ST.

VINCENT COLLEGE OF CABUYAO

Brgy. Mamatid, City of Cabuyao
Laguna 4025
Name: _________________________________________ Score: __________
Section: ________________________________________ Mr. J. F. E. Ambas, CPA

Midterm Exam - Accounting for Factory Overhead

True or False.

________ 1. Service departments are sometimes called indeterminate cost centers, while production departments would be the final
cost centers.
________ 2. Service departments are production departments such as assembly departments that manufacture goods.
________ 3. One of the purposes of service department cost allocation is to value inventory for external financial reporting.
________ 4. The direct method is a method of cost allocation that charges costs of service departments to user departments and
ignore any services used by other service departments.
________ 5. Under the step method of cost allocation, the final amount of pesos allocated to any production department is
influenced by the order in which the allocation is made from the service departments.
________ 6. If there are no inter-service department activities, then all three allocation methods will give identical result.
________ 7. When a plant wide rate is used, this means that a single rate used to allocate overhead to all departments in the
company.
________ 8. With the algebraic method, each department’s costs are set out in an equation where total costs equal the sum of direct
costs and allocated costs.
________ 9. Inter-service departments activities are fully ignored by both the direct and step methods of cost allocation.
________ 10. Over applied overhead occurs when total actual is less than applied FOH.
________ 11. The predetermined overhead rate is an amount obtained by dividing the total overhead for the past period by the total
overhead allocation base for the coming period.
________ 12. When over applied overhead is assigned to Cost of Goods Sold, the effect is to increase the balance of Cost of Goods
Sold account.
________ 13. The numerator reason refers to the overhead variance caused by the difference between the estimated and actual
FOH costs for the period.
________ 14. If all manufacturing overhead costs were variable, the production volume variance would always be zero.
________ 15. The sum of the spending variance and the volume variance equals the total manufacturing overhead variance.