Question 1

For a manufacturer, measures of volume may include:

Accepted Answer

A)  Number of units produced. 
B)  Number of square feet occupied. 
C)  Amount of direct materials used in production. 
D)  Both number of units produced and amount of direct materials used in production are correct. 
A)  Number of units produced. 
B)  Number of square feet occupied. 
C)  Amount of direct materials used in production. 
D)  Both number of units produced and amount of direct materials used in production are correct.

Question 2

Select the incorrect statement from the following.

Accepted Answer

A)  Indirect costs can be easily traced to a cost object. 
B)  Actual costs are useful for evaluating managerial performance. 
C)  Actual costs are not relevant in many decisions because actual costs cannot be determined until after the decision has been made. 
D)  When accumulating the cost of a specific cost object, the indirect costs are allocated to the cost object. 
A)  Indirect costs can be easily traced to a cost object. 
B)  Actual costs are useful for evaluating managerial performance. 
C)  Actual costs are not relevant in many decisions because actual costs cannot be determined until after the decision has been made. 
D)  When accumulating the cost of a specific cost object, the indirect costs are allocated to the cost object.

Question 3

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

Accepted Answer

A) True 
 B)False

Question 4

Cost allocation is the process of dividing a total cost into its fixed and variable components.

Accepted Answer

A) True 
 B)False

Question 5

Danforth Manufacturing Company uses a cost-plus pricing strategy. At the beginning of the year, Danforth estimated that total annual fixed overhead costs would amount to $60,000. Further, Danforth estimated that the annual volume of production would be 1,000 units of product. Based on these estimates, Danforth computed a predetermined overhead rate that was used to allocate overhead cost to the products made throughout the year. As predicted, the actual volume of production amounted to 1,000 units of product. However, actual fixed overhead costs amounted to $56,000. Based on this information alone:

Accepted Answer

A)  a lower than appropriate selling price was assigned to products during the year. 
B)  a higher than appropriate selling price was assigned to products during the year. 
C)  the correct selling price was assigned to products during the year. 
D)  the answer cannot be determined from the information provided. 
A)  a lower than appropriate selling price was assigned to products during the year. 
B)  a higher than appropriate selling price was assigned to products during the year. 
C)  the correct selling price was assigned to products during the year. 
D)  the answer cannot be determined from the information provided.

Question 6

Michael & Co. expects overhead costs of $60,000 per month and direct production costs of $24 per unit. The estimated production activity for the current accounting period is as follows: $$\begin{array} { | l | c | c | c | c | } 
\hline& 1 ^ { \text {st } } \text { Quarter } & 2 ^ { \text {nd } } \text { Quarter } & \mathbf { 3 } ^ { \text {rd } } \text { Quarter } & 4 ^ { \text {th } } \text { Quarter} \
\hline \text { Units produced } & 11,500 & 5,000 & 8,250 & 11,250 \
\hline
\end{array}$$ The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)

Accepted Answer

A)  $1.50 per unit. 
B)  $2.67 per unit. 
C)  $18.00 per unit. 
D)  $42.00 per unit. 
A)  $1.50 per unit. 
B)  $2.67 per unit. 
C)  $18.00 per unit. 
D)  $42.00 per unit.

Question 7

The first step in cost accumulation is to identify cost objects.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Which of the following best describes the term used to assign indirect costs to a cost object?

Accepted Answer

A)  Cost tracing 
B)  Cost allocation 
C)  Cost assignment 
D)  Cost accumulation 
A)  Cost tracing 
B)  Cost allocation 
C)  Cost assignment 
D)  Cost accumulation

Question 10

Craig Manufacturing Company operates its three production departments within a single facility. Each department produces its own products and maintains its own production equipment. Although they share a common facility, each department is overseen by a separate supervisor. Which one of the following costs is a direct cost of each department?

Accepted Answer

A)  Lease payment on facility 
B)  Depreciation on the facility 
C)  Production supervisor salary 
D)  Plant manager salary 
A)  Lease payment on facility 
B)  Depreciation on the facility 
C)  Production supervisor salary 
D)  Plant manager salary

Question 11

Overhead costs:

Accepted Answer

A)  Cannot be traced to cost objects in a cost-effective manner, but are instead allocated to cost objects. 
B)  Cannot be allocated to cost objects. 
C)  Are always variable costs. 
D)  Are only incurred by manufacturing companies. 
A)  Cannot be traced to cost objects in a cost-effective manner, but are instead allocated to cost objects. 
B)  Cannot be allocated to cost objects. 
C)  Are always variable costs. 
D)  Are only incurred by manufacturing companies.

Question 12

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

Accepted Answer

A) True 
 B)False

Question 13

Some costs that possibly could be traced directly to cost objects are nonetheless classified as indirect costs because:

Accepted Answer

A)  Such costs cannot be traced to objects in a cost-effective manner. 
B)  Such practice results in a more accurate accumulated cost for the object. 
C)  Generally accepted accounting principles require some costs to be treated as indirect. 
D)  All of the answers are correct. 
A)  Such costs cannot be traced to objects in a cost-effective manner. 
B)  Such practice results in a more accurate accumulated cost for the object. 
C)  Generally accepted accounting principles require some costs to be treated as indirect. 
D)  All of the answers are correct.

Question 14

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 15

Jessup Company expects to incur overhead costs of $12,000 per month and direct production costs of $138 per unit. The estimated production activity for the upcoming year is 1,200 units. If the company desires to earn a gross profit of $63 per unit, the sales price per unit would be which of the following amounts?

Accepted Answer

A)  $209 
B)  $201 
C)  $321 
D)  $143 
A)  $209 
B)  $201 
C)  $321 
D)  $143

Question 16

Selection of a cost driver depends on:

Accepted Answer

A)  The availability of information for both the cost and the potential cost driver. 
B)  A cause-and-effect relationship between the cost driver and the cost. 
C)  Judgment of management. 
D)  All of the answers are correct. 
A)  The availability of information for both the cost and the potential cost driver. 
B)  A cause-and-effect relationship between the cost driver and the cost. 
C)  Judgment of management. 
D)  All of the answers are correct.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

At the beginning of the year, Rangle Company expected to incur $54,000 of overhead costs in producing 6,000 units of product. The direct material cost is $20 per unit of product. Direct labor cost is $30 per unit. During January, 600 units were produced. The total cost of the units made in January was:

Accepted Answer

A)  $30,000 
B)  $5,400 
C)  $35,400 
D)  None of the answers are correct. 
A)  $30,000 
B)  $5,400 
C)  $35,400 
D)  None of the answers are correct.

Question 19

The Western and Pacific Railroad has two divisions, the Western Division and the Pacific Division. The company recently invested $8,600,000 to maintain its railroad track. Pertinent data for the two divisions are as follows:Total Miles Traveled: $\begin{array}{lr}
\text { Western Division } & 860,000 \mathrm{miles} \
\text { Pacific Division } & 1,260,000 \mathrm{miles}
\end{array}$
 The amount of track improvement cost that should be allocated to the Western Division is: (Round intermediate calculation to 2 decimal places.)

Accepted Answer

A)  $5,819,333. 
B)  $3,491,600. 
C)  $4,300,000. 
D)  $860,000. 
A)  $5,819,333. 
B)  $3,491,600. 
C)  $4,300,000. 
D)  $860,000.

Question 20

Bank's Department Store has three departments: Men's, Women's and Children's. The store incurred $33,000 of store rental costs during the current year. The departments identified the following cost drivers: $\begin{array}{lrrr}
&\text { Men's }&\text { Women's}&\text { Children's }\
\text { Labor dollars } & \text { \$ 533,000 } & \$ 778,000 & \$ 243,000 \
\text { Number of employees } & 13 & 23 & 7 \
\text { Square footage } & 3,300 & 8,300 & 1,300\
\text { Number of sales transactions } & 303.000 & 903.000 & 93.000
\end{array}$  Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round your answer to the nearest dollar.)

Accepted Answer

A)  $21,233 
B)  $5,372 
C)  $5,160 
D)  $2,363 
A)  $21,233 
B)  $5,372 
C)  $5,160 
D)  $2,363

For a manufacturer, measures of volume may include:

Select the incorrect statement from the following.

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

Cost allocation is the process of dividing a total cost into its fixed and variable components.

The first step in cost accumulation is to identify cost objects.

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

Which of the following best describes the term used to assign indirect costs to a cost object?

Overhead costs:

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

Some costs that possibly could be traced directly to cost objects are nonetheless classified as indirect costs because:

Selection of a cost driver depends on:

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

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

For a manufacturer, measures of volume may include:

Select the incorrect statement from the following.

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

Cost allocation is the process of dividing a total cost into its fixed and variable components.

The first step in cost accumulation is to identify cost objects.

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

Which of the following best describes the term used to assign indirect costs to a cost object?

Overhead costs:

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

Some costs that possibly could be traced directly to cost objects are nonetheless classified as indirect costs because:

Selection of a cost driver depends on:

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

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