Chapter: Accounting of overheads (Part 2)
1.

Apportionment means sharing on a reasonable basis. Many overhead costs are costs that cannot be allocated directly to one cost centre, because they are shared by two or more cost centres. These costs are apportioned between the cost centres.

A. Incorrect
B. Correct
C. none
D. none
Answer» B. Correct
2.

Absorption is also called:

A. Allocation
B. Sharing
C. Overhead recovery
D. None
Answer» C. Overhead recovery
3.

When overheads have been allocated and apportioned to production cost centres, they are charged to the cost of products manufactured in the cost centre.

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct
4.

Production overheads are the overhead costs of both the production departments and the service departments.

A. False
B. True
C. none
D. none
Answer» B. True
5.

The apportionment of production overhead costs might be in two stages: • sharing (or dividing) general costs between production centres and service centres; and • then sharing the costs of the service centres between the production centres.

A. Correct
B. Incorrect
C. none
D. none
Answer» A. Correct
6.

Sharing the costs of the service centres between the production centres is called:

A. Reapportionment
B. Reallocation
C. Secondary apportionment
D. None
Answer» B. Reallocation
7.

The total overhead costs of each production centre should be:

A. Costs allocated directly to the production centre
B. Shared costs apportioned to the production centre
C. A share of the costs of each service department, apportioned to the production centre
D. All of the above
Answer» C. A share of the costs of each service department, apportioned to the production centre
8.

The absorption rate may be calculated by the fraction: • Total overhead costs • Total of absorption basis.

A. Correct
B. Incorrect
C. none
D. none
Answer» A. Correct
9.

Overheads can be absorbed into cost units by means of: • Physical unit produced • Percentage of prime cost • Percentage of direct wages • Direct labour hour rate • Machine hour rate

A. All of the above
B. (I) (IV) and (V) only
C. (IV) and (V) only
D. None
Answer» A. All of the above
10.

The purpose of allocation and apportionment of overheads is to calculate an absorption rate for each production department.

A. False
B. True
C. none
D. none
Answer» A. False
11.

Absorption rates are used to add overhead costs to:

A. The Admin costs
B. Other expenses
C. The costs of production
D. None
Answer» B. Other expenses
12.

A situation may arise where both service departments do work for the other service department, as well as the production departments. The secondary apportionment is more complex. The process is called reciprocal apportionment

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct
13.

The reciprocal apportionment and can be done using:

A. Repeated distribution method
B. Simultaneous equations method
C. Both A&B
D. None
Answer» B. Simultaneous equations method
14.

A single overhead absorption rate might be used for all the production departments in the factory.

A. True
B. False
C. none
D. none
Answer» A. True
15.

Single overhead absorption rate is also known as:

A. Blanket rate
B. Factory-wide absorption rate
C. Both A&B
D. None
Answer» B. Factory-wide absorption rate
16.

A blanket overhead absorption rate is an absorption rate used throughout a factory and for all jobs and units of output irrespective of the department in which they were produced.

A. True
B. False
C. none
D. none
Answer» A. True
17.

Blanket overhead rates are not appropriate in the following circumstances.

A. There is more than one department
B. Jobs do not spend an equal amount of time in each department
C. Both A&B
D. None
Answer» B. Jobs do not spend an equal amount of time in each department
18.

Administration overheads and sales and distribution overheads are not absorbed into product costs. Instead, they are treated in full as an expense in the financial period to which they relate.

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct
19.

Non-production overhead costs are never added to the value of inventory.

A. False
B. True
C. none
D. none
Answer» A. False
20.

It is possible to add non-production overheads to the full production cost of units produced and sold (i.e. No cost will be carried forward to the next period in the form of closing stock), to obtain a full cost of sale.

A. True
B. False
C. none
D. none
Answer» A. True
21.

Overhead absorption is the process whereby overhead costs allocated and apportioned to production cost centres are added to unit, job or batch costs.

A. True
B. False
C. none
D. none
Answer» A. True
22.

Overhead absorption is sometimes called overhead recovery.

A. False
B. True
C. none
D. none
Answer» B. True
23.

Overheads are usually added to cost units using a predetermined overhead absorption rate, which is calculated using figures from the budget.

A. False
B. True
C. none
D. none
Answer» B. True
24.

Predetermined absorption rates is where, the absorption rate calculated in advance using estimates for cost and production volume in the annual financial plan or budget.

A. Correct
B. Incorrect
C. none
D. none
Answer» A. Correct
25.

A predetermined overhead absorption rate is also known as:

A. Fixed overhead absorption rate
B. The fixed overhead recovery rate
C. The fixed overhead applied
D. All of the above
Answer» C. The fixed overhead applied
26.

If the amount of production overheads absorbed into product costs is more than the actual production overhead expenditure, there is:

A. Over-absorbed overhead
B. Under-absorbed overhead
C. Neither A or B
D. None
Answer» A. Over-absorbed overhead
27.

The over-absorbed overhead is accounted for as an adjustment to the profit in the period, and is added to profit in the cost accounting income statement.

A. Correct
B. Incorrect
C. none
D. none
Answer» A. Correct
28.

Under or over absorption is caused by the actual fixed overhead and production volume being different from those figures used to calculate the predetermined rate.

A. False
B. True
C. none
D. none
Answer» B. True
29.

Identify the circumstances where under- or over-recovery of overhead will occur:

A. Actual overhead costs are different from budgeted overheads
B. The actual activity level is different from the budgeted activity level
C. Actual overhead costs and actual activity level differ from the budgeted costs and level
D. All of the above
Answer» C. Actual overhead costs and actual activity level differ from the budgeted costs and level
30.

Variable overhead is overhead that increases as more production work is done. Total variable overhead expenditure therefore depends on the volume of production. Variable overhead is usually calculated as an amount for each direct labour hour worked.

A. The above statement is correct
B. The above statement is incorrect
C. none
D. none
Answer» A. The above statement is correct
Tags
Question and answers in Accounting of overheads (Part 2), Accounting of overheads (Part 2) multiple choice questions and answers, Accounting of overheads (Part 2) Important MCQs, Solved MCQs for Accounting of overheads (Part 2), Accounting of overheads (Part 2) MCQs with answers PDF download