Multiple Choice Answers

Direct labor costs are included in the conversion costs of a product.

True
False

Recording depreciation __________.

a. Decreases net income and cash flows
b. Decreases net income and has no effect on cash flows
c. Decreases net income, assets and cash flows
d. Decreases net income and has no effect on assets and cash flows

If factory overhead applied exceeds the actual costs, overhead is said to be underapplied.

True
False

For which of the following taxes is there a ceiling on the amount of employee annual earnings subject to the tax?

a. only federal income tax
b. federal and state unemployment tax
c. only state unemployment compensation tax
d. only federal unemployment compensation tax

Which of the following is an example of direct labor cost for an airplane manufacturer?

a. Cost of oil lubricants for factory machinery
b. Cost of wages of assembly worker
c. Salary of plant supervisor
d. Cost of jet engines