Chapter 11 Multiple-choice questions

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. Which definition best describes indirect costs?
Indirect costs are those costs which cannot be directly associated with a product or service. Although they are often fixed, this is not always the case. They should be controlled by departmental managers and include all costs that are not directly associated with a product or service.
Page reference: 189-190

Indirect costs are those costs which are not controlled directly by a manager. correct incorrect

Indirect costs are those costs which cannot be directly associated with a product or service. correct incorrect

Indirect costs are always fixed. correct incorrect

Indirect costs are always manufacturing overhead costs. correct incorrect

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. The management accounting technique that spreads indirect manufacturing costs fairly across the range of products is called:

Absorption costing. correct incorrect

Allocation costing. correct incorrect

Indirect costing. correct incorrect

Overhead costing. correct incorrect

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. What would happen to a blanket rate if production volumes were increased?

The fixed cost per unit of the product would increase. correct incorrect

The unit cost of a product would decrease. correct incorrect

The unit cost of a product would increase. correct incorrect

The direct cost per unit of a product would decrease. correct incorrect

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. A business absorbs overheads on a direct labour hourly basis, which were budgeted at 2,500 labour hours with overheads of £56,500. Actual results were 2,350 hours with actual overheads of £54,050. Calculate the over or under recovery.

£940 under recovery correct incorrect

£1,000 over recovery correct incorrect

£940 over recovery correct incorrect

£1,000 under recovery correct incorrect

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. A company had an under recovery of overheads of £200,000 with a budgeted overhead of £1,000,000. If its estimated overhead hours were 20,000 and its actual overhead hours were 22,000, calculate the actual overhead cost.

£800,000 correct incorrect

£1,200,000 correct incorrect

£900,000 correct incorrect

£1,300,000 correct incorrect

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. In absorption costing, what are the allocated costs?

The costs that can be directly associated with a department correct incorrect

Manufacturing costs, which need to be spread over production departments correct incorrect

Manufacturing costs, which need to be spread over products or services. correct incorrect

The costs that can be directly associated with a service department correct incorrect

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

Floor space correct incorrect

Numbers of personnel correct incorrect

Value of buildings and equipment correct incorrect

Administration costs correct incorrect

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. A company manufactures high-quality china plates, which are hand-painted. It has a budgeted overhead of £20,000, taking 150 machine hours and 800 direct labour hours. Each plate uses £3 of direct materials, 0.25 labour hours at £10 per hour and 0.2 machine hours. What is the cost of a plate?

£32.17 correct incorrect

£30.50 correct incorrect

£10.50 correct incorrect

£11.75 correct incorrect

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. Which of the following factors is considered to have influenced the development of activity-based costing?

Increasing uniformity of products with sophisticated production technologies correct incorrect

Increase in direct costs as a proportion of total product costs correct incorrect

A very high proportion of high-volume products correct incorrect

Increase in overhead costs as a proportion of total product costs correct incorrect

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

More accurate product costs correct incorrect

Reduced complexity of calculating costs correct incorrect

Inclusion of non-manufacturing costs correct incorrect

More detailed understanding of what drives cost correct incorrect