The following information was gathered for Larsen Company for the year ended December 31, 20X1.

Budgeted direct-labour hours

15,500

Actual direct-labour hours

16,200

Budgeted factory overhead

$73,625

Actual factory overhead

$74,990

54) Assume that direct-labour hours is the cost driver. What is the budgeted factory-overhead rate?

A) $4.75

B) $4.63

C) $4.54

D) $4.84

55) Assume that direct-labour hours is the cost driver. What is the amount of factory overhead applied?

A) $73,625

B) $76,950

C) $71,765

D) $74,990

56) As managers seek more accurate product costing, overhead application solely on the basis of direct-labour hours or direct-labour cost is certain to

A) increase in popularity.

B) remain about as popular as it currently is.

C) decrease in popularity.

D) increase or decrease depending upon amounts involved.

57) A normal costing system uses the following:

A) actual direct material, actual direct labour, and actual overhead.

B) actual direct material, actual direct labour, and applied overhead.

C) actual direct material, applied direct labour, and actual overhead.

D) applied direct material, applied direct labour, and actual overhead.

58) Which of the following is NOT a contributory cause of overhead variances?

A) Poor forecasting

B) Inefficient use of overhead items

C) Calendar variations, number of workdays in a month

D) Operating at the level of volume used as a denominator in calculating the budgeted overhead rate

59) A company that produces less than its planned volume for a year will

A) underapply overhead.

B) not have an overhead variance.

C) overapply overhead.

D) not necessarily over- or underapply overhead.

60) The excess of actual overhead over the overhead applied to products is called

A) overapplied overhead.

B) underapplied overhead.

C) overestimated overhead.

D) prorated overhead.

61) The most widely used approach to disposing of overhead variances is

A) proration.

B) to allocate between cost of goods sold and finished goods inventory.

C) immediate write-off.

D) to capitalize as a cost of finished goods inventory.

62) In the immediate write-off approach, underapplied overhead is regarded as

A) a reduction in current income.

B) an addition to the cost of inventory.

C) a decrease in cost of goods sold.

D) a decrease in the cost of inventory.

63) In the immediate write-off approach, overapplied overhead is regarded as

A) a decrease in current income.

B) a decrease in cost of goods sold.

C) an addition to the cost of inventory.

D



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