Method and Practice Cost Accounting

Overhead costs have been increasing due to all of the following EXCEPT:

• increased automation

• more complexity in distribution processes

• tracing more costs as direct costs with the help of technology

• product proliferation

Variable overhead costs include

• plant-leasing costs

• the plant manager’s salary

• depreciation on plant equipment

• machine maintenance

Fixed overhead costs include:

• the cost of sales commissions

• property taxes paid on plant facilities

• energy costs

• indirect materials

Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily add value for:

• the current shareholders

• the customer using the products or services

• plant employees

• major suppliers of component parts

Effective planning of fixed overhead costs includes all of the following EXCEPT:

• choosing the appropriate level of capacity

• eliminating nonvalue-adding costs

• redesigning products to use fewer resources

• redesigning the plant layout for more efficient processing

In a standard costing system, a cost-allocation base would MOST likely be:

• actual machine-hours

• normal machine-hours

• standard machine-hours

• Any of these answers is correct.

The MAJOR challenge when planning fixed overhead is:

• calculating total costs

• calculating the cost-allocation rate

• choosing the appropriate level of capacity

• choosing the appropriate planning period

Choosing the appropriate level of capacity:

• is a key strategic decision

• may lead to loss of sales if overestimated

• may lead to idle capacity if underestimated

• All of these answers are correct.

For calculating the costs of products and services, a standard costing system:

• only requires a simple recording system

• uses standard costs to determine the cost of products

• does not have to keep track of actual costs

• All of these answers are correct.

The variable overhead flexible-budget variance measures the difference between:

• actual variable overhead costs and the static budget for variable overhead costs

• actual variable overhead costs and the flexible budget for variable overhead costs

• the static budget for variable overhead costs and the flexible budget for variable overhead costs

• None of these answers is correct.