1. Direct costing may be used for: Answer internal reporting purposes. external financial reporting purposes. income tax reporting purposes. all of the above. The primary difference between absorption costing and direct costing is the treatment of: Answer direct material costs. variable manufacturing overhead. fixed manufacturing overhead. direct labor costs. An excess of cost of goods manufactured over cost of goods sold for the period represents: Answer an increase in gross profit. a decrease in work in process inventory. overapplied manufacturing overhead. an increase in finished goods inventory. Cost accounting is a subset of: Answer financial accounting. process cost accounting. job order cost accounting. managerial accounting. Which of the following items would not be reported on the statement of cost of goods manufactured? Answer Cost of goods sold. Purchases. Total manufacturing costs. Contribution margin. Total manufacturing costs for the month on the statement of costs of goods manufactured equals: Answer variable costs + fixed costs + mixed costs. work in process inventory - finished goods inventory. cost of goods sold - cost of goods manufactured. cost of raw material used + direct labor cost incurred + manufacturing overhead applied. A debit balance in the manufacturing overhead account at the end of the period indicates that: Answer manufacturing overhead is overapplied. manufacturing overhead is underapplied. manufacturing overhead has been accurately applied. None of the above. An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a: Answer cost driver cost applier direct cost cost object Which of the following activities is not included in the organization's value chain? Answer Marketing. Finance. Customer service. Research and development. An organization's value chain refers to: Answer the process of using cost information to manage the activities of the organization. the sequence of functions and related activities that add value for the customer. the process of collecting and recording valuable information in the accounting information system. None of the above. 1. If all units produced during the month of September are sold, and no additional units are sold from the beginning finished goods inventory, then: Answer income determined with absorption costing will exactly equal income determined with direct costing. ending work in process inventory will increase. income determined with absorption costing will be lower than income determined with direct costing. ending finished goods inventory will decrease. The shift in the amount of manufacturing overhead costs applied to the mix of products produced that occurs when using a single cost driver rate as compared to using activity-based costing rates is known as: Answer underapplied overhead overapplied overhead cost absorption cost distortion An example of a cost likely to have an indirect relationship with products being manufactured: Answer production labor costs. raw material costs. electricity costs for packaging equipment. none of the above. The predetermined overhead application rate based on direct labor hours is computed as: Answer actual total overhead costs divided by actual direct labor hours. estimated total overhead costs divided by estimated direct labor hours. actual total overhead costs divided by estimated direct labor hours. estimated total overhead costs divided by actual direct labor hours. The three components of product costs are: Answer direct material, supervisor salaries, selling expenses. direct labor, manufacturing overhead, indirect material. direct material, direct labor, manufacturing overhead. manufacturing overhead, indirect material, indirect labor. Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing? Answer Units produced equal units sold. Units produced are greater than units sold. Units produced are less than units sold. Income determined with absorption costing will always equal income determined with direct costing. Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because: Answer direct costs identified with the product or activity may not be accurately assigned. fixed costs will change in total if the volume of activity changes. all costs may not have been allocated to the product or activity. arbitrarily allocated costs may not behave in the way assumed in the allocation method. Cost accounting is primarily concerned with: Answer accumulation and determination of product or service cost. income measurement and inventory valuation. generally accepted accounting principles. all of the above. The term "cost" means: Answer the price paid for a raw material. the wage paid to a worker. the price charged by an entity for its services. all of the above. In the T-account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account: Answer raw materials purchases are debited to work in process. direct labor costs are credited to work in process. cost of goods manufactured is debited to finished goods inventory. cost of goods sold is debited to finished goods inventory