Chapter: Accounting of overheads (Part 1)
1.

. Cost apportionment involves:

A. The sharing out of overheads to service departments
B. The sharing out of common costs to departments
C. The allocation of direct costs to departments
D. The sharing out of costs to products
Answer» C. The allocation of direct costs to departments
2.

. What would be the most appropriate way of apportioning depreciation costs across different manufacturing departments in a business?

A. Floor space
B. Numbers of personnel
C. Value of buildings and equipment
D. Value of land.
Answer» D. Value of land.
3.

. Which of the following is a conventional method of ascertaining cost?

A. Absorption costing
B. Full Costing
C. Both a & b
D. None of the above
Answer» A. Absorption costing
4.

. The total cost of a product will include:

A. Prime costs plus direct production overhead plus indirect-production overhead plus tax
B. Prime cost plus absorbed direct production overhead
C. Prime costs plus direct production overhead plus indirect production overhead
D. Prime cost only
Answer» C. Prime costs plus direct production overhead plus indirect production overhead
5.

. Which of the following is not considered to be a benefit of activity-based costing?

A. More accurate product costs
B. Reduced complexity of calculating costs
C. Inclusion of non-manufacturing costs
D. More detailed understanding of what drives cost.
Answer» D. More detailed understanding of what drives cost.
6.

Wages paid to a labour who was engaged in production activities can be termed as.

A. direct cost.
B. indirect cost
C. sunk cost
D. imputed cost.
Answer» A. direct cost.
7.

. The cost which is to be incurred even when a business unit is closed is a.

A. imputed cost.
B. historical cost.
C. sunk cost.
D. shutdown cost
Answer» D. shutdown cost
8.

. Which of the following best describes a fixed cost? A cost which:

A. Actual direct labour time per unit being greater than budget.
B. Actual cost of direct labour being greater than budget.
C. Actual overheads incurred being less than budget.
D. The number of units produced being greater than budget.
Answer» D. The number of units produced being greater than budget.
9.

. Which of the following is most likely to be an allocated production overhead cost to the finishing cost centre?

A. Factory rates.
B. Salary of the finishing cost centre supervisor.
C. Power used on finishing cost centre machines.
D. Salary of the production manager.
Answer» C. Power used on finishing cost centre machines.
10.

Wages paid to a office cleaning staff who was engaged in Administration activities a can be termed as.

A. direct cost.
B. indirect cost
C. sunk cost
D. imputed cost.
Answer» B. indirect cost
11.

Overhead is the cost incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.

A. Correct
B. Incorrect
C. none
D. none
Answer» A. Correct
12.

Indirect expenses are also known as overheads.

A. True
B. False
C. none
D. none
Answer» A. True
13.

Overhead is actually the total of:

A. Indirect materials
B. Indirect expenses
C. Indirect labour
D. All of the above
Answer» D. All of the above
14.

Overhead costs may be classified according to the function of the organization as:

A. Production/Manufacturing overheads
B. Non-production/Non-manufacturing overheads
C. Both A&B
D. None
Answer» C. Both A&B
15.

. Production Overheads are costs related to the production process other than direct labour and materials. They are also known as factory overheads since they are incurred inside the factory, other overheads such as selling and administrative overheads are always charged to in the period in which they are incurred

A. The above statement is true
B. The above statement is false
C. none
D. none
Answer» A. The above statement is true
16.

Production overheads represent indirect materials, indirect wages and indirect expenses attributable to:

A. Production activities
B. Service activities
C. Both A&B
D. None
Answer» C. Both A&B
17.

Indirect production costs are incurred in three main ways: • Production activities: costs arising in production departments such as fuel, depreciation, supervision • Service activities: the cost of operating non-producing departments such as materials handling, canteen • Establishment costs: general production overheads such as factory rent/rates, heating and lighting

A. True
B. False
C. none
D. none
Answer» A. True
18.

Which of the following procedure is incorrect for attributing overhead costs to cost units? I. Collecting production overhead costs by item II. Establishing cost centres III. Allocating and apportioning overhead costs to cost centres IV. Apportioning service cost centre costs to production cost centres V. Absorbing production cost centre costs into cost units

A. All of the above are correct
B. All of the above are incorrect
C. (II) and (IV) are incorrect
D. (II) is incorrect
Answer» A. All of the above are correct
19.

. The total amount of factory overhead represents:

A. Allocated costs
B. Apportioned costs
C. Share of service department costs
D. All of the above
Answer» D. All of the above
20.

Allocation is where overheads are allocated to cost centres. If a cost centre is responsible for the entire cost of an item of expenditure, the entire cost is charged directly to the cost centre.

A. Correct
B. Incorrect
C. none
D. none
Answer» A. Correct
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