Sheddon Industries produces two products. The products' identified costs are as follows: \[\begin{array} { l c c } & \text { Product A } & \text { Product B } \\ \text { Direct materials } & \$ 20,000 & \$ 15,000 \\ \text { Direct labor } & \$ 12,000 & 24,000 \end{array}\] The company's overhead costs of $108,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the cost per unit for product B? (Do not round intermediate calculations.)

A) $7.80 B) $22.20 C) $16.80 D) None of the answers are correct. A) $7.80 B) $22.20 C) $16.80 D) None of the answers are correct.

Michael & Co. expects overhead costs of $16,000 per month and direct production costs of $30 per unit. The estimated production activity for the current accounting period is as follows: \[\begin{array} { | c | c | c | c | c | } \hline & 1 ^ { st} \text {Quarter } & 2 ^ { \text {nd } } \text { Quarter }& { 3 } ^ { \text {rd } }\text { Quarter } \text { Quarter } & 4 ^ { \text {th } } \text { Quarter } \\ \hline \text { Units produced } & 10,500 & 6,000 & 6,000 & 9,500 \\ \hline \end{array}\] The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)

A) $0.50 per unit. B) $2.00 per unit. C) $6.00 per unit. D) $36.00 per unit. A) $0.50 per unit. B) $2.00 per unit. C) $6.00 per unit. D) $36.00 per unit.

State University's College of Business is divided into three departments, accounting, marketing, and management. Relevant information for each department is provided below: \[\begin{array} { l c c c } \text { Cost Driver } & \text { Accounting } & \text { Marketing } & \text { Management } \\ \text { Number of students } & 700 & 400 & 200 \\ \text { Number of classes } & 32 & 18 & 14 \\ \text { per semester } & & & \\ \text { Number of faculty } & \text { 10 } & 12 & 5 \end{array}\] 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?

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.

Which of the following is not an example of a cost object and its related cost driver? $\begin{array}{cc} \text { Cost Object } &&&& \text { Cost Driver} \\ \end{array}$ A.$\begin{array}{cc} \text { Rent } &&&&&& \text { Square feet } \\ \end{array}$ B.$\begin{array}{cc} \text { Transportation } & & \text { Miles driven } \\ \end{array}$ C.$\begin{array}{cc} \text { Direct labor hours } & \text { Indirect labor} \\ \end{array}$ D.$\begin{array}{cc} \text { Uttilities} &&&&& \text { Machine hours } \\ \end{array}$

A) Option A B) Option B C) Option C D) Option D A) Option A B) Option B C) Option C D) Option D

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 $220,000. What amount of rent expense should be allocated to the Technology Department? (Do not round intermediate calculations.)

A) $48,125 B) $55,000 C) $68,750 D) $220,000 A) $48,125 B) $55,000 C) $68,750 D) $220,000

Michael & Co. expects overhead costs of $28,000 per month and direct production costs of $14 per unit. The estimated production activity for the current accounting period is as follows: \[\begin{array} { | c | c | c | c | c | } \hline & 1 ^ { st } \text {Quarter } & \mathbf { 2 } ^ { \text {nd } } \text { Quarter } & \mathbf { 3 } ^ { \text {rd } } \text { Quarter } & 4 ^ { \text {th } } \text { Quarter } \\ \hline \text { Units produced } & 11,700 & 9,200 & 6,350 & 12,750 \\ \hline \end{array}\] The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)

A) $0.67 per unit. B) $1.50 per unit. C) $8.00 per unit. D) $22.00 per unit. A) $0.67 per unit. B) $1.50 per unit. C) $8.00 per unit. D) $22.00 per unit.

Exam 12: Cost Accumulation, Tracing, and Allocation

Sheddon Industries produces two products. The products' identified costs are as follows: Product A Product B Direct materials \ 20,000 \ 15,000 Direct labor \ 12,000 24,000 The company's overhead costs of $108,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the cost per unit for product B? (Do not round intermediate calculations.)

(Multiple Choice)

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Question 81

At the beginning of the year, Barcroft Co. estimated that its total annual fixed overhead costs would amount to $25,000. Further, Barcroft estimated that its volume of production would be 2,000 units of product. Based on these estimates, Barcroft computed a predetermined overhead rate that was used to allocate overhead costs to the products made during the year. As predicted, actual fixed overhead costs did amount to $25,000. However, actual volume of production amounted to 2,200 units of product. Based on this information alone:

(Multiple Choice)

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Question 82

Michael & Co. expects overhead costs of $16,000 per month and direct production costs of $30 per unit. The estimated production activity for the current accounting period is as follows: Quarter Quarter Quarter Quarter Quarter Units produced 10,500 6,000 6,000 9,500 The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)

(Multiple Choice)

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Question 83

A cost object is anything for which management desires a separate tracking of costs, while a cost driver is the factor that causes the cost object to increase or decrease.

(True/False)

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Question 84

Volume measures serve as good cost drivers for allocating variable overhead costs because of the causal relationship that exists between those drivers and variable costs.

(True/False)

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Question 85

Select the false statement from the following.

(Multiple Choice)

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Question 86

Select the incorrect statement from the following.

(Multiple Choice)

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Question 87

A chair manufacturer makes custom chairs using hand tools, wood, glue, and varnish. Which of the following statements is true?

(Multiple Choice)

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Question 88

Select the correct statement from the following.

(Multiple Choice)

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Question 89

State University's College of Business is divided into three departments, accounting, marketing, and management. Relevant information for each department is provided below: Cost Driver Accounting Marketing Management Number of students 700 400 200 Number of classes 32 18 14 per semester Number of faculty 10 12 5 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?

(Multiple Choice)

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Question 90

An allocation base has a cause-and-effect relationship with a cost object.

(True/False)

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Question 91

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

(True/False)

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Question 92

Sturbridge Company manufactures fine furniture and grandfather clocks. Sturbridge has an excellent reputation, and each grandfather clock sells for several thousand dollars. Which of the following should not be treated as direct costs, assuming the cost object is individual clocks?

(Multiple Choice)

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Question 93

Which of the following is not an example of a cost object and its related cost driver? Cost Object Cost Driver A. Rent Square feet B. Transportation Miles driven C. Direct labor hours Indirect labor D. Uttilities Machine hours

(Multiple Choice)

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Question 94

Indirect costs should not be pooled unless they share a common cost driver.

(True/False)

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Question 95

The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was purchased for a cost of $122,000 at the beginning of the year was expected to deliver 122,000 tons over its useful life. The following is a breakdown of the tons delivered during the year to each construction site: Construction Sites: A B C D Tons Delivered: 1,400 2,500 3,400 900 How much truck depreciation should be allocated to Site A? (Do not round intermediate calculations. Round your answer to the nearest dollar.)

(Multiple Choice)

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Question 96

Alleghany Community College operates four departments. The square footage used by each department is shown below. Department Square Footage Accounting 7,000 Marketing 8,000 Technology 10,000 Sciences Total Alleghany's annual building rental cost is $220,000. What amount of rent expense should be allocated to the Technology Department? (Do not round intermediate calculations.)

(Multiple Choice)

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Question 97

Michael & Co. expects overhead costs of $28,000 per month and direct production costs of $14 per unit. The estimated production activity for the current accounting period is as follows: Quarter Quarter Quarter Quarter Units produced 11,700 9,200 6,350 12,750 The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)

(Multiple Choice)

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Question 98

Volume measures serve as good cost drivers for allocating variable overhead costs because of the causal relationship that exists between those drivers and variable costs.

(True/False)

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Question 99

Great Outdoors Company makes two types of camping tents. Making a standard camping tent requires 4 hours of labor while making a deluxe camping tent requires 10 hours of labor. During the most recent accounting period the company made 2,000 standard camping tents and 500 deluxe camping tents. Indirect manufacturing costs amounted to $52,000 and are allocated based on labor hours. Based on this information:

(Multiple Choice)

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Question 100

A cost object is anything for which management desires a separate tracking of costs, while a cost driver is the factor that causes the cost object to increase or decrease.

Volume measures serve as good cost drivers for allocating variable overhead costs because of the causal relationship that exists between those drivers and variable costs.

Select the false statement from the following.

Select the incorrect statement from the following.

A chair manufacturer makes custom chairs using hand tools, wood, glue, and varnish. Which of the following statements is true?

Select the correct statement from the following.

An allocation base has a cause-and-effect relationship with a cost object.

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

Sturbridge Company manufactures fine furniture and grandfather clocks. Sturbridge has an excellent reputation, and each grandfather clock sells for several thousand dollars. Which of the following should not be treated as direct costs, assuming the cost object is individual clocks?

Which of the following is not an example of a cost object and its related cost driver? Cost Object Cost Driver A. Rent Square feet B. Transportation Miles driven C. Direct labor hours Indirect labor D. Uttilities Machine hours

Indirect costs should not be pooled unless they share a common cost driver.

Volume measures serve as good cost drivers for allocating variable overhead costs because of the causal relationship that exists between those drivers and variable costs.

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

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