Overhead and
Activity Based Costing

NOTE: For multiple-choice and true/false questions, simply place your cursor over what you think is the correct answer. (There is no need to click the answer.) For fill-in-the-blank questions place your cursor over the _________.

If you have difficulty answering the following questions, learn more about this topic by reading our Overhead and Activity Based Costing Explanation.

1.

Selling, general and administrative costs are part of manufacturing overhead.

True

False

2.	Factory overhead and burden are terms used as alternatives for the term ____________________ overhead.

3.	Which of the following are part of manufacturing overhead?
Direct labor              Indirect labor              Office depreciation

4.	The factory maintenance department and the factory administration department are examples of _________________ departments.

5.

To be in compliance with generally accepted accounting principles, selling and administrative expenses and interest expense should be allocated to the cost of products manufactured in order to properly value inventories on a manufacturer's balance sheet.

True

False

6.	Which of the following would not be included in a product's cost for inventory valuation for the financial statements?
Factory supplies              Quality control              Interest expense

7.	Which would be the least favorable basis for allocating manufacturing overhead for a factory with automated equipment and a significant variation of services by its indirect labor?
ABC              Direct labor hours              Machine hours

8.	Which would be the most favorable basis for allocating manufacturing overhead for a factory with automated equipment and a significant variation of services by its indirect labor?
ABC              Direct labor hours              Machine hours

9.	Real estate tax on the factory building is part of ______________________________.
income tax expense              manufacturing overhead              SG&A expense

10.	Rent expense for the executive offices is part of _____________________________.
manufacturing overhead              nonoperating expenses              SG&A expense

11.

Activity-based costing will provide greater accuracy when allocating costs than a manufacturer's machine hours when its products and customers are ________ diverse.

less

more

12.

When using machine hours for allocating manufacturing overhead (instead of activity-based costing), a low-volume item requiring a significant amount of special handling will be assigned too _________ manufacturing overhead.

little

much

13.

The cost to set up production equipment is best allocated directly to products via machine hours.

True

False

14.

Setup cost is an example of a batch-level cost.

True

False

15.

Manufacturing costs are often organized in the general ledger by function and department. When applying activity-based costing, these manufacturing costs will be sorted by activities.

True

False

16.

In activity-based costing, the manufacturing overhead cost per unit will depend partially on the number of units in a batch.

True

False

17.	In ABC the assumption is that __________________ use resources or cause costs.
activities              products

18.

If products are uniform and customers are similar in their demands, activity-based costing may not offer a significant advantage over machine hours when assigning overhead.

True

False

19.

A product with a high gross profit could be an unprofitable product.

True

False

20.

Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions.

True

False