstream costs.

 

 

59. All of the following are downstream costs except: 
A. Packaging costs
B. Research and development
C. Advertising
D. Sales commissions

 

 

60. Select the incorrect statement regarding upstream and downstream costs. 
A. Profitability analysis should consider only manufacturing and downstream costs.
B. Companies must recover the total cost of developing, producing, and delivering products.
C. Pricing decisions must consider both upstream and downstream costs in addition to manufacturing costs.
D. Upstream and downstream costs are reported as period costs on the income statement.

 

 

61. Select the incorrect statement regarding service companies. 
A. Because service companies do not carry inventory, it is impossible to determine product costs.
B. Because the products of service companies are consumed immediately, there is no finished goods inventory on their balance sheets.
C. Managers of service companies are expected to control costs, improve quality, and increase productivity just like managers of manufacturing companies.
D. Material, labor, and overhead costs of service companies are treated as period costs.

 

 

62. Identify the true statement regarding how product costs in a manufacturing company differ from product costs in a service company. 
A. Manufacturing companies incur costs for supplies but service companies do not.
B. Manufacturing companies accumulate product costs in inventory accounts, while service companies do not.
C. Service companies generally incur less labor costs than manufacturing companies.
D. Service companies are less competitive than manufacturing companies.

 

 

63. Costs associated with holding inventory often include: 
A. theft, damage, and obsolescence.
B. lower motivation of employees.
C. increased production time.
D. all of these.

 

 

64. A company that uses a just in time inventory system: 
A. has finished goods inventory on hand at all times in order to speed up shipments of customer orders.
B. may find that having less inventory actually leads to increased customer satisfaction.
C. assesses its value chain to create new value-added activities.
D. adopts a systematic, problem-solving attitude.

 

 

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