Question 1

Service departments:

Accepted Answer

A)  are responsible for manufacturing the products sold to customers. 
B)  work directly on the firm's products. 
C)  provide services directly to customers. 
D)  provide support services to the producing departments. 
A)  are responsible for manufacturing the products sold to customers. 
B)  work directly on the firm's products. 
C)  provide services directly to customers. 
D)  provide support services to the producing departments.

Question 2

Which of the following characteristics is a consequence of the implementation of a plant-wide allocation rate?

Accepted Answer

A)  The uniqueness of individual departments is not reflected in the cost numbers. 
B)  Allocations are first conducted among departments, and then aggregated for the plant as a whole. 
C)  Downstream costs are not measured at all. 
D)  Managers have absolutely no incentive to control costs. 
A)  The uniqueness of individual departments is not reflected in the cost numbers. 
B)  Allocations are first conducted among departments, and then aggregated for the plant as a whole. 
C)  Downstream costs are not measured at all. 
D)  Managers have absolutely no incentive to control costs.

Question 3

Traditional-based product costing uses which of the following procedures?

Accepted Answer

A)  Overhead costs are traced to departments, then costs are traced to products. 
B)  Overhead costs are traced to activities, then costs are traced to products. 
C)  Overhead costs are traced directly to products. 
D)  All overhead costs are expensed as incurred. 
A)  Overhead costs are traced to departments, then costs are traced to products. 
B)  Overhead costs are traced to activities, then costs are traced to products. 
C)  Overhead costs are traced directly to products. 
D)  All overhead costs are expensed as incurred.

Question 4

____ refers to the assignment of indirect costs to cost objects.

Accepted Answer

A)  Allocation 
B)  Direct tracing 
C)  Physical observation 
D)  Cost management 
A)  Allocation 
B)  Direct tracing 
C)  Physical observation 
D)  Cost management

Question 5

When applied overhead exceeds actual overhead cost,

Accepted Answer

A)  over-applied(absorbed) overhead is added to cost of goods sold. 
B)  overapplied overhead is deducted from cost of goods sold. 
C)  underapplied overhead is added to cost of goods sold. 
D)  underapplied overhead is deducted from cost of goods sold. 
A)  over-applied(absorbed) overhead is added to cost of goods sold. 
B)  overapplied overhead is deducted from cost of goods sold. 
C)  underapplied overhead is added to cost of goods sold. 
D)  underapplied overhead is deducted from cost of goods sold.

Question 6

Oaks Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of £30,000 are allocated on the basis of standard service used. The Personnel Department costs of £4,500 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are £9,000 and £15,000, respectively. Data on standard service hours and number of employees are as follows:
MD
PD
P1
P2
Standard service hours used
100
50
300
150
Number of employees
10
20
90
90
Direct labour hours
50
50
250
250
Using the sequential method, if the support department with the highest percentage of interdepartmental service is allocated first, the cost of the support departments allocated to Department P1 is

Accepted Answer

A)  £12,750. 
B)  £24,000. 
C)  £20,295. 
D)  £21,750. 
A)  £12,750. 
B)  £24,000. 
C)  £20,295. 
D)  £21,750.

Question 7

Support departments

Accepted Answer

A)  are responsible for manufacturing the products sold to customers. 
B)  work directly on the products of the firm. 
C)  provide services directly to customers. 
D)  provide essential services to the producing departments. 
A)  are responsible for manufacturing the products sold to customers. 
B)  work directly on the products of the firm. 
C)  provide services directly to customers. 
D)  provide essential services to the producing departments.

Question 8

____ is (are) a method of allocating service department costs that gives partial recognition to interdepartmental services by using a methodology that allocates service department costs sequentially both to the remaining service departments and the producing departments.

Accepted Answer

A)  The direct method 
B)  The step method 
C)  The linear algebra method 
D)  The direct and step methods 
A)  The direct method 
B)  The step method 
C)  The linear algebra method 
D)  The direct and step methods

Question 9

Which of the following accurately describes advantages and disadvantages of employing a system of allocation that uses a plant-wide rate?

Accepted Answer

A)  The plant-wide rate approach is the simplest to apply, but it is also the most costly to implement. 
B)  The plant-wide rate approach is the simplest to apply, but most likely provides the least accurate product costs. 
C)  The plant-wide rate may be straightforward, but it is not appropriate for small businesses that offer a single service or product. 
D)  The plant-wide rate really offers no advantage whatsoever. 
A)  The plant-wide rate approach is the simplest to apply, but it is also the most costly to implement. 
B)  The plant-wide rate approach is the simplest to apply, but most likely provides the least accurate product costs. 
C)  The plant-wide rate may be straightforward, but it is not appropriate for small businesses that offer a single service or product. 
D)  The plant-wide rate really offers no advantage whatsoever.

Service departments:

Which of the following characteristics is a consequence of the implementation of a plant-wide allocation rate?

Traditional-based product costing uses which of the following procedures?

____ refers to the assignment of indirect costs to cost objects.

When applied overhead exceeds actual overhead cost,

Support departments

____ is (are) a method of allocating service department costs that gives partial recognition to interdepartmental services by using a methodology that allocates service department costs sequentially both to the remaining service departments and the producing departments.

Which of the following accurately describes advantages and disadvantages of employing a system of allocation that uses a plant-wide rate?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

Filters

Exam 3: Cost Assignment

Service departments:

Which of the following characteristics is a consequence of the implementation of a plant-wide allocation rate?

Traditional-based product costing uses which of the following procedures?

____ refers to the assignment of indirect costs to cost objects.

When applied overhead exceeds actual overhead cost,

Support departments

____ is (are) a method of allocating service department costs that gives partial recognition to interdepartmental services by using a methodology that allocates service department costs sequentially both to the remaining service departments and the producing departments.

Which of the following accurately describes advantages and disadvantages of employing a system of allocation that uses a plant-wide rate?

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Accounting Entries for a Job Costing System

Process Costing

Joint and By-Product Costing

Income Effects of Alternative Cost Accumulation Systems

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Activity-Based Costing

Pricing Decisions and Profitability Analysis

Decision-Making Under Conditions of Risk and Uncertainty

Capital Investment Decisions: Appraisal Methods

Capital Investment Decisions: the Impact of Capital Rationing, Taxation, Inflation and Risk

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis 1

Standard Costing and Variance Analysis 2: Further Aspects

Divisional Financial Performance Measures

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Management Accounting

Cost Estimation and Cost Behaviour

Quantitative Models for the Planning and Control of Stocks

The Application of Linear Programming to Management Accounting

Filters