Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1)
1)
Which of the following is not an overhead cost type?
A)
Expected
B)
Mixed
C)
Fixed
D)
Variable
Answer:
A
Explanation:
2)
2)
For the general overhead categories used in the book, where would the costs for newspaper
advertisements used to hire personnel be recorded?
A)
Publications and subscriptions
B)
Advertising
C)
Promotion
D)
Employee recruiting
Answer:
D
Explanation:
3)
3)
Which of the following is not a bona fide fringe benefit?
A)
Vacation pay
B)
Health insurance
C)
Dependent care assistance
D)
Federal Unemployment Tax (FUTA)
Answer:
D
Explanation:
4)
4)
For the general overhead categories used in the book, which of the following would be costed to
the employee taxes section?
A)
State unemployment tax (SUTA)
B)
Social Security
C)
Federal withholdings
D)
All of the above
Answer:
D
Explanation:
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5)
5)
Which of the following would be a general overhead cost?
A)
Doors supplied for a construction project
B)
Copier for the main office
C)
Phone bill for a project superintendent’s phone
D)
Framing labor on a construction project
Answer:
B
Explanation:
6)
6)
In general, how much of the cost of meals is tax deductible?
A)
75%
B)
All (100%)
C)
50%
D)
None (0%)
Answer:
C
Explanation:
7)
7)
For the general overhead categories used in the book, which of the following is not a general
overhead advertising cost?
A)
Advertising materials
B)
Signage for the company trucks
C)
Ad space
D)
Project sign for a specific project
Answer:
D
Explanation:
The project sign would be a cost to the project.
8)
8)
Which of the following would be a legal and professional service that would be recorded as a
general overhead expense?
A)
Architectural design for an unsuccessful proposal
B)
Legal services used to set up the company
C)
Legal services used to collect bills
D)
All of the above
Answer:
D
Explanation:
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9)
9)
Which of the following would not be included in general overhead when preparing a general
overhead budget for projection of the company’s cash flow?
A)
Loan payments on a truck
B)
Depreciation on a truck
C)
Cash paid when purchasing a truck
D)
None of the above
Answer:
B
Explanation:
10)
10)
For the general overhead categories used in the book, where would vehicle taxes be recorded?
A)
Employee taxes
B)
Taxes and licenses
C)
Miscellaneous
D)
Car and truck expense
Answer:
D
Explanation:
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
11)
What is a mixed cost?
Answer:
Mixed costs are costs that contain both a variable cost component and a fixed cost component.
12)
How may the contract with a project owner determine how general overhead is defined?
Answer:
The difference between a project overhead and general overhead may vary from project to project
based on what is billable to the project’s owner under the construction contract with the owner. For
example, one contract may specifically allow the construction company to bill the cost of the project
manager to the project, whereas another may specifically prohibit it and require that the project
manager be paid out of the profit and overhead markup.
13)
Why is entertainment tracked separately on the general overhead budget?
Answer:
The Tax Cuts and Job Act, passed in December 2017, eliminated the deduction for entertainment,
which includes entertainment activities, memberships to social clubs, and associated entertainment
facilities. Because of this, entertainment costs need to be tracked separately.
14)
What is the best source of data for projecting future general overhead costs?
Answer:
The best sources of data for future general overhead costs are historical costs; however, these costs
must be adjusted to take into account the uniqueness of each year’s financial objectives.
15)
Why would a company have unallocated materials?
Answer:
Unallocated materials include inventory shrinkage due to theft or damage.
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16)
How are general overhead cost controlled?
Answer:
To control general overhead costs, a budget should be prepared for the general overhead, and the
general overhead costs should be tracked.
17)
Why must charitable contributions be tracked separately?
Answer:
Charitable contributions must be tracked separately because there may be limits to their tax
deductibility.
18)
What must be kept in mind when preparing a general overhead budget?
Answer:
First, the budget should have enough detail to allow management to track and manage costs. Second,
the budget should not have so much detail that management spends a lot of extra time and effort
tracking costs or gives up trying to track costs because it is too difficult. Third, the budget needs to
provide the information necessary to prepare financial statements and income tax returns.
19)
What must be done to accurately project and control general overhead costs?
Answer:
To accurately project and control costs, the general overhead budget must be estimated line by line.
20)
How does general overhead affect the profit of a company?
Answer:
Because both profit and general overhead come out of the gross profit, the smaller the overhead costs,
the greater the profit.
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Answer Key
Testname: C9
1)
A
2)
D
3)
D
4)
D
5)
B
6)
C
7)
D
8)
D
9)
B
10)
D
11)
Mixed costs are costs that contain both a variable cost component and a fixed cost component.
12)
The difference between a project overhead and general overhead may vary from project to project based on what is
billable to the project‘s owner under the construction contract with the owner. For example, one contract may
specifically allow the construction company to bill the cost of the project manager to the project, whereas another may
specifically prohibit it and require that the project manager be paid out of the profit and overhead markup.
13)
The Tax Cuts and Job Act, passed in December 2017, eliminated the deduction for entertainment, which includes
entertainment activities, memberships to social clubs, and associated entertainment facilities. Because of this,
entertainment costs need to be tracked separately.
14)
The best sources of data for future general overhead costs are historical costs; however, these costs must be adjusted
to take into account the uniqueness of each year’s financial objectives.
15)
Unallocated materials include inventory shrinkage due to theft or damage.
16)
To control general overhead costs, a budget should be prepared for the general overhead, and the general overhead
costs should be tracked.
17)
Charitable contributions must be tracked separately because there may be limits to their tax deductibility.
18)
First, the budget should have enough detail to allow management to track and manage costs. Second, the budget
should not have so much detail that management spends a lot of extra time and effort tracking costs or gives up
trying to track costs because it is too difficult. Third, the budget needs to provide the information necessary to prepare
financial statements and income tax returns.
19)
To accurately project and control costs, the general overhead budget must be estimated line by line.
20)
Because both profit and general overhead come out of the gross profit, the smaller the overhead costs, the greater the
profit.
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