1. Whenever the amount of misapplied overhead is immaterial (in dollar amount), it is usually closed out to:

a. Finished goods inventory.

b. Work in process inventory.

c. Cost of goods sold.

d. Materials inventory.

2. Overapplied overhead exists whenever:

a. Backflush costing is used.

b. An ABC system is used.

c. Actual overhead is more than estimated overhead using the predetermined rate or rates.

d. Actual overhead is less than estimated overhead using the predetermined rate or rates.

3. Which of the following statements about absorption costing is true? (Select the five that apply.)

• a. it treats variable overhead as a product cost.
• b. It treats fixed overhead as a product cost.
• c. It shows gross profit as a major subtotal.
• d. It is required by GAAP.
• e. It facilitates CVP analysis.
• f. it treats direct labor as a product cost.

4. Which of the following statements about variable costing is true? (Select the three that apply.)

• a. It treats fixed overhead as a product cost.
• b. It is required by GAAP.
• c. It treats direct labor as a product cost.
• d. It facilitates CVP analysis.
• e. It treats variable overhead as a product cost.
• f. It shows gross profit as a major subtotal.