Two positions have normally been taken with respect to the recording of fixed manufacturing overhead as an element of the cost of plant assets constructed by a company for its own use: a. It should be excluded completely. b. It should be included at the same rate as is charged to normal operations. What are the circumstances or rationale that support or deny the application of these methods?

Two positions have normally been taken with respect to the recording of fixed manufacturing overhead as an element of the cost of plant assets constructed by a company for its own use: a. It should be excluded completely. b. It should be included at the same rate as is charged to normal operations. What are the circumstances or rationale that support or deny the application of these methods?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 12MC: Which of the following would not be classified as manufacturing overhead? A. indirect materials B....

See similar textbooks

Similar questions

Which of the following would not be an element of factory overhead? a. salary of a marketing manager b. amortization on the maintenance equipment c. salary of the plant supervisor d. property taxes on the plant buildings
Which of the following would not generally be considered a fixed overhead cost?a. Straight line depreciation (No); Factory insurance (No); Units of production depreciation(No)b. Straight line depreciation (Yes); Factory insurance (No); Units of production depreciation(Yes)c. Straight line depreciation (Yes); Factory insurance (Yes); Units of productiondepreciation (No)d. Straight line depreciation (No); Factory insurance (Yes); Units of production depreciation(No)
Which one of the following discretionary fixed cost? The salary of the deputy manager of the factory plant .The depreciation cost of the Headquarters offices The property taxes of the factory plant the cost of accounting system of the company .None of the given answers
Depreciation of Machinery would not be an element of factory overhead? Select one: a. True b. False
Which of the following are true regarding activity-basedcosting? a. A primary goal of using ABC is a more useful alloca-tion of manufacturing overhead to product lines. b. Under ABC, direct labor hours are never used to allo-cate overhead costs to activity pools or product lines. c. The use of ABC is indicated when it is suspected thateach of a firm’s product lines consumes approximatelythe same amount of overhead resources but the current allocation scheme assigns each line a substantially dif-ferent amount.
If the actual amount of the manufacturing overhead allocation base is greater than the estimated amount of the allocation base used to calculate the predetermined rate, then manufacturing overhead must have been under-allocated. Select one: True False
" When the predetermined overhead rate is based on the level of activity at capacity, an item called the Cost of Unused Capacity might appear to be treated as a period expense on income statements prepared for internal management use." Please explain the statement (True/False) thoroughly with examples. What does "Cost of Unused Capacity" mean?
Which of the following costs is not relevant whenconsidering the closure of a department within afactory?direct materialsfixed overheadsvariable overheadsdirect labour
Determining the basis for applying manufacturing overhead costs involvesA. primarily the accumulation of direct labor hours since virtually all overhead costs are driven by direct labor hours.B. primarily the maintaining of accurate records of production volume since virtually all overhead costs are driven by the number of units produced.C. the determination of a measure of activity that is a causal factor in the incurrence of overhead cost.D. actual rather than budgeted levels of activity.
Which of the following is an example of a variable cost? a.Insurance on the production equipment b.Direct materials c.The production supervisor's salary d.Depreciation of the factory building e.None of these
Which of the following statements is true? a) Using either direct labor hours or direct labor costs to calculate a plantwide overhead rate will generally ensure that direct labor costs are accurately traced to jobs. b) An assumption that the only cost driver of an organization is direct labor hours is generally not accurate. c) A manufacturing overhead rate is only determined and used for fixed manufacturing overhead. d) Manufacturing overhead is directly traced to jobs using an overhead application rate(s).
Poulenc plc. uses direct labour cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labour cost as indirect labour. The effect of this misclassification will be to: a) understate the predetermined overhead rate. b) have no effect on the predetermined overhead rate. c) cannot be determined from the information given. d) overstate the predetermined overhead rate.