Question 1

Preston Company has three divisions. The company should consider a cost to be a direct cost of a division if:

Accepted Answer

A)  It meets guidelines imposed by generally accepted accounting principles. 
B)  It can be traced to a division in a cost-effective manner. 
C)  It is a variable cost. 
D)  It can be allocated to a division. 
A)  It meets guidelines imposed by generally accepted accounting principles. 
B)  It can be traced to a division in a cost-effective manner. 
C)  It is a variable cost. 
D)  It can be allocated to a division.

Question 2

Nature's Soap manufactures Bar soap and Liquid soap. Of the following costs, which would be an indirect cost to the Liquid Department?

Accepted Answer

A)  Liquid manager's salary 
B)  Manufacturing plant insurance 
C)  Depreciation of the liquefying equipment 
D)  Liquid Fragrance 
A)  Liquid manager's salary 
B)  Manufacturing plant insurance 
C)  Depreciation of the liquefying equipment 
D)  Liquid Fragrance

Question 3

Sheddon Industries produces two products. The products' identified costs are as follows: $$\begin{array} { l c c } 
& \text {Product A } & \text { Product B} \
\text { Direct materials } & \$ 23,000 & \$ 19,000 \
\text { Direct labor } & \$ 11,000 & 27,000
\end{array}$$ The company's overhead costs of $57,000 are allocated based on direct labor cost. Assume 7,000 units of product A and 8,000 units of Product B are produced. What is the cost per unit for product B? (Do not round intermediate calculations.)

Accepted Answer

A)  $12.69 
B)  $10.69 
C)  $11.06 
D)  None of the answers are correct. 
A)  $12.69 
B)  $10.69 
C)  $11.06 
D)  None of the answers are correct.

Question 4

The accuracy of managerial accounting information usually is more important than timeliness.

Accepted Answer

A) True 
 B)False

Question 5

The Western and Pacific Railroad has two divisions, the Western Division and the Pacific Division. The company recently invested $8,000,000 to maintain its railroad track. Pertinent data for the two divisions are as follows: $\begin{array}{lr}
\text { Total Miles Traveled: }\\
\text { Western Division } & 800,000 \mathrm{miles} \
\text { Pacific Division } & 1,200,000 \mathrm{miles}
\end{array}$

The amount of track improvement cost that should be allocated to the Western Division is:

Accepted Answer

A)  $4,000,000. 
B)  $3,200,000. 
C)  $800,000. 
D)  $5,333,333. 
A)  $4,000,000. 
B)  $3,200,000. 
C)  $800,000. 
D)  $5,333,333.

Question 6

The goal in allocating a cost to cost objects is to achieve a rational allocation.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is false?

Accepted Answer

A)  Both direct and indirect costs can be assigned to a cost object. 
B)  Cost drivers are often selected based on the availability of information. 
C)  Volume measures are good drivers for fixed overhead costs. 
D)  Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product. 
A)  Both direct and indirect costs can be assigned to a cost object. 
B)  Cost drivers are often selected based on the availability of information. 
C)  Volume measures are good drivers for fixed overhead costs. 
D)  Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product.

Question 8

Allocation of costs to various cost objects may:

Accepted Answer

A)  affect managers' performance evaluation. 
B)  affect the overall profitability of a company. 
C)  affect the apparent profitability of the various products a company makes. 
D)  affect managers' performance evaluation and the apparent profitability of the various products a company makes. 
A)  affect managers' performance evaluation. 
B)  affect the overall profitability of a company. 
C)  affect the apparent profitability of the various products a company makes. 
D)  affect managers' performance evaluation and the apparent profitability of the various products a company makes.

Question 9

Indirect costs are often pooled, and not allocated individually because:

Accepted Answer

A)  individual allocation would be more timely. 
B)  individual allocation would be more accurate. 
C)  individual allocation would be tedious. 
D)  the benefits of individual allocation of indirect costs are greater than the costs. 
A)  individual allocation would be more timely. 
B)  individual allocation would be more accurate. 
C)  individual allocation would be tedious. 
D)  the benefits of individual allocation of indirect costs are greater than the costs.

Question 10

Which formula best represents the first step used to allocate an indirect cost to a cost object?

Accepted Answer

A)  Total cost to be allocated divided by cost driver 
B)  Cost driver divided by allocation rate 
C)  Cost driver divided by total cost to be allocated 
D)  Allocation rate divided by total cost to be allocated 
A)  Total cost to be allocated divided by cost driver 
B)  Cost driver divided by allocation rate 
C)  Cost driver divided by total cost to be allocated 
D)  Allocation rate divided by total cost to be allocated

Question 11

Southeast Manufacturing Company has identified the following cost objects: Cost Object 1: The cost of operating the finishing department
Cost Object 2: The cost of a particular product made in June
Cost Object 3: The cost of operating the factory
With respect to these cost objects, the cost of the salary of the supervisor of the finishing department is directly traceable to cost objects:

Accepted Answer

A)  1 and 2. 
B)  2 and 3. 
C)  1 and 3. 
D)  1, 2, and 3. 
A)  1 and 2. 
B)  2 and 3. 
C)  1 and 3. 
D)  1, 2, and 3.

Question 12

State University's College of Business is divided into three departments, accounting, marketing, and management. Relevant information for each department is provided below: $$\begin{array} { l c c c } 
\text { Cost Driver } & \text { Accounting } & \text { Marketing } & \text { Management } \
\text { Number of gtudenta } & 700 & 400 & 200 \
\text { Number of clageg } & 32 & 18 & 14 \
\text { per semester } & & & \
\text { Number of faculty } & \text { 10 } & 12 & 5
\end{array}$$ The Dean of the College of Business is trying to assign funds from the operating budget to the three departments. Assuming that the chair of each department is trying to attain the highest funding possible for his/her department, which of the following most accurately describes the allocation base that each chair will favor?

Accepted Answer

A)  The chair of the Management department will want to use the number of classes while the chair of the Marketing department will prefer the number of faculty. 
B)  The chair of the Accounting department and the chair of the Management department will want to use the number of faculty. 
C)  The chair of the Marketing department will want to use number of students, while the chair of the Accounting department will want to use number of classes per semester. 
D)  The chair of the Accounting department will want to use number of students while the chair of the Management department will want to use number of faculty. 
A)  The chair of the Management department will want to use the number of classes while the chair of the Marketing department will prefer the number of faculty. 
B)  The chair of the Accounting department and the chair of the Management department will want to use the number of faculty. 
C)  The chair of the Marketing department will want to use number of students, while the chair of the Accounting department will want to use number of classes per semester. 
D)  The chair of the Accounting department will want to use number of students while the chair of the Management department will want to use number of faculty.

Question 13

The process of dividing a total cost into parts and assigning it to cost objects is known as:

Accepted Answer

A)  cost tracing. 
B)  cost division. 
C)  cost allocation. 
D)  None of the answers are correct. 
A)  cost tracing. 
B)  cost division. 
C)  cost allocation. 
D)  None of the answers are correct.

Question 14

Assume that a factory seeks to allocate rent to several departments that occupy the factory. The factory is occupied by all of the departments. Which of the following is the most logical cost driver for allocating the factory rent?

Accepted Answer

A)  Number of employees 
B)  Square footage occupied by each department 
C)  Machine hours 
D)  Number of labor hours in each department 
A)  Number of employees 
B)  Square footage occupied by each department 
C)  Machine hours 
D)  Number of labor hours in each department

Question 15

Humphries Construction Company builds warehouses that range in size from 12,000 to 100,000 square feet. Which of the following would not be a rational base for allocating overhead costs to the warehouses?

Accepted Answer

A)  Labor hours 
B)  Direct material costs 
C)  Number of warehouses completed 
D)  Square footage of the warehouses 
A)  Labor hours 
B)  Direct material costs 
C)  Number of warehouses completed 
D)  Square footage of the warehouses

Question 16

Costs that can be traced to a cost object in a cost-effective way are called direct costs.

Accepted Answer

A) True 
 B)False

Question 17

A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

Accepted Answer

A) True 
 B)False

Question 18

Alleghany Community College operates four departments. The square footage used by each department is shown below. $\begin{array}{lc}
\text { Department } & \text { Square Footage }\
\text { Accounting } & 7,000 \
\text { Marketing } & 8,000 \
\text { Technology } & 10,000 \
\text { Sciences } & \underline{7,000}\
\text {Total}&\underline{32,000}
\end{array}$ Alleghany's annual building rental cost is $260,000.What amount of rent expense should be allocated to the Sciences Department? (Do not round intermediate calculations.)

Accepted Answer

A)  $56,875 
B)  $65,000 
C)  $81,250 
D)  $260,000 
A)  $56,875 
B)  $65,000 
C)  $81,250 
D)  $260,000

Question 19

Blankenship Company operates a factory with two departments, X and Y. The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

Accepted Answer

A)  Square footage occupied. 
B)  Machine hours. 
C)  Direct labor hours. 
D)  Units sold. 
A)  Square footage occupied. 
B)  Machine hours. 
C)  Direct labor hours. 
D)  Units sold.

Question 20

The process of dividing a total cost into parts and assigning it to cost objects is known as:

Accepted Answer

A)  cost tracing. 
B)  cost division. 
C)  cost allocation. 
D)  None of the answers are correct. 
A)  cost tracing. 
B)  cost division. 
C)  cost allocation. 
D)  None of the answers are correct.

Preston Company has three divisions. The company should consider a cost to be a direct cost of a division if:

Nature's Soap manufactures Bar soap and Liquid soap. Of the following costs, which would be an indirect cost to the Liquid Department?

The accuracy of managerial accounting information usually is more important than timeliness.

The goal in allocating a cost to cost objects is to achieve a rational allocation.

Which of the following statements is false?

Allocation of costs to various cost objects may:

Indirect costs are often pooled, and not allocated individually because:

Which formula best represents the first step used to allocate an indirect cost to a cost object?

The process of dividing a total cost into parts and assigning it to cost objects is known as:

Assume that a factory seeks to allocate rent to several departments that occupy the factory. The factory is occupied by all of the departments. Which of the following is the most logical cost driver for allocating the factory rent?

Humphries Construction Company builds warehouses that range in size from 12,000 to 100,000 square feet. Which of the following would not be a rational base for allocating overhead costs to the warehouses?

Costs that can be traced to a cost object in a cost-effective way are called direct costs.

A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

Blankenship Company operates a factory with two departments, X and Y. The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

The process of dividing a total cost into parts and assigning it to cost objects is known as:

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 12: Cost Accumulation, Tracing, and Allocation

Preston Company has three divisions. The company should consider a cost to be a direct cost of a division if:

Nature's Soap manufactures Bar soap and Liquid soap. Of the following costs, which would be an indirect cost to the Liquid Department?

The accuracy of managerial accounting information usually is more important than timeliness.

The goal in allocating a cost to cost objects is to achieve a rational allocation.

Which of the following statements is false?

Allocation of costs to various cost objects may:

Indirect costs are often pooled, and not allocated individually because:

Which formula best represents the first step used to allocate an indirect cost to a cost object?

The process of dividing a total cost into parts and assigning it to cost objects is known as:

Assume that a factory seeks to allocate rent to several departments that occupy the factory. The factory is occupied by all of the departments. Which of the following is the most logical cost driver for allocating the factory rent?

Humphries Construction Company builds warehouses that range in size from 12,000 to 100,000 square feet. Which of the following would not be a rational base for allocating overhead costs to the warehouses?

Costs that can be traced to a cost object in a cost-effective way are called direct costs.

A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

Blankenship Company operates a factory with two departments, X and Y. The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

The process of dividing a total cost into parts and assigning it to cost objects is known as:

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters