1.

Costing system that charge the product with the use of an arbitrary overhead
application rate determined at the end of the period.
a. Normal costing
b. Actual costing
c. Job order costing
d. Process costing

2. A company has two productions and two service departments that are housed in
the same building. The most reasonable basis for allocating building costs (rent,
insurance, maintenance, security) to the production and service departments is:
a. Direct labor hours
b. Number of employees
c. Square feet of floor occupied
d. Direct materials used

3. The method of overhead allocation that usually starts with the service
department rendering the greatest amount of service to the greatest number of
other service departments and the progresses in descending order to the service
department rendering services to the least number of other service departments is
the:
a. Step method
b. Direct method
c. Step and direct methods
d. Reciprocal method

4. In highly automated manufacturing, all of the following may be appropriate bases

for manufacturing overhead application except:
a. machine hours
b. direct labor hours
c. number of setups
d. movement of materials

5. Which of the following is true concerning standard costs?

a. Standard costs are estimates of costs attainable only under the most ideal
conditions but rarely practicable.
b. Standard costs are difficult to use with the process costing system.
c. If probably used, standard can help motivate employees.
d. Unfavorable variances, material in amount, should be investigated but large
favorable variances need not be investigated

Answers:
1. a
2. c
3. a
4. c
5. c