Several Statements That May Apply to Actual Costing, Normal Costing

question 91

Short Answer

Several statements that may apply to actual costing, normal costing, both, or neither appear below. Choose the best answer from the four that follow. Each numbered item has only one correct answer. Each lettered item may be used once, more than once, or not at all.
A. Actual costing only
B. Normal costing only
C. Both actual and normal costing
D. Neither actual nor normal costing
____ 1. Actual activity and an estimated rate are used to allocate overhead
____ 2. Actual direct materials are traced to each job
____ 3. Direct labour estimates are debited to work in process
____ 4. Estimated direct materials are traced to each job
____ 5. Jobs absorb the actual cost of direct labour
____ 6. Managers allocate overhead using estimated activity and an estimated rate
____ 7. May result in underapplied overhead
____ 8. Overhead is allocated using the actual activity and an actual rate
____ 9. Overhead is not allocated
____ 10. Used to prepare interim income statements

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Definitions:

Bondholders

Investors who own bonds issued by a corporation or government, essentially lending money to the issuer in exchange for periodic interest payments and the return of principal at maturity.

Bankruptcy Probabilities

Bankruptcy Probabilities represent the likelihood of a company or entity being unable to meet its financial obligations and thus having to declare bankruptcy.

Capital Structure

The mix of debt and equity financing a company uses to fund its operations and growth.

Tax Savings

The reduction in income tax obligation achieved through various deductions, credits, and exemptions.